This document provides a summary of discussions from the Future Humanitarian Financing (FHF) cross-sector dialogues held at  King’s College London on 29th October 2014 and at CAFOD on 3rd November 2014.

Emerging themes

    • The existing humanitarian architecture is exclusive of many important actors, not least domestic governments and civil society actors. In addition to nation states, networks are increasingly important political and economic actors. Our current approaches are often state-centric and fail to adequately engage networks such as Diasporas, faith and business networks.
    • The contributions of existing and potential financing actors are not optimally configured according to comparative advantage and area of responsibility and there are unrealised potential synergies to better align different types of financing investments – notably development, climate and humanitarian.
    • Humanitarian actors are not yet taking full advantage of opportunities to benefit from the expertise, capacity, resources and influence of the private sector. There is a need to better understand the specific interests and comparative advantages of private sector actors and to determine areas of ‘shared value’ and opportunities for joint ventures. Humanitarian actors also need to move beyond a generalised rhetoric around improving partnerships to be realistic about working with the private sector and their ability to maintain a principled approach.
    • There is an obvious ‘quick-win’ in better use of analysis and forecasting including market analysis currently undertaken by private sector actors.
    • There is a compelling need to invest in developing financial products and mechanisms which release funds based on early indicators of crisis.
    • Our current approaches to understanding humanitarian needs may not be adequate to understand an increasingly diverse ‘portfolio’ of financial flows and assistance which affected populations may receive, which may include domestic or international humanitarian assistance/relief, government sponsored social protection payments, insurance payouts and remittances.

The following sections elaborate major discussion themes examined during the dialogue events.

A more open and inclusive humanitarian enterprise

Rising global actors may not be interested to engage with the traditional system on its existing terms, which may be perceived as cumbersome and exclusive, and may instead establish their own procedures, models and principles. Currently, ‘traditional’ humanitarian actors have failed to engage meaningfully with these actors.

The world increasingly works through networks in addition to and alongside nation states. But our existing humanitarian approaches are based on engagement with nation states. Meanwhile, global and regional networks, including Diasporas, faith and business networks are playing a growing role in meeting the financial costs of responding to crises. We are not currently cognisant of or engaged with these types of networks. Indeed adapting to engage with networks will be challenging – particularly where short-lived networks emerge in response to specific situations.

There is a clear need to reconfigure the existing humanitarian system to reflect the full diversity of financing and responding actors and which is adapted to meet the decision-making and accountability needs of different contexts. Broadening participation will likely require the formal western humanitarian system to cede control.

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Synergies between humanitarian, climate adaptation and development investments

There are strategic, intellectual, operational and financial synergies that can be reached between the humanitarian, development and climate adaptation communities, which could improve the efficiency and effectiveness of these investments. Currently emphasis is placed on achieving shared understanding of risk and joint planning – coordinated financing approaches have yet to receive similar levels of attention. The common appeal of building resilience is likely to be the galvanising concept which will bring these actors to the table. But, achieving greater synergies will be dependent on improving development financing, which is currently fragmented, slow and poorly configured to ‘pick-up’ where humanitarian financing ends. Existing pooled funds may be useful ‘centres of gravity’ around which to build alignment and coordination. In addition, humanitarian actors may need to draw sharper boundaries around the outer-limits of humanitarian action and to re-focus on their core competencies in meeting acute needs, particularly in conflict and other contested settings.

 

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Working effectively with the private sector

Capacity and resource challenges of the future cannot be handled by the humanitarian community alone. Meanwhile, the private sector has a keen interest in stability in order to ensure business continuity. The comparative advantage of the private sector for humanitarian action is not however a source of cash, but rather a potential source of skills, technology and influence. Many examples were cited of businesses helping to improve humanitarian systems and processes in planning, forecasting, rapid scale-up and down of operations, supply chain management, market analysis and communication. The private sector may also be a strategic ally in fostering innovation: businesses may be more accustomed for example to tolerating an unpredictable rate of return on investments in pursuit of developing new approaches and may already have invested in developing research and development expertise and capacity.

But currently humanitarian actors are often un-clear about what specific ‘asks’ they could address to the private sector and are potentially naïve about the interests, priorities and approaches of private sector actors. Other areas of international engagement, notably in risk and resilience, are much more advanced than the humanitarian community in establishing networks for sustained dialogue and engagement with private sector actors.


Disaster risk insurance

Risk Transfer key conceptsInsurance guarantees a degree of resilience against risk and works best as one element of a diversified set of ‘ex ante’ measures to meet the cost of disasters. Population growth in disaster-prone areas is driving demand for insurance in developing countries. There is also a correlation between economic growth and growth in demand for insurance whereby higher GDP per capita correlates with higher demand for insurance as people look to protect their accumulated assets. The global insurance and reinsurance industries also have a strong interest in expanding into new markets in order to diversify their portfolio of risk.

There is potential for insurance to expand significantly into covering natural and pandemic health disasters utilising new technologies and approaches to measuring these risks. Humanitarian actors have in some instances partnered effectively with insurance providers and development actors to design insurance products adapted to the needs of resource constrained and disaster vulnerable populations.

We can expect therefore an expansion in the provision of and role for insurance in meeting the cost of disasters in developing countries. But insurance is not able to protect against the risk of conflict – which in practice is a major driver of humanitarian financing needs. And where insurance is viable, it is likely to be most effective when combined with a ‘bundle’ of other types of resources and assistance including social protection measures supported by governments, international and domestic humanitarian assistance or relief and remittances.

 

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PTDC0028Innovative financing

Innovative Finance KCThere is frequently a significant gap between when humanitarian funding is needed and when funding is available. Innovative financing models and approaches may offer lessons which could alleviate this problem. Development Impact Bonds (DIBs) provide significant upfront capital from investors to deliver programmes against a set of mutually agreed results or outcomes. The focus on results also promotes greater experimentation in programming approach to achieve the agreed programme results. Such an approach may be transferrable to slow-onset disasters where early availability of funds promotes improved humanitarian outcomes and reduced overall cost as compared with a humanitarian response to late indicators of humanitarian need.

There are however, additional costs associated with models relying on private sector financing which require a return on investments and it is by no means clear that investments in humanitarian contexts would offer attractive or reliable returns sufficient to attract investment from purely commercial actors. Such investment models may be suitable for programmes targeting improved resilience and may help to foster programming innovation and experimentation. It currently remains more cost-effective however to finance humanitarian response through grant funded mechanisms. However the timeliness of funding could be considerably improved through mechanisms which rapidly release funds in response to pre-agreed triggers.

 

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About the Future Humanitarian Financing Initiative  

FHF is convened on behalf of the Inter-Agency Standing Committee (IASC) task team on humanitarian financing and is led by a steering group comprising CAFOD, the UN Food and Agriculture Organisation (FAO) and World Vision and funded by the Government of Germany and FAO.

The purpose of the FHF initiative is to discuss the potential of new and emerging approaches to financing and investigate how these might support both a more open and adaptive humanitarian endeavour as well as new business models fit to meet the changing nature and scope of humanitarian crises.

The FHF initiative will follow a multi-stakeholder exploration of the potential and implications of financing approaches used outside, and at the margins of, the humanitarian sector – including the opportunities and risks these pose to the key actors and current modes of humanitarian response.

Dialogue events were held in London and key centres of regional humanitarian coordination including Amman, Dakar and Bangkok, with a final synthesis to be held in Geneva in January 2015.

Expected outcomes of the FHF initiative include:

  • a more robust understanding within the humanitarian community of the characteristics and comparative advantages of alternative financing approaches – and their potential to address humanitarian needs;
  • a set of recommendations for the IASC Principals and members that will constitute an agenda for research, experimentation, adaptation and engagement with emerging financing approaches as well as linked recommendations proposing adjustments to existing financing approaches;
  • the beginnings of an expanded collaborative network of humanitarian financing actors, which may be developed and sustained beyond the lifetime of the FHF initiative.

 

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