Finding ways to channel more private investment into humanitarian settings was a hot topic this year at Davos — the World Economic Forum’s 48th annual meeting in Switzerland — which included the tentative launch of a development impact bond to create jobs for Syrian refugees.
The IKEA Foundation said it will provide €6.8 million ($7.7 million) to fund the outcomes of the bond, which has been put together by impact finance firm KOIS, and aims to help up to 12,000 Syrian refugees and host populations in Jordan and Lebanon earn a living.
New research by British think tank the Overseas Development Institute shows that job creation activities have the potential to offer a financial and social return on investment. But some delegates expressed reservations about the role the private sector should play in financing humanitarian efforts.
Mark Lowcock, head of the U.N. Office for the Coordination of Humanitarian Affairs, said that while he sees a big opportunity for the private sector to come in where there are “investable activities,” it is important not to assume too much from investors and businesses that are ultimately profit-driven.
The development impact bond is part of a broader effort to attract new financing for humanitarian efforts in the face of an increasing number of protracted crises. Between 2005-2017, the number of active crises nearly doubled from 16 to 30 and the average length of active United Nations interagency appeals also increased, according to UNOCHA. Despite these growing needs, donor financing has not kept pace. Experts also say funding needs to be longer-term and to embrace the humanitarian-development continuum in order to reflect the extended nature of the crises.
Per Heggenes, CEO at the IKEA Foundation, said that financial tools such as development impact bonds could help bridge the funding gap. “The needs are increasing, and we can’t expect it all to be covered by donors; we have to look to involve the private sector partly on the funding side but also [for] their knowledge and networks which can be more valuable than just money.”
Speaking during a session Tuesday, Peter Maurer, president of the International Committee of the Red Cross, said aid actors tend to see fragile states as “places where it is impossible to do something.” While many organizations are working on income-generating activities, they tend to be “left alone by the international aid system,” he said.