Dr Jane Thomason is an entrepreneur, social capitalist, experienced CEO, energetic change maker and thought leader in the applications of blockchain technology for social impact.
Has the Development Assistance Community had a Digital Epiphany?
“Digital inclusion and the use of mobile platforms have become key factors in a country’s economic development journey. Frontier technologies like blockchain, artificial intelligence (A.I.), the Internet of things (IoT) and others are disrupting industry after industry. However, the wave of digitalisation remains greatly underleveraged by the development community”. (Concept Note, DAC Roundtable on “Harnessing the potential of digitalisation and disruptive digital technologies for development co-operation,” Paris, 3 September, 2018)
Over the past year, I have engaged in conversations with ADB, World Bank, IMF, APEC, OECD, USAID and DFAT about blockchain and frontier technologies and their importance as an adjunct to traditional development practise.
Last week in Paris, I attended two watershed events: the DAC roundtable on “Harnessing the potential of digitalisation and disruptive digital technologies for development co-operation;” and the OECD Blockchain Policy Forum, which included a Panel on Development Co-operation: Blockchain for Sustainable Development.
The growth of technology is exponential. Smart phones are only ten years old. Computer chips have become increasingly powerful while costing less. Technological capabilities have increased by thousands, millions, and billions for less cost in just a few decades. “We won’t experience 100 years of progress in the 21st century—it will be more like 20,000 years of progress (at today’s rate).” (Kursweil, 2001) The number of mobile phone users in the world is expected to pass the five billion mark by 2019.
The future is approaching much faster than many realize and it’s critical to be ready, however, the development assistance community has been slow to move systematically and purposefully to address the digital future.
Seemingly not anymore. The OECD meeting was attended by 1,000 people, with 18,000 watching the livestream from 200 countries. From among the international development institutions leadership seems to be emerging from the OECD and the World Bank. Governments will also be key, both from an adoption perspective as well as the creation of the policy and regulatory environment. Public intervention will be needed to develop the cost model for “last mile” users and to overcome impediments of scale (e.g. setting up pooled finance facilities) so that private investments can be fully mobilized. Resistance from institutions (e.g. banks) and actors (e.g. corrupt officials), is to be expected, as they will be disrupted by this technology. Middle men will be disintermediated and will resist the implementation of Blockchain, as will those who benefit from the lack of transparency in financial flows.
The discussions explored how international development institutions can scale strategies, what mechanisms they do within their respective agencies and share among donors and partners. Five key takeaways for development cooperation were:
Bold leadership is needed
The pace of change demands bold ambition and leadership to build digital transformation and to be at the forefront of innovation. International institutions have a role in supporting governments to prepare for and create policy and regulatory frameworks that foster, and do not hamper, digital innovation. International institutions can also promote principles and standards for digital development throughout the aid system, to ensure that more digital products and services reach, empower and improve the lives of poor people, particularly those at risk of being left behind. Structural policies should also facilitate innovation and entrepreneurship to foster innovation and technology diffusion, ensure that competitive conditions prevail and avoid erecting barriers to cross border digital markets.
The digital talent pool is too shallow
There is a global shortage of two main types of talent: (i) high level policy specialists who also have an up to date knowledge of frontier technologies to advise international institutions and governments; and (ii) developer talent (entrepreneurs, programmers, designers, and engineers) who can build and maintain the digital systems that governments will depend on. Software talent is now said to be more important to companies than actual cash.
New models of finance and procurement will be needed
These are new technologies and there is limited funding to support the commercial scaling of social impact prototypes. Taking successful use cases to scale will likely require new forms of financial and institutional partnerships. International banks, investors, and development finance institutions can play a role in expanding the reach of Blockchain into emerging markets. Blockchain also enables new forms of finance including crowd funding and dynamic funding mechanisms from private finance markets. Tax mechanisms and incentives allow Blockchain to encourage the private sector to invest in Blockchain, for example, through tax credit schemes where credit flows back to investor. More funding is needed in social impact capital to support the development and testing of new technologies for development, that have longer time horizons, lower financial returns but higher social returns financing. Some donors are experimenting with new forms of partnership for technology, but traditional procurement mechanisms will need review.
International development institutions should experiment and shape
Within existing programs, international institutions can support testing and conducting pilots and find space for opportunities to digital solutions in aid programmes. They can identify the most promising use cases for development purposes. Some of the use cases discussed are listed below:
- Identity: Opportunity to rapidly establish and scale an advanced digital identity system leveraging today’s technological advances.
- Financial inclusion: Digital currencies and large scale roll out of mobile money systems could fuel rapid widespread access to financial services that was not available before.
- Land and assets registration: Through digitization of assets, people would be able borrow to improve their livelihoods and an immutable digital record (once established) means that ownership is unambiguous.
- Payments: Digital payments provide benefits of traceability and efficiency in disbursement.
- Supply chains of medicines: Advances in logistic chain management leverages both digital and data analytics to not only improve the tracking and authenticity of medicines.
- Energy: The provision of access to affordable electricity through the introduction of off-grid renewable energy technologies, especially based on solar photovoltaic, has the potential to dramatically improve the lives of the poor.
- Economic growth: Digitization accelerates economic growth and facilitates job creation
- Voting: Overcoming identity obstacles in cost effective ways is also a key to resolving some of the deep seated problems of democratic processes.
- Government Efficiency: Adapting and utilizing digital technologies in government operations can drastically reduce the cost of the government sector, as well as the efficacy of service provision and social impact.
- Financial protection: Financial inclusion for poor families enabled by remittances and mobile/ digital payments
- Direct health incentive payments: Antenatal attendance, specific treatment attendance, immunization
- Improved government responsiveness: Blockchain based polling for social accountability
- Provenance: for drug supplies and agricultural value chains
- Speed, transparency and efficiency in donor fund flows : Donors distribute their funds through systems that are costly, cumbersome, and porous. Blockchain can enable the international development community can increase the impact of the dollars it spends on aid.
International development institutions can help match make technology companies to existing problems and find solutions already being implemented elsewhere in developing countries, and support them to work with local entrepreneurs to mould their technology to fit culture and context of each country.
There is an acute need build the evidence base on the impact of the blockchain use cases and share. There is also a need for new approaches to evaluation that account for the shorter feedback loops of technological experimentation and the need for ongoing data gathering and analysis during design, testing and rollout of a technological solution
Many participants spoke of blockchain collaboration as developing a new global economic system. If we are to realise the promise of a digital future which lifts people out of poverty and creates positive social impact, we have to connect many different worlds and we collaboration with governments; NGOs; development partners; industry, and research institutions.
What happens now?
The size and scale of the OECD Blockchain Policy Forum exceeded expectations. It was a loud message to the global development policy community that they need to be active and at the table of the digital future. The DAC are focussing on understanding how technology can contribute to making development co-operation more effective, impactful and inclusive. They are exploring: a systemic approach to digitalisation; creating an enabling environment for digitalisation and operationalising a digitalisation strategy. Frontier technologies offer an important opportunity to accelerate progress towards the SDGs. It is time to lean in and help shape the new technologies as they rapidly accelerate. I expect the OECD event will galvanise a more systematic and joined up international development approach to the digital future.