The rising instance of conflicts and natural disasters in recent years has driven up the need for humanitarian aid, but never before have provisions been so inadequate. According to the United Nations Office for the Coordination of Humanitarian Affairs, 125 million people require humanitarian assistance yet the funding gap looms at an estimated $15 billion and counting.
To address this critical issue, U.N. Secretary-General Ban Ki-moon commissioned a high-level panel of experts who recently released their findings in a report titled, “Too important to fail — addressing the humanitarian financing gap,” in advance of the World Humanitarian Summit, which will take place next May in Istanbul, Turkey.
“We are living in the age of the megacrises,” Ban told reporters at a press conference. “But, as this report clearly demonstrates, the gap in funding is a solvable problem.”
Here is what the panel identified as three interdependent challenges to sufficient humanitarian financing and what needs to be done to overcome them.
Reduce the needs
The most effective way of dealing with growing humanitarian needs is to address their root causes. This approach necessitates a strong will among the most powerful global leaders to prevent and resolve conflicts and mitigate the effects of natural disasters.
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Since longer-term development programs are the best resilience builders, the report suggests that official development assistance should focus on vulnerable countries and be reoriented towards the reduction and prevention of damages caused by climate change and armed conflict as opposed to just financing projects after the need arises.
Aside from ODA, there should be systematic investment in resilience building, which includes dedicated international funds for peace building and conflict resolution.
Countries most at risk of natural disasters must also create room in their budgets that will enable governments to provide resources for any desired purpose, including humanitarian response, without jeopardizing their financial stability. They also need to generate local and national capacity for crisis prevention and response, particularly with regards to disaster risk reduction.
The Sendai Framework for Disaster Risk Reduction 2015-2030, which was adopted at the third World Conference on Disaster Risk Reduction, emphasized the importance of risk management and resilience building.
Applying it would directly reduce humanitarian needs and associated costs since 20 percent of humanitarian financing requirements are used to respond to recurring and sudden natural disasters. But current investments are inadequate. For every $100 spent on development aid projects, only 40 cents went towards adapting to natural disasters and mitigating its effects.
Donors should provide development finance in protracted crises and, whenever possible, make a stronger push for joint humanitarian-development financial programming. In 2014, humanitarian aid became the U.N.’s most expensive initiative, surpassing peacekeeping by $2 billion. Protracted crises are the single-largest driver of these exorbitant costs with $8 out of every $10 of humanitarian funding directed towards conflicts, most of them lasting over seven years.
The ensuing 60 million refugees and displaced people are increasingly coming from or going to middle-income countries particularly Jordan and Lebanon, which host millions of Syrian refugees. But the eligibility criteria for the International Development Association, the arm of the World Bank that focuses on the world’s poorest countries, is based on gross domestic product, which renders Jordan and Lebanon ineligible for funds.
The IDA needs to be reclassified to build the resilience of MICs by giving them access to its grants and low-interest loans. To ensure that low-income countries receive adequate assistance, the IDA’s Crisis Response Window funding should be increased by at least threefold.
Deepen and broaden the resource base for humanitarian action
In an interconnected world, humanitarian donors should explore new models of funding global public goods. While a financial transaction tax, or Tobin Tax, which would be imposed on all share, bond and currency transactions, seems unlikely in the near future, the report dubs voluntary “solidarity levies” or a global tax, for instance, on airline tickets, as a viable means to provide health care for displaced people.
Since 2004, a group of countries led by France has considered that option. The additional air ticket levy is not a global tax in the strict sense of having a single agreed-upon rate with an international body that has the power to enforce it and collect funds. It is more of a domestic tax that several countries have agreed to organize and implement in support of the nonprofit UNITAID. Between 2006 and 2011, UNITAID raised 1.6 billion euros ($1.75 billion) by imposing an air ticket levy in just 10 countries, helping to fund treatments and diagnostics for communicable diseases in low-income countries.
The humanitarian community should attract new donors and secure new finance sources by guaranteeing that their efforts receive suitable recognition in the key tracking systems for humanitarian aid. Donors should also develop and promote more risk financing tools for disaster-prone countries.
Since the vast majority of people affected by conflict live in Muslim countries, the humanitarian community should take advantage of the potential for Islamic social finance to meet humanitarian needs. In December 2014, the International Finance Facility for Immunization, which is backed by nine sovereign governments, issued its first sukuk — Islamic bonds — totaling $500 million over three years, in the largest ever debut issue by a global nonprofit.
A second sukuk was issued in September 2015 raising $200 million and was oversubscribed by 1.6 times. Sixty-five percent of investors came from the Middle East. IFFIm will use the proceeds to finance projects for Gavi, the Vaccine Alliance, which dedicates half of its funding to immunization campaigns in 33 Muslim-majority countries, such as Yemen and Indonesia.
In terms of the private sector, businesses should be encouraged to provide in-kind contributions in anticipation of emergencies with the U.N. Global Compact creating opportunities to tap into assets and skills. Businesses have the creativity and resources to provide new approaches to aid delivery and modernize transparency and accountability.
The public is also donating more. Funding from individuals, foundations and companies has grown from 16 percent of recorded humanitarian aid in 2006 to 24 percent in 2014 (with individuals accounting for nearly 80 percent of private funding). But because private fundraising can be irregular, costly and competitive, humanitarian donors should develop international media platforms for more systematic and predictable individual donations.
Improve delivery: A ‘grand bargain’ on efficiency
Donors shouldn’t be enticed just to give more, but to give better by being more flexible. In exchange, aid organizations will exercise greater transparency and cost consciousness. This concept is called a “grand bargain,” one that eliminates inefficiencies and adopts best practices in humanitarian action. It has three main elements.
1. Financial transparency: Aid organizations and donors should combine forces to improve financial transparency, an oft-criticized topic that impedes their ability to garner greater public support. Also, more aid should be localized and cash given directly to the affected people to empower them to make their own decisions. A 2014 study found that 70 percent of a sample group of Syrian refugees in Iraq traded in-kind assistance for cash. Yet, only 6 percent of all humanitarian aid is given through cash or vouchers.
2. Cutting costs: Aid organizations should look for new ways to reduce overhead and management costs to maximize the amount of funding directed to people in need. Various initiatives led by the U.N.’s High-Level Committee on Management indicate substantial savings in time and cost. For instance, the U.N. offices in Geneva have reduced expenses by roughly $30 million annually by working with other U.N. offices, NGOs and the private sector to establish common procurement practices and reduce expenses in areas, such as travel and utilities. Aid organizations need to encourage initiatives that enhance efficiency, including periodic functional reviews on expenditures and avoiding duplication while conducting more joint and impartial needs assessments.
3. Rethinking donorship: Donors must commit to more multiyear humanitarian funding with fewer earmarks to maximum their impact. Initiatives like the Good Humanitarian Donorship support flexible funding, but the majority of financial contributions are still earmarked to varying degrees. In 2013, 81 percent of government funding provided to the main six U.N. agencies was earmarked, up from 15 percent a decade earlier. Reporting requirements should also be simplified and improved.
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