Financing and Blockchain in Africa: building trust

By BRIOT Julien

To participate in reassuring not only civil society but also and above all donors and investors, the establishment of a blockchain system could be a convincing technological solution.

Some countries such as Comoros, Ghana, Sierra Leone and Burkina Faso have fully understood this and are currently experimenting with it. Its effect is more than positive.

A solution allowing greater transparency and better management of funds

The blockchain is an unalterable digital register, built on the basis of a consensus between the participants in all the stages or sequences of an operation. Thus, concerning loans and donations to States to finance clearly identified projects, a blockchain would be able to identify for each project, the amounts loaned or given, and their use “euro by euro”, from the date of the disposition of the funds until that of the last expenditure.

All those involved in the use of funds contribute to the enrichment of the database (each block corresponding to the stages of financing) and control the proper management of these funds.

To guarantee the reliability and integrity of the data, the blockchain uses “miners”, chosen from among its stakeholders (participants in the funded project, contributors or readers) who, according to predefined rules (conditions of use of the funds) validate the information before registering it (forever) on the blockchain. The blocks of information, timestamped and added to the chain, can no longer be modified and become electronic proof of the proper use of the funds (complex subject of proof in this matter of encrypted information).

The implementation of the blockchain to help create trust in the allocation of funding, including in the context of development aid

More than nineteen years after the adoption of the Merida Convention (whose objective is to fight against corruption and work for international cooperation in the fight against corruption, whether directly or indirectly, it that is to say in areas that are the direct consequence of corrupt practices, such as money laundering), the effective implementation of the principle of restitution to the populations of embezzled public assets is not necessarily achieved. you.

The results of a study commissioned by the World Bank on February 18, 2020 show that on average 7.5% of the institution’s disbursements for the benefit of developing countries are diverted to offshore financial centres.

If blockchain had been in place for these disbursements, out of $100 million, up to about $7.5 million likely would not have been misappropriated. At each stage of the decision, the various participants should have approved the decision of the other participants, controlled each stage of the operations and thus made it possible to avoid any fraudulent act. With the blockchain, all stakeholders are therefore contributors to the database but also, at the same time, controllers of the proper management of funds.

All lenders and donors as well as civil society will thus be able to regain confidence in the proper use of funds loaned or donated for the financing of projects, particularly within the framework of development aid.

The blockchain can be a tool or even the tool at the service of all to participate in better ensuring good governance in the monitoring of certain financial flows with the continent and therefore its development for the benefit of all.

Julien BRIOT is a compliance expert who has worked in various activities (in energy within the management of Total E&P, in the financing of infrastructure projects, in a French State investment vehicle, in the banking sector at BNP Paribas, Edmond De Rothschild and BMCE Bank) and internationally (France, Maghreb, Luxembourg and Senegal).

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