Blockchain technology for partnerships at eye-level

The management and distribution of donor funds is a tricky business. While donor institutions worry about misappropriation, recipients are sensitive about being monitored and restricted. KfW, the German development bank, has developed a completely new, innovative approach that facilitates trust in cooperation. TruBudget is a platform based on blockchain technology, allowing public investments to be carried out transparently and securely in developing countries. KfW is currently testing TruBudget in cooperation with Burkina Faso’s Ministry of Finance and other partners.
The Brazilian Development Bank BNDES has become the first institution to use TruBudget in its procedures and IT-systems. picture-alliance/NurPhoto The Brazilian Development Bank BNDES has become the first institution to use TruBudget in its procedures and IT-systems.

TruBudget (Trusted Budget Expenditure) is a KfW-created digital work platform for partner countries. On that platform, all of the government agencies and donor organisations that are involved in a development project can document and track every action and disbursal. TruBudget is a trust-enhancing workflow tool for business partners who do not have access to a shared IT system.

Every user action is stored in a so-called blockchain, a continuously expandable list of data sets. Once data has been saved in a blockchain, it cannot be changed. Counterfeit and revisions are impossible. Moreover, the data is not stored centrally on a server or on the computers of a single company. Instead, the documentation is decentralised on the computers of all users. That is what makes the system so secure. Information cannot be lost and is protected from retroactive forgery.

These features of TruBudget create enormous advantages. For example, every partner can access up-to-date information about the status of every project in real time. There is no need for cumbersome communication. The new system stops endless e-mail correspondence for requesting updates, sending reminders or exchanging various versions of reports. The agreement process is vastly simplified by the fact that all partners can base decisions on identical, up-to-date information.

Furthermore all information entered on the platform is reliable. Everyone can immediately see who decided and initiated what and when. Even in cases of fraud (which are still possible), the responsible party can be clearly identified thanks to the fraud-proof protocol. This kind of transparency not only facilitates permanent peer control, it also increases the pressure on whoever is responsible for taking the next step.

TruBudget can significantly lower high transaction costs that arise from cumbersome coordination and control efforts. As a result, official development assistance (ODA) becomes more targeted and measures are taken more effectively. That is exactly in line with the goals of the Paris Declaration on Aid Effectiveness (see box).

With support from Germany’s Federal Ministry for Economic Cooperation and Development (BMZ), the Ministry of Finance of Burkina Faso has developed its own version of TruBudget. Going forward, it may yet be used for implementing all donor projects. Séglaro Abel Somé, Burkina’s deputy minister of finance, says he expects the new application to improve information concerning donor funding, leading to more effective budgeting.

TruBudget has been designed to be easy to use. All that partners need is an internet connection, though it neither has to be permanent nor particularly fast. Work steps are processed either on TruBudget’s user interface or via partners’ own workflow programmes, which are linked to TruBudget through a digital interface (API). The platform therefore makes partners’ cooperation not depending on the respective IT systems they use. Moreover, the digital interface eliminates the need for manual and error-prone entries into other databases. Burkina Faso’s Ministry of Finance and Planning particularly appreciates this aspect as today’s data compilation can be very cumbersome.

Brigitte Compaoré Yoni of Burkina Faso’s Ministry of Finance says: „Thanks to TruBudget, we are finally able to compile reliable and comprehensive data on individual donor disbursements.“

TruBudget was designed to serve as an instrument for partner countries. Decisions about governance and access rights are left up to any government that wants to use such a platform to implement donor-financed projects or programmes. Accordingly, KfW designed the application with open source software. The source code of open-source software is publicly visible and usable. TruBudget is available to anyone free of charge.

TruBudget has been designed to be so flexible that it can serve other purposes. One example is the management of vaccination supply chains. In this case, the software will record stages of delivery, from ordering to transport to arrival in a village. GAVI, the international vaccine alliance, is currently exploring the use of TruBudget in financial management as well as in vaccine supply chains. Other applications, are conceivable as well, for instance the monitoring of contract conditions. The software could also be coupled with other innovative approaches like open data or artificial intelligence (AI).

Alongside Burkina Faso’s Ministry of Finance, the Brazilian Development Bank BNDES has become the first institution to use TruBudget in its procedures and IT-systems. The application is being used to manage the Amazon Fund, though only for individual processes for the time being. Ethiopia and Georgia are also planning pilot applications for KfW-financed programmes. The BMZ is supporting these initiatives. The goal is to ensure access to digital technologies to all countries.

In TruBudget, we finally have a tool that allows donors to use partner systems with an acceptable level of risk. Donor money can thus be included directly and in a safe way in a partner country’s budget process. This approach serves effectiveness and sustainability. The big question now is whether the governments concerned and the donor organisations they cooperate with will consider this technology to serve their interests. More than ever, donors will be assessed according to how much they want their support to actually promote the structural independence of developing countries. This is a paradigm shift, made possible by new technologies. Unfortunately not everyone has accepted it yet.

Piet Kleffmann is the director of the TruBudget task force.

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