INNOVATION

COMMUNITYCURRENCIES

Breaking Convention from Traditional Aid Models

When 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

have intensified existing gender disparities in the Kenyan economy. A 2020 study by researchers at Kenya’s Ministry of Health found that amongst youth in Nairobi, females reported significantly more time spent on caregiving and household work, with over 54% of them reporting an increase in financial reliance on others compared to 36% of men. The researchers also noted that with more men facing unemployment and being confined to the household, a skewed division of household labour constrained women’s income-generating opportunities.

For practitioners and policymakers, this highlights the need to accompany emergency interventions with additional support targeted at females, such as temporary employment opportunities, access to microcredit and psychological services. One takeaway here is that small-scale transfers used as an emergency humanitarian response should be seen as an important buffer rather than as a tool for gender empowerment – although large-scale transfers are likely to yield different results.

Looking ahead

Universal basic income, in any form, is not a silver bullet. But studies like this are an important prototype for how we can use new monetary design tools for the purpose of economic recovery and gender-targeted development aims.

The effects of the Covid-19 pandemic have made one thing glaringly clear: most low-income economies are dangerously fragile. Take away people’s ability to work in close contact with each other, and the ripple effects on small business owners, street vendors and day labourers can be devastating.

Aggregate shocks call for unconventional solutions. If implemented correctly, could cryptocurrencies be a tool for economic recovery targeted at women? In these strange times, better to put these questions to the test.

JUNE 2021 YOUTH MONTH EDITION