The Red Cross has launched a new two-year initiative to use blockchain-based ‘local currencies’ to help facilitate and manage trade and economic activity in local communities throughout Kenya. According to a report from Thomson Reuters, the initiative is part of an effort to help improve local utilization of roughly $1 billion of annual Red Cross disaster relief.
The effort could help rural Kenyans and slum-dwellers address systemic shortcomings in local economies, where Kenyans often have more than enough goods and services to sell but economic activity is constrained by a lack of available cash. As the report notes, there are also inefficiencies throughout many local economies, where even local savings and loans often use paper stored in lock boxes to track and manage transactions.
To counter those inefficiencies and alleviate the lack of cash, the Red Cross societies of Kenya, Denmark, and Norway plan to deploy blockchain currencies in local areas. The currencies will use blockchain technology to record and manage transactions of credits which can be exchanged for goods and services via mobile phone. Those credits can be earned by Kenyans and then spent on the goods they need.
The proposal has already drawn criticism from some Kenyan banks, which have expressed concerns that the new initiative could undercut consumer demand for their loans by enabling Kenyans to create their own local savings and credit pools. However, Grassroots Economics founder Will Ruddick suggested that those local currencies would actually help deal with the estimated $2.6 billion shortfall in credit throughout the developing world.
As Ruddick told Thomson Reuters:
"Those kind of loops are what economies are built on. If they're not there, you end up with the chronic cycle of the Red Cross giving aid every three years because it's not building communities up.”