MENTHER INNOVATION
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Y T I N U M
CURRENCIES
Breaking Convention from Traditional Aid Models
hen most people think “cryptocurrency”, they imagine teenagers mining Bitcoin in their basement. They seldom think of rural women in Kenya buying tomatoes on the blockchain. At least, this is what I thought back in 2019 when I started working with a Kenyan nonprofit that has been tinkering with alternative currency models for the past decade. Grassroots Economics argues that most aid models do little to address the structural causes of poverty – and in times of economic crisis like the Covid-19 pandemic, what you really want is a tool that addresses both people’s immediate welfare needs and the longterm economic resilience of the community. They propose something radically different: instead of giving people lump sums of national currency, sign them up to join a community currency network, where they receive universal basic income in the form of non-interestbearing digital tokens. What makes Grassroots Economics’s Sarafu Network unique is that the program uses a
decentralized ledger on an opensource blockchain, enabling transactions to be tracked in real-time. Tokens can only be spent with other members of the network and are therefore designed to encourage local trade. In other words, think “Bitcoin”, but applied solely for the purpose of socio-economic development.
A twist on conventional aid approaches
So just how well do these cryptocurrencies work as a form of emergency aid? Last year, I conducted what may be the world’s first randomized control trial (RCT) on community currencies. I transferred $30 in
the form of community currency tokens to roughly 400 individuals living in Nairobi. The transfers were sent out in weekly batches of $10 and ran for three weeks between November 2020 and December 2020. Two months later, when I compared community currency transfer beneficiaries to individuals in the control group, there were notable increases on several important indicators. Beneficiaries showed a $93.51 increase in their available wallet balance, a $23.17 increase in monthly income, a $16.30 increase in monthly spending, a $6.31 increase in average trade size and a $28.43 increase in expenditure on food and water.
Gender matters, a lot
One result that stood out was the stark difference in the magnitude of impacts for male versus female beneficiaries. Female beneficiaries’ wallet balances were still higher than the control group, but 91% lower than their male counterparts. Their average trade size and number of sales reflected a similar pattern. These results say a lot about how the effects of Covid-19
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