The Gordian Knot of Humanitarian Financial (Cash & Voucher) Assistance

In this article James Shepherd-Barron suggests that it’s time for humanitarian financial (cash & voucher) assistance to disintermediate and decentralise; be wrested away from the self-serving interests of aid organisations and placed in the hands of a new form of independent ‘humanitarian’ bank capable of transferring funds across borders quickly, privately, accountably and cheaply direct from donor to beneficiary, and in keeping with humanitarian principles.

Thanks to Alexander the Great, “cutting the Gordian Knot” has entered our lexicon as shorthand for finding an elegant solution to an apparently intractable problem. After struggling in vain to disentangle a particularly complicated knot in the Phrygian capital of Gordium in 333 BC, he instead found a neat solution by cutting it through with a single sweep of his sword.

Today, the world of ‘Big Aid’ has turned what should have been a relatively straightforward technical issue of expediting cash transfers into a ‘Gordian’ knot of complexity which fragmentation, competition and vested interest ensure we can’t unravel. Unlike Alexander, we don’t seem able to find an elegant alternative.

In large part this is because we have been struggling to come up with a solution to a problem that doesn’t exist. Blinded by the techno-utopian dream of digital money and the self-serving arguments of our philanthro-capitalist and governmental donors, we have been trying to re-invent the world in our own digital image. Such efforts are hubristic, self-defeating and counter-productive.

If nothing else, decades of working in under-developed and under-banked societies should have taught us all that the rails along which electronic transacting run need to be safe and reliable. This means not just fraud-free and transparent, but with a reliable electricity supply and more or less uninterrupted Internet connectivity; neither of which can be guaranteed in most of the settings in which humanitarians work.

800 years after Alexander’s tussle with the Gordian Knot, Marco Polo came across paper money. This is the same paper money we use today, and we use it because it’s a tried and trusted technology that works. It does something no other technology has yet been able to emulate, that is satisfy the double coincidence of wants reliably, quickly and with minimal friction. It will remain the payment instrument of choice until something comes along that offers similar benefits at lower cost.

Why then are we so focused on fixing something that so demonstrably isn’t broken? Some cynically argue it’s because digitisation offers the most profitable route to the privatisation and de-commoditisation of aid; others that it’s more accountable, quicker, easier and safer. Such arguments are indeed compelling but do nothing to explain why the recipients of our digital largesse convert over 90% of the virtual funds they receive into the tangible alternative as soon as they get the chance.

This charitable instinct is, I would argue, past its sell-by-date. We are in a world of South-South collaboration where our ‘Northern’ models of what works no longer necessarily apply. Aid agencies have struggled to come to terms with the implications of this massive paradigm shift and have tended to see the cash revolution as a threat to their existence rather than a business opportunity to which they must adapt.

The inevitable conclusion is that it’s time for humanitarian financial assistance to be disintermediated and de-centralised; wrested away from the self-serving interests of earnest do-gooding aid agencies in the ‘Global North’ and placed in the hands of a new form of humanitarian banking in the ‘Global South’ that is capable of transferring funds across borders, privately, with full accountability, direct from donor to beneficiary, and in keeping with humanitarian principles.

This doesn’t mean aid agencies have no role, just that it will shift to one where protection, quality assurance and the humanitarian imperative will be overseen by just a small fraction of those involved now.

James Shepherd-Barron, December 2019