Blockchain & Social Empowerment

Blockchain may be able to address various factors of poverty and provide an alternative.

The application of blockchain technology in supply chains is growing due to the transparency and accuracy of the tool in data tracking and monitoring transactions between multiple parties. Blockchain is also relevant in empowering disadvantaged communities, especially in societies seeking social fairness and access.

Commonly thought of as a digital and decentralised ledger that records all transactions in a supply chain, blockchain is often associated with digital currency or tokens. Every time someone buys a good or service with tokens, a ledger records that transaction. The “blocks” are hence digital pieces of information that store information about the transactions like the participant, date, time and dollar value, using a unique code called a “hash” to distinguish the different blocks of information.  Blockchain hence offers a much faster processing time than traditional transaction processes.

But blockchain has far wider potential than just facilitating online transactions. It has the ability to transform lives in the developing world. The World Bank defines poverty as living on less than US $1.90 per person per day; and it is estimated that there are about 1.3 billion people that fall under this category in the world, roughly over a fifth of the total global population. Causes of poverty are often due to economic circumstances, lack of opportunity and low levels of development. Blockchain may be able to change this.

The lack of digital capacity is no longer a limiting factor as anyone with a smartphone can use blockchain applications.

Securing Trust 

The poor are typically disconnected from banking and credit facilities. In less developed countries, people may not even have any form of documentation, which means that they cannot prove their identity or title to a property, and cannot access basic services. Recognising this problem, blockchain offers the means to use digital tokens as the best means for the poor to pay their bills or to secure microloans to buy goods to enrich the quality of their lives. 

Blockchain’s decentralised nature assists microfinance institutions in removing the need for mediators or trust authorities. The use of blockchain furthermore helps people in trusting each other rather than centralised institutions to obtain loans. With blockchain microfinance, small businesses and farmers can access loans by having a digital identity with efficient payment of loans made possible through smart contracts based on appropriate terms and conditions specified for repayment. 

Shanzhai City (SZC), a Hong Kong-based organisation, has created a platform on Impact Oxygen Protocol for communities to build their own capacity in financial and data literacy instead of having to turn to external aid or intervention. This enables communities to foster local informal economies in a decentralised environment through social finance solutions that are linked to impact measurement and consensus-based outcomes as a result of financing. In addition, SZC has created a toolkit to fit different types of needs and scales for capital deployment within the poor. The ultimate goal is to allow communities to form their own development finance organisation (either as centralised or decentralised or a hybrid), according to local economic situations or cultural values that have their own unique systems of trust.

“The use of blockchain furthermore helps people in trusting each other rather than centralised institutions to obtain loans.”

Blockchain technology has far greater potential than just facilitating online transactions. 

Selected by the World Food Program in their incubation program, and in partnership with Bolavan Farms, a sustainable agriculture social enterprise in Laos, and GrainPro, a low-tech seed storage solution company, SZC designs a "Decentralised Seed Bank" solution with 20 plus village cooperatives in Laos to tokenise seeds in storage for financing and liquidities. Although most farmers practice seed storage in their households or village communal spaces, they have been unable to leverage these seeds as valuable assets that can become collateral for financing. With blockchain, building on existing practices of seed storage in the villages, the farmers have been able to turn the ‘banked seeds’ in communal storage space into tokens, which can allow seed owners to utilise these tokenised assets for financing, e.g. collateral for lending and borrowing.

Farmers are able to “tokenise” seeds in storage for financing and liquidities.

Protecting Labour Rights

Another role where blockchain is making a social impact is in labour rights. Estimates of the number of people in debt bondage, coerced labour or being trafficked is around 42 million worldwide. A large proportion of these “modern slaves” is in Asia, particularly in the agriculture and fishery industries, where migrant workers are involved. Blockchain can be used to protect workers’ contract terms, verify salaries and avoid debt bondage (caused by workers paying agencies large sums of money to secure jobs overseas). In labour supply chains, many parties are involved including brokers, employment agencies, operators, NGOs and major brands, all of whom are seeking access to information and asking themselves, “How do I know what I am looking at is the same as what the worker agreed to?” 

The Mekong Club, an NGO focused on modern slavery in private sector supply chains, has been piloting the use of blockchain with its partner technology company, Diginex.  Both the Mekong Club and Diginex believe that there are large factions of identifiable migrant workers whose contracts could be stored on blockchain. Backed by major brands who are concerned about labour abuse in their supply chains, blockchain technology can help companies and government fight modern slavery.  

Blockchain can bridge the gap of trust between people rather than depending on a centralised institution.

The effectiveness of blockchain is often questioned by many due to the lack of digital capacity in the poor to adopt this technology. Diginex points out that many workers, regardless of status, possess a mobile phone and can use this for blockchain applications if it is shown to be an effective way of self-protection. The company is currently working with migrant workers in aquaculture in Thailand, the F&B sector in the Middle East and the plastic industry in Malaysia, to prove this point. 

Despite the evidence that blockchain can resolve many social problems, governments and companies are reluctant to adopt this technology. This is due to legacy systems and the resistance to change them. However, blockchain has the potential to be a powerful innovator in social good. From a supply chain perspective, it not only makes the information robust and transparent but also makes the transaction process more efficient. The key to success is scale and adoption. The technology is ready to use, but to sell the idea, it has to be framed in terms of the huge benefits that employers, as well as workers, will receive, making the world a better and more sustainable place ultimately for all.

“Blockchain can be used to protect workers’ contract terms, verify salaries and avoid debt bondage.”

Contribution by:

Dr Thomas S. K. Tang is currently an Advisor for Atlas Industries (Vietnam) Ltd and also the Sustainability Advisor for The Purpose Business.