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Crisis funding - how much do we really know?

With the recent, landmark IPCC study highlighting more frequent and severe disasters, how can we ensure funding for crises gets to where it's needed, fast?

I’ve been working in humanitarian policy for twenty years and assumed that for the most part, I knew how emergencies were funded. After all, the ability to put pressure on funders for more money and to find creative ways of doing so is a critical element of a humanitarian policy adviser’s job. However, after recently working on a study for the Centre for Disaster Protection and Development Initiatives, looking at funding flows to nine crises, I was surprised to find some of my assumptions challenged.

In the recently released ‘Funding Disasters’ report, I worked alongside other experts to analyse international financial flows to nine countries for the 18 months after they’d been hit by crises. The purpose of this work was to gain a better understanding of how funding flows in crises, and what needs to change to make sure that money is used in the most effective way possible to protect lives and livelihoods.

There was a lot of data which took months of work to analyse. There were several findings that were to be expected, including:

  • Funding was insufficient. This inevitably increases suffering for people impacted by disasters as responders have to ration funds and assistance, making hard choices about who gets support and who does not.

  • Funding was late. Only 2.3% of all funding was pre-arranged, all the rest had to be found after the crisis had hit, such that after six months, only 41% of total response funding had been committed. Governments and responders were still scrambling for funding, often competing with other implementing agencies, and having to make plans in the dark.

  • Droughts remain poorly funded. Despite the collective ‘never again’ after the Somalia drought in 2011, there are still institutional barriers that prevent swift drought funding, such that early or preventive action is too little (from development actors) and too late (from humanitarians).

  • The UN’s Central Emergency Response Fund (CERF) – plays a huge role in first response. It contributed 5.7% of humanitarian funding and has been supremely adapted for fast and flexible response. For Cyclone Idai in Mozambique, CERF applied emergency fast-track procedures to approve projects within two days and disbursed funding on average four days later.

But other results came as more of a surprise. We also found:

  • Development actors play an essential and unparalleled role, providing 74% of funding. The World Bank was the source of 50% of all funding (see Figure 1) and in this study, no other institution came close, with the next major funders being the Asian Development Bank at 15% and the USA at 9% of total funding (35% of humanitarian funding).

  • The World Bank has a key and growing role in crises. When I began my career in the sector, humanitarians and the World Bank had few reasons to interact, but the situation has changed markedly. The World Bank now has a major portfolio of tools and mechanisms to respond to crises, and Disaster Risk Financing is a major focus. Much of the Bank’s funding is for recovery and reconstruction, and most of its funding is slow, but it is developing ways to provide funding faster. And, the amounts of money here are not small. For example:

  • Loans constitute a large part of funding for crisis response. Loans represented just over half of all funding in our sample. For middle-income countries like Indonesia, this is perhaps expected, and it is certainly true that poorer countries borrow less. Loans represented 13% in Mozambique, 35% in DRC, and 48% in Nepal, which should be seen alongside the fact that Mozambique was already in debt distress when the cyclones struck, and DRC was at moderate risk of debt distress.

    There are different schools of thought concerning loans: some in our research team felt that countries should have the freedom to take on more loans - as much as they needed to fund their critical response and recovery – anything less would stifle development and prolong suffering. Others felt that there was a justice issue, that already-poor countries should not be taking on more debt for disasters, many of which have been supercharged by climate change that they had not caused. There is remarkably little written in the crisis financing literature about this – more analysis is required.

So, what needs to happen next?

The report has a raft of recommendations, but here are a few of the key takeaways:

  1. Many risks are understood and many crises can be predicted, yet most actors make funding decisions once the crisis has begun. Instead, all actors need to provide a greater proportion of their funding as pre-arranged based on pre-agreed triggers for response. In our study, the World Bank Cat DDO and sovereign insurance paid out in less than two weeks – such fast disbursement could transform crisis response. And simply knowing that this funding will arrive, can incentivise governments and response partners to put systems in place in advance to ensure that this funding will be used most effectively.

  2. Despite real progress, more is needed to speed up the World Bank’s crisis financing. Including CERCs in all programmes and doing contingency planning such that funding can be disbursed quickly is low hanging fruit.

  3. Disaster risk finance can seem to be about technical financial mechanisms, and isn’t necessarily what gets humanitarians out of bed in the morning. But risk models, contingent credit, triggers, contingency funds, early response mechanisms etc are all a means to a very important end. Humanitarians should get more involved in shaping and delivering DRF programmes (such as those implemented by the Start Network) and join the Centre’s campaign to make pre-arranged financing the standard way to pay for crises.

This blog first appeared on the Centre for Disaster Protection website

Image credit: Fernando Gandarillas / IFRC

About the author:

Debbie Hillier is a Principal Consultant for Climate Change & Disaster Risk at Oxford Policy Management. Prior to OPM, Debbie spent 20 years working at Oxfam as a policy advisor working on disaster risk and response, humanitarian crises, and the Control Arms Campaign.