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Conflict, fragility and resilience

The 22 billion dollar challenge

 


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Enough quality money to deal with the crises of the future

Death, destruction, danger, despair. What better argument for providing enough quality money – money that arrives in the right place, in the right way, at the right time – than the pressing need to end human suffering?

And yet, many humanitarian crises remain underfunded, unfunded, forgotten. Donors and operational agencies are forced to make hard decisions about which life-saving operations to prioritise, and which to let go. Lives, livelihoods, and the future prospects of whole societies are left in limbo. In short, there is insufficient quality money - money does not reach all those in need, to purchase what they need, when they need it. Human suffering continues unabated.

It is time to take a long, hard look at how to fix the funding problem: how to find enough quality money to deal with the crises of the future. Quality money is not just about writing a bigger cheque; the money also needs to arrive in the right place, in the right way, and at the right time.

That is the 22 billion dollar challenge. This year we will have about 22 billion dollars to help everyone affected by wars and disasters get back on their feet.

How should we best manage those funds, and take those difficult, but necessary, steps towards better humanitarian financing: financing that is fit for purpose in a crisis-prone world?

What is the $22 billion made of?

USD 22 billion: the best estimate for total international humanitarian response in 2013. Government donors (OECD Development Assistance Committee members and others) accounted for three quarters of this, contributing $16.4 billion. Private sources provided an estimated $5.6 billion. Despite this, only 65% of the needs budgeted by the United Nations co-ordinated appeals that year were met.

Of the $13.48 billion from OECD DAC members, most was provided as cash donations (grants). A small amount was also provided as direct technical assistance – skilled personnel, for example urban search and rescue teams, water engineers, nurses and doctors etc. – this type of assistance totalled $129 million in 2013. Some of the funding was provided as goods (for example food or medicines) that will then need to be transported to the war or disaster affected country.

A small, but growing, proportion of the finance is provided as risk finance and transfer mechanisms (bonds, contingent credit lines, insurance with parametric triggers, etc).

Aid can also be provided as loans to affected governments, for example Italy provided $74million of humanitarian loans in 2012. France, Germany, Italy, Japan and Korea have provided humanitarian loans in the past.

It is fairly certain that the amount of funding – the $22 billion – will remain constant in the near future. Certainly, no major growth in OECD government humanitarian budgets is foreseen, given the current global economic climate.

#reshapeaid or #22bn

 What do we know about the quality of the funds?

The funds come from a range of different sources – mostly government budgets and private giving, but also from various other sources such as taxes on air tickets etc.

Funding decisions and pledges happen at different times of the year: government funding decisions are usually made at the beginning or near the end of budget cycles – usually 1 January, 1 April or 1 July, so there is never a full picture of the funding available for a particular calendar year.

Funds can be sent all at once, or payments may be spread across the year. Many donors make two or three payments each year. Additional funding decisions can be made by governments if, for example, there is a major earthquake, epidemic or new conflict – but there is no guarantee.

There is no legal or international obligation to provide humanitarian funds. There are no international agreements, targets or commitments about the volume of humanitarian finance. So, funding is based on goodwill and moral obligation– and thus highly susceptible to things that may erode that moral obligation, such as fraud.

There is also no system to co-ordinate the different revenue streams – even for a new crisis. Staff in one government funding agency are unlikely to know the names or email addresses of staff in another government’s funding agency – even if they are working on the same crisis country or region. 

The cash is provided in a range of different currencies – EUR, USD, AUD, JPY, GBP, etc. – but expenses are mainly in US dollars; creating significant currency exposure for the broader system.

The time delay between agreeing to provide funds (pledging) and cash actually arriving in organisation’s bank accounts can be significant – often months, sometimes years. This is also the case with major pledging conferences, such as that for the Syria affected region: pledges may take a long time to turn into cash.

Governments of developing countries affected by wars and disasters rarely spend very much money on meeting the needs of their citizens. This is mostly because they lack liquidity – sufficient cash flow – in the aftermath of a disaster, and so cannot respond, even if they want to. Funding directly to disaster affected countries – as happens in the Pacific – can help overcome cash flow problems, and avoid expensive international responses.

Can these funds be used any way we like?

 Humanitarian funds often come with conditions – 85-90% of funds must be spent on certain wars or disasters, within a certain timeframe, and/or on specified activities.

Funds that are provided with “no strings attached” are often used by organisations to fund their overhead costs (mostly their headquarters costs and their fundraising costs). Other organisations deduct a service charge from funds received for humanitarian operations to pay their overheads.

Funds are mostly given directly to organisations who implement the response – dictating what type of aid will be provided: funds provided to a food organisation, for example, will not be used for providing water.

Funds are often passed on from one organisation to another, which can create a long chain of service charges and increase the time taken to respond. For example, funds can be provided:

  • Direct to organisations who supply goods and services
  • To organisations (for example United Nations agencies) who pass them on to other organisations (for example international NGOs), who may provide goods and services, or also pass the funds on again (for example to local NGOs)
  • To common (pooled) funds, often (but not always) managed by a United Nations agency, who then pass the funds on to operational organisations (who may again pass them on)
  • Direct to affected states, especially in disaster situations.

A growing amount of funding is provided in the form of cash (often through debit cards). However, this cash is mostly managed by humanitarian organisations – and a service charge is removed.

 How do we know we are getting maximum value for money?

The cost of responding to wars and disasters has increased by 660% since 2000, when the world committed to the Millennium Development Goals (figures adjusted for inflation).

There is no system to prioritise the use of resources.

There is very little economic modelling in the sector – resulting in very little consideration given to cost-benefit analysis and comparing scenarios.

Many of the goods (food, medicines, tents etc.) could be bought in bulk when market prices are low, but often they are not, because organisations are never sure when funds will arrive.

Organisations receiving funds fiercely guard their independence, which includes resisting calls to be more transparent and accountable for their costs.