As the turbulent situation in Afghanistan unfolds, while on the other side of the world another devastating earthquake has hit Haiti, there is an especially tragic relevance to World Humanitarian Day celebrated on 19 August this year. The climate crisis with its increasing and ever more severe droughts, forest fires and catastrophic floods are further exacerbating humanitarian crisis. This tragic potion of conflict, climate emergency and the Covid-19 pandemic has led to extreme poverty rising for the first time in 20 years.
While climate change is expected to lead to another 300 million forcibly displaced people in the next decade, it is by no means the only humanitarian crisis. According to the UNHCR, at the end of 2020, 82,4 million people had had to flee their homes or had been forcibly displaced as a result of conflict, violence, or human rights violations, representing the largest displacement of human population since WWII. Sadly, just five countries produce 68% of all refugees displaced abroad: Syria, Venezuela, Afghanistan, South Sudan, and Myanmar.
In 2021, 235 million people will need humanitarian assistance and protection. Neighboring countries, which are mostly in the global South, typically bear the vast majority of refugees, being particularly burdensome due to their limited financial and administrative capacities. Nonetheless, there is a strong presumption that, with sufficient international financial and technical support, the impact of refugees on the host community can be positive. To not have to solely rely on international financial aid, however, economic inclusion is imperative to the self-reliance and resilience of refugees, with an increasing number of impact investors seeing the opportunity in empowering them as economic actors. While still a new movement, a number of innovative financing mechanisms are already underway, such as:
1. The International Committee of the Red Cross (ICRC) launched the world’s first Humanitarian Impact Bond to build and run three new physical rehabilitation centers in Nigeria, Mali, and the Democratic Republic of Congo to serve people wounded in conflict.
2. In 2017, Kiva launched its World Refugee Fund, which works by crowdfunding loans to support refugees and IDPs in the Middle East, Africa and Latin America.
3. The Small Enterprise Assistance Fund (SEAF) is developing the Forcibly Displaced People’s private equity fund.
4. Convergence, an online Blended Finance transaction platform, announced that it will award a grant to Kois Invest for the design of a development impact bond (DIB) to fund employment integration interventions for Syrian refugees in order to offer them a sustainable future.
Whether climate change forcing a growing numbers of people to leave their homes or low economic growth leading to instability, violence, and ultimately, forced migration – investing in refugees is critical to achieving the SDGs.
Do not miss it
During Building Bridges week, one event will be dedicated to the various financial innovations for humanitarian purposes, drawing across the capital spectrum: grants, impact bonds, debt and private equity funds. The event will demonstrate that even difficult humanitarian situations can be addressed, in part at least, by financial innovation and private sector investments.
* A chronicle of the Building Bridges Community prepared with the support of Sustainable Finance Geneva and the AlphaMundi Group. Written this month by Nora von Wintersdorff, Fellow at AlphaMundi
