The UN is appealing for $41 billion to help 183 million people in need of aid worldwide in 2022. Every year, humanitarian funding appeals are increasing. And while donors are giving more and more money to help people caught up in conflict and disaster, their funding isn’t keeping up with rising needs.
With COVID-19, climate change, and the competing demands of protracted crises driving up those needs year-on-year, it seems unlikely that the current humanitarian funding model will ever be sufficient.
In this episode, host Heba Aly speaks to three organisations who are experimenting with different ways of funding their humanitarian programmes – from crowdfunding and zakat to creating social enterprises; from an impact bond to encouraging private sector investment in refugees.
Guests: Jahin Shams Sakkhar, program development specialist at Bangladeshi aid organisation Uttaran; Juan Coderque, head of new financing models at the International Committee of the Red Cross; John Kluge, founder of the Refugee Investment Network.
New episodes of Rethinking Humanitarianism are published every two weeks. Make sure you never miss an episode of season two by subscribing on Spotify, Apple, Google, Stitcher, or YouTube, or searching “The New Humanitarian” in your favourite podcast app.
Heba Aly: Last week, the United Nations appealed for $41 billion to help people in need around the world in 2022. That’s double the amount that the UN asked for just three years ago.
Climate change, Covid-19, and increasingly complex and protracted conflicts are creating more and more humanitarian needs.
Government donors are giving more and more to humanitarian response every year. But despite the increased amounts of humanitarian aid dollars overall, traditional funding just can’t keep up. Last year, for the first time in history, the UN led appeal was less than half-funded.
At the launch of this year’s appeal, even the UN Under-Secretary-General for Humanitarian Affairs, Martin Griffiths, admitted the numbers were out of reach.
Griffiths, United Nations, Dec, 2021
We’re aware that we’re not going to get the 41 billion, much as we will try hard. And with your help, hope to get as far as we can.
Aly: So as needs keep rising and funding plateaus, where will the money to respond to people in need come from?
I'm Heba Aly, sniffling with a cold in Geneva, Switzerland. And this is Rethinking Humanitarianism.
Today, we’re looking into how the humanitarian aid sector can sustainably fund its operations. And the picture is pretty grim. Here’s Angus Urquhart of the research organisation Development Initiatives on financing trends within the humanitarian aid sector.
Angus Urquhart: We've got insufficient funding to meet these growing levels of need. So we know that international humanitarian assistance has actually grown fairly consistently over the past decade, even if it starts to stagnate in the last couple of years.
But at the same time, that funding hasn't been sufficient to meet the ever increasing level of need, particularly as we see more protracted crises. And that's a situation that's been exacerbated by COVID, and is likely to be exacerbated further by climate change.
And underlying that we’ve got a funding base that hasn’t really diversified. So we don’t see significant new sources of financing. And at the same time, we were very much reliant on the same group of a small number of donors providing nearly all of the assistance.
So now the top three donors, the US, Germany, and the UK provide more than half of all assistance within the system. So about 61% in 2020. If we then look at terms of whether this system is sustainable, I think when you look at the likely impact of climate change, the increasingly protracted nature of crises, I think what we fundamentally need is a shift away from the current reactive system that we have to one that’s much more focused on preparation, that’s much more focused on building resilience, and that’s much more focused on acting early. And at the moment, we don’t see the shifts in that direction happening quick enough, or at the necessary scale.
Aly: To my mind, what we’re talking about here is a runaway train. Humanitarian needs are going to be astronomically higher in the years to come because of the effects of climate change. What’s the funding picture going to look like in five or ten years? How can it possibly keep up?
So today, we’re going to speak to three organisations that are actively experimenting with different ways of funding humanitarian efforts. Our first guest is Jahin Shams Sakkhar, a program development specialist at Uttaran. And Uttaran is a development and humanitarian organisation in Bangladesh. Jahin joins us today from Satkhira district in southwestern Bangladesh, one of ten coastal districts hit by Super Cyclone Amphan last year. Jahin, welcome to the podcast.
Jahin Shams Sakkhar: Thank you so much.
Aly: Jahin, since the 1980s, Uttaran has relied on funding from international donors like the European Union. What happened during Covid that made you feel you could no longer rely on Western donors?
Shams Sakkhar: Well, Covid was a real eye opener for all of us, particularly working in national NGOs in Bangladesh. Because we do work on the ground. So some of our offices remained open. But the majority of the offices near Dhaka, all the donors’ offices are closed, everyone was working from home.
It was very difficult to get access to funding because it was very difficult to get any decisions going. Banks were closed, everything was closed during the first wave. We did get some funding from some major institutional donors like FCDO for the first wave. But it wasn’t as much as we expected, because we realised that their countries are going through similar problems.
So we decided that we need to look for other ways of funding. We decided that we’re going to change things up a little, we're not going to approach any donors. We’re going to approach a lot of our friends, families living in the country, and living abroad. We’re going to do crowdfunding, which is very unknown to Bangladeshi national NGOs.
Bangladesh is growing as a developing country. So there are a lot of friends and families of Bangladeshi living abroad living within the country. But, doing really, really well and would love to help out but they don’t have the channels through which they would do [so]. So we tapped into some of the sources. One of the sources that we tried was zakat.
Aly: These are the mandatory alms that Muslims pay every year.
Shams Sakkhar: Yes, this is the mandatory money that most Muslims would pay every year. Because Uttaran has been trying to raise zakat funding for one of its developing programmes. So we kind of had that experience and translated into our humanitarian program, and it worked. And that’s how we collected the money.
It is an unexplored territory for many Bangladeshi organisations. It was unexplored for us. But I think the way we are moving forward, I do believe that we definitely have to try some unexplored territories.
Aly: This concept of tapping into the diaspora for funding has long been an aspiration of the humanitarian sector. And certainly during Covid, we did see a rise in what has been termed mutual aid and this kind of solidarity, and people simply helping each other.
Can that, from your experience recently, be an answer? I mean, what kind of scale are we talking about? Was that able to really fund the majority of your operations?
Shams Sakkhar: I think seventy to eighty percent of the funding that we received during Covid came directly from the diaspora. And that’s how we adjusted because the amount required versus the amount we had, there was a major difference.
And apart from that, I'll just quickly add, there was also the fact that we had Amphan last year, Cyclone Amphan last year during Covid. At that time, we mobilised around 300 to 400 million BDT, which is around 30 million euros. And out of that, around .57 millions euros were from crowdfunding, from zakat fund, and diasporas.
Aly: It's interesting, because a few years ago, actually, when I was living in Dubai, I wrote an article on the potential of zakat. And at the low end of the estimates, every year, somewhere between 200 billion and $1 trillion are spent in zakat. That’s obviously at least five times more than the latest global humanitarian appeal.
There was a period in which interest in zakat was huge, and that has since died down. So I was glad to hear about your experiences with it, which sound, I suppose, rather encouraging. Is that something that you feel you can do year on year and be able to regularly finance your programs with?
Shams Sakkhar: It is very tough for a Muslim, to convince to give funding for NGOs. Because NGOs in Bangladesh are generally known for microfinance. Because they have interest involved, and as a Muslim, you cannot have interest and all that. It’s a challenge. And we have done a bit. I think it is possible.
One example that we do for our school. So we take zakat funding from a community for a school that we operate. And that’s how we got the idea. Initially, it was very difficult. But now, every year, the catchment area of the school provides 15 to 20 thousand euros every year for the school. So it is possible through very large community mobilisation. It is possible to reach and break down such barriers.
But again, the transparency we maintain with donors and bilaterals, we have to maintain equally, in fact, sometimes even better transparency and accountability with the community people. Because we’re talking about cultural funding here, funding based on faith and belief. So it has to be very, very strong. Your transparency and accountability system and your belief to serve the community has to be very, very, very strong in order to ensure that you get those funding, which is a bit tough, to be honest.
Aly: And so, I don't know if it’s perhaps in part because it’s a bit tough to get the funding from the community, you’ve also been developing some earned revenue mechanisms, if I understand it. So could you tell us a bit about that?
Shams Sakkhar: At the moment in Bangladesh, there are huge chunks of humanitarian funding available because of the Rohingya refugee crisis. And also Bangladesh historically is a disaster prone country. So there is always humanitarian funding available in Bangladesh. But we are graduating from LDCs – least developed countries – into middle income countries by 2026. So the UN has proposed that. It’s good for a country but some of the fundings will shrink.
Secondly, the Rohingya crisis has been going on for four years. So it’s a matter of another big event globally, anywhere in the world: Maybe there is an Haiti crisis, maybe there is an earthquake somewhere else. Maybe there’s a big volcanic eruption somewhere else, maybe there’s even a tsunami. These things would shift humanitarian focus,because Bangladesh has been getting a lot of humanitarian focus because of the refugee crisis. So as it shifts, it shrinks some of the work that we do. So therefore, we decided that by 2025, we are going to provide at least 10 percent of our humanitarian funding through revenues, and through zakat, and through other sources, not from donor sources. By 2026, we are going to try to increase that by 15 percent.
And how do you want to increase that? First of all, we started some social businesses. For example, last couple of years ago, we got a big investment from BSRM – BSRM is a steel company. So we got $100,000 USD for planting a water factory. The southwest has special problems already, there’s water vending business going on here, which is pretty expensive for normal people to get access to. Through this, we are planning to provide people with water, but with a very [small] amount of money. And we will be generating some revenue from it. That's one way.
Secondly, from 2022 onwards, we are developing a new strategy on carbon offsetting. There are big companies who want to offset their carbons. And they are paying a heavy amount of taxes in their country, because they are producing more carbon than they should be. What they can do, is that they can outsource this carbon. If they plant trees somewhere else in the world, and buy and pay for that carbon, they'll be paying less than the tax they have to pay for that carbon.
We don’t have land, we have beneficiaries who have land. We can build connections with those private companies globally. So we connect those people with the land and the private companies, and we become the middle player. And also clear out all the government clearances, get the government clearances, get all these things in process. And connect them and make money out of it and make sure many people [will] make money out of it as well. That would also provide us some money. By 2030 we’re planning to get at least 50 percent of financing from carbon markets. Because that's a very untapped and very raw sector for NGOs that NGOs haven’t moved into.
Aly: One of the reasons I would think that NGOs are not moving into it is that generally, the concept of profit is antagonistic to a charity. So how are you dealing with that challenge in terms of the mindset?
Shams Sakkhar: As an NGO, we learn only to give. Within the organisation, it’s a big conflict, get everyone on board. Look, this is changing. We also want to keep on helping people because that’s our mission. That's our vision. So we need money. Where does this money come from? So we need to invest in something. If we have money that we can decide how we want to spend, that helps us.
“If we have money that we can decide how we want to spend, that helps us.”
Aly: For instance, the Kenyan Red Cross runs a private ambulance service, it has real estate assets to generate revenue for their work. We’re talking about $40 billion that the UN is requesting. Can social enterprises fill that gap, do you think?
Shams Sakkhar: Not all of it. And as local organisations, you always have local people who are in need of humanitarian support. Only large humanitarian crises get funded, but small humanitarian crises, they do not get funded. So we need to keep on exploring, we need to keep on receiving those and getting those monies from different sectors. We need to forget about the government sector. Sometimes we need to think of zakat, or diasporas, or even generating revenue from which we can support people. I don’t know how much that will be. But we need to keep on trying.
Aly: So I have one final question for you. You say we need to keep on trying, for other organisations that may want to start going down this route of generating their own social enterprises and being less dependent on the big Western donors. What is one place they could start one practical thing they can do?
Shams Sakkhar: For a social enterprise, the first thing is that, make sure it’s actually a social enterprise, not only think about only making profits. Profits are very important, but think about how you want to spend your profits, like in social causes.
Secondly, keep on exploring. India has a huge amount of private funding for its NGOs. All the Mumbai celebrities, or the Bollywood celebrities, or the cricket celebrities, they do a lot of funding for people in crisis. Bangladesh also certainly has big celebrities. Those are some untapped resources that we can use. There are celebrities, there are footballers, you have to be smart about it.
Aly: Jahin, thank you so much for joining us on the podcast.
Shams Sakkhar: Thank you so much. Bye bye.
Aly: Social enterprises are one way to generate additional revenue. But there are a whole range of other so-called innovative financing mechanisms out there. And one organisation that has been experimenting with them is the International Committee of the Red Cross. Juan Coderque is the head of new financing models at the ICRC and he joins us from Geneva. Hello, Juan.
Juan Coderque: Good morning, and delighted to be here.
Aly: Now a few years back, the ICRC introduced what it called the humanitarian impact bond – or HIB for short. And it was all the rage in the sector because it was one of the first of its kind. Talk us through how it works.
Coderque: We got some 17-18 million [CHF] from private investors. We are using the money to build three new physical rehabilitation centers in Mali, in Nigeria, and in [the Democratic Republic of Congo]. The centres are built, the centres are delivering services. Depending on how we reach our objectives, again building the centres, putting the centres to work, and delivering care for patients and then the productivity measures. Then outcome funders – when the humanitarian impact bond comes to an end in July 2022, and impact is evaluated by external evaluators – will pay back principal and a return to investors based on the outcomes we have achieved, or not. Because there’s of course a risk, this is not just about benefit, it's also about putting part of the principal at risk.
Aly: Okay, so private investors put the money in, so they’re taking the risk. And then the ICRC is responsible for delivering certain results. And if it does succeed in delivering those results, then what you call the outcome funders, which are essentially governments at this point, will repay those investors plus interest.
Coderque: Yes. Munich Re, Lombard Odier, and a number of clients from Lombard Odier family office. Those are the main investors. And when it comes to the outcome funders, it’s Switzerland, Belgium, Italy, the UK, and La Caixa Foundation.
Aly: How effective has it been? I know the external evaluation hasn’t taken place. But what results have you seen so far?
Coderque: Results coming out of the humanitarian impact bond can be put in different buckets. So the first bucket is about the humanitarian impact bond itself. We have three new centers, the three new centers are delivering services, and we have introduced a number of productivity measures that are being tested. In addition, we have had additional funding from traditional sources, but the outcome funding will be additional [to] the funding we get from our traditional donors.
Second, based on the learnings of the HIB, and the fact that innovative finance can be very useful for this very long term programme, which is physical rehabilitation in fragile settings, we [now have] a pipeline of new financing models to further support physical rehabilitation over the next many years.
And I think there’s, very importantly, a third bucket about everything we’ve learned around innovative finance that we are applying in different ways to other elements of humanitarian action.
Aly: I sat in on a few meetings at Davos several years ago, actually, in which some of the key players behind this bond were pretty honest about its limitations. And first and foremost that, as you mentioned, it’s the same public donors that are ultimately forking up the money. So yes, the private sector takes the risk, but ultimately, it’s the governments who are paying when the project succeeds. So you haven't really succeeded in broadening the funding base through this model, have you?
Coderque: I wouldn’t put it that way. You have to look at the impact bonds as a tool in a toolkit of innovative financing models. Impact bonds can do what they can do but the capacity for scale of impact bonds is very little compared to, for example, blended finance or concessional finance. It would be wrong to say impact bonds can scale into the billions. No, they can’t. Not that I know. But other financial mechanisms can help achieve replication and scale that impact bonds may not. But very importantly, impact bonds are a tool in the toolkit of innovative financing mechanisms. This is also something we have learned.
Aly: So would it be fair to say that your learnings from this are that despite all the buzz around the humanitarian impact bond, it isn’t really the strongest tool in that toolkit and perhaps received more attention than it deserved?
Coderque: There’s no silver bullet. And to the question: How is innovative finance or private investment going to address the humanitarian financing gap? No, what is going to solve the humanitarian financing gap is more political will on the part of the international community to reduce conflict, to reduce the impact of conflict, to ensure that there is more respect for international humanitarian law, to ensure that there’s more ODA available. Innovative finance can bring a lot of value to humanitarian context and to humanitarian action. But silver bullet, no. It’s the politicians who need to solve the big issues.
Aly: How much of this money is new money from new players, rather than tapping into the same ODA money?
Coderque: We are coming up with this important infrastructure water project in DRC. Infrastructure plus a financially sustainable operating model through collaboration between humanitarian development actors. And more than a financial mechanism this project is going is based on a normative financing approach, whereby we're going to make some grants for the ICRC but also different forms of funding and financing from development actors to local actors and possibly the private sector. But all as part of a bigger and a common endeavour to bring water to Goma.
From our perspective, this is new money going into humanitarian issues. So another thing that we’re coming up with immediately after Christmas is what we're calling the ICRC Climate and Environment Transition Fund. Here, the idea is that with an initial upfront investment of 15 million CHF to focus on the seven countries where we consume – we as ICRC – consume the most diesel. We can generate savings of about 30-40 million CHF over 20 years, plus 150 million kilograms of CO2. And that’s a first step for this fund, which is going to be a revolving fund.
One of the objectives for the fund next year is to design a repayment mechanism based on the savings that we are generating and we will explore – we will explore, I underline, I'm not sure we can pull it off – but we will explore [the] possibility to have private investment.
Aly: There's this tension, right? Anytime you talk about private capital, because on the one hand, it is the most obvious answer in terms of getting out of this charity handout cycle that is clearly not sustainable for the long term. But on the other hand, it irks a lot of people. And I remember actually, your president, Peter Maurer, saying his first cold shower came when he was accused of making a profit off of disabled people. And that’s a recurring fear, I think, that the private sector’s interests and values are not aligned. So how do you overcome that as you think about the future of humanitarian financing?
Coderque: In order to engage with the private sector, as we do, you need to have some clear guidelines and frameworks. There are things you can do and there are things you cannot do when engaging with private actors. And you need to make sure that you have clear due process, guidelines, and rules of engagement. This is number one.
Second, whereas a number of years ago, when we came up with the humanitarian impact bond, the issue of return for the private sector was indeed a delicate issue. I think that colleagues are more used to this kind of approach now. Because I think there is, globally speaking, more understanding in terms of what are the benefits of engaging with the private sector, when it comes to people affected by conflict. We’re not here to provide a return for investors, we are here to generate additional solutions for people affected by conflict. So there’s more understanding within the ICRC that these innovative financing models offer new solutions and new forms of value-add for people affected by conflict, and for the people who lead these programmes.
And last but not least, I think that there has also been an effort within the organisation, but also on the part of the overall humanitarian ecosystem to say, ‘look, there's actually a moral imperative to look for additional solutions, including by mobilising the private sector, because this can bring additional value for people affected by conflict.’
It needs to be repeated, the humanitarian financing gap is not going to be addressed with private capital or additional, more funding. It requires political solutions, it requires reducing needs, etc, etc. That is a very, very important point to make. Otherwise, some people out there are going to think that there's no problem and everything will be solved, because we are going to mobilise private capital, therefore, everything will be alright.
Aly: And you’ve said a few times now that the real answer is reducing the needs and politicians ending conflicts and so on. If we are to take more of a realpolitik view of the world, we continue to see needs skyrocketing. Is mobilising the private sector going to be enough, do you think, to fill those needs?
Coderque: Not one source is enough. But what is absolutely clear is that we need to continue exploring the role of private capital, private skills, private know-how in humanitarian settings. This is a clear priority. Because we think it can generate additional humanitarian value, new ways of working, and more resources. However, it also needs to be clearly stated that humanitarian action will continue functioning mostly on the basis of grants. That is not going to change in the near future, or in the mid-term or long-term. However, and again, this is very important, new financing models will allow us to design new ways of working across the humanitarian, development, private sector with more local engagement. And also new ways of financing that can bring new solutions and more resources to humanitarian settings. So we need to continue exploring; we need to continue replicating; and hopefully in the near future scaling up.
Aly: And so I’ll ask you the same question that we asked everyone at the end of every interview, which is if other organisations are looking to go down this path and to leverage private capital and tap into private sector sources of revenue, what advice would you give them? Where’s one place they can start?
Coderque: The one thing not to do is to start doing this on your own. I think it’s very important that anyone trying to look into this space should team up with partners like government donors or with corporate partners or with other humanitarian actors who have been investing in innovative finance. That will be the first one.
Second one would be that in order to deliver and in order to finance it is important to develop a number of organisational readiness capabilities. Again, if we come back to the humanitarian impact bond, one of the issues that was flagged or raised concerns when we did it was that it was very costly. Yes, of course, it required an investment. That wouldn’t be the case today, or certainly by far not that much, because now we have a team of innovative finance experts that can do the job internally.
Aly: Juan, thank you for joining us on Rethinking Humanitarianism.
Coderque: Thank you, Heba.
Aly: Juan essentially said that humanitarians shouldn’t turn to the private sector to solve all their financing problems, it’s just not going to happen. Which begs the question, are investors really ready to put money into fragile contexts? Or is private capital perhaps better suited for building self-reliance or pathways out of dependency, as Angus of Development Initiatives alluded to at the very start of the episode.
To help us think that through our final guest today is John Kluge, the founder and managing director of the Refugee Investment Network. And their aim is to encourage what they call refugee lens investing. The network is based in the US, but John joins us today from Jordan. Hello.
John Kluge: Hello, hello. Thank you for having me on.
Aly: So what exactly is refugee lens investing?
Kluge: Refugee lens investing, it’s really about intention. Our work was really inspired by gender lens investing and the inequities that face over half of the world’s population. Gender lens investing was designed with both a framework and intentionality to help guide investors to support women-led companies, companies and businesses that are improving outcomes for women and girls around the world through their products and services, their operating practices, their governance structures.
If you think about the average Western investor, most of these investors are exposed to topics around migration, displacement, refugees through the media. They’re not living on the doorstep of these conflicts. And their understanding of these issues is somewhat shaped and informed by what they're consuming.
“If you think about the average Western investor, most of these investors are exposed to topics around migration, displacement, refugees through the media.”
Our job is to first educate them, help them understand the context and this universe. But it’s also to give them a lens to see the world. To see how they can use their resources and their practices to build more inclusive communities and support people who have been affected by conflict or persecution or seeking a better outcome for themselves and their families.
Aly: And so concretely, what does that mean in terms of what the Refugee Investment Network does.
Kluge: So at a very basic level, we do a lot of listening and a lot of talking. We are a nonprofit organisation that kind of sits in the middle of different kinds of investors, different kinds of businesses and entrepreneurs, humanitarians, development agencies, and governments. We’re sort of a strategic adviser in a way, part educator, part matchmaker, and part sort of structuring agency. We basically work with different kinds of investors to develop strategies to deploy different kinds of capital to support people on the move and the communities that host them.
Aly: So can you give me a couple examples of the kinds of deals that you’ve struck and what kind of scale we're talking about?
Kluge: The Japanese International Cooperation Agency – or JICA – has contracted RIN to work on this programme here in Jordan to develop this roadmap for refugee lens investing.The Japanese have had a long standing commitment to the people of Jordan, and are continuing to do great work. But I think they’re really interested in seeing how they can be supportive of building a practice of refugee lens investing here, and enabling others to become active partners and participants.
Our work these last few years, we did some early matching of individual enterprises that were either run by displaced people, [or] were being run by people who are supporting displaced communities with their products or services.
So we just announced a partnership actually, this morning, in East Africa with Acumen, which is an impact investing fund, as well as the Swiss Development Agency and the IKEA Foundation. So we looked at Acumen’s historical deal flow in East Africa. There are companies in their portfolios, for example, that are either led by displaced or formerly displaced people or companies that are hiring significant numbers of internally displaced people. Or companies that have incredible products or services that will radically improve outcomes for these communities. But maybe they’re not serving them right now. And what we came to with Acumen was to understand some of the markets that they’re already in a way that would allow them to develop something with a refugee lens: using that intentionality to build a new investment product.
Before we became the RIN, we partnered with Kiva, which is a crowdfunding platform for microlending. A few years ago, most microfinance institutions around the world didn’t want to lend to refugee entrepreneurs, because they perceived them to be too risky. So Kiva said, look, if we give you some lending capital, can you experiment to see what happens? The [micro-finance institutions] found that refugees are actually great customers. That eventually led Kiva to create their own investment fund, specifically to support refugee micro-entrepreneurs around the world. And that is something that the US Development Finance Corporation, just this last year, participated in with a nearly $20 million debt note.
So it’s a good example where our job is to help create something that allows more of a field to expand. It gives others a chance to participate. Kiva did the lion’s share of that work. But it’s a good example, because it’s had an outsized impact.
Aly: So that example, to me speaks to getting refugees out of dependency and into a state of self reliance. That’s quite different than investing directly in a conflict zone, where the vast majority of humanitarian needs are.
And to touch a bit further on the discomfort of investors in these more fragile contexts, I want to share with you a clip from an investor named Ion Yadigaroglu, from Capricorn Investment Group. And Capricorn was created by a $5 billion endowment from the success of eBay. It was originally intended as philanthropic funding, but they decided to see what impact they could have through investment instead, and specifically, investment targeted at making a difference.
And yet, despite more than 15 years of effort by what you might consider more enlightened investors, even they are struggling to find an investment model that works in the really tough conflict or post-conflict areas. Here’s Ion speaking at the World Economic Forum in Davos back in 2019.
Yadigaroglu, Davos, Jan, 2019
You end up in these completely no win situations. There is simply no way even with the best intentions, the best thinking to not be criticised. There may be no way to reasonably operate a sneaker factory, and be reasonably competitive and still not end up facing very, very soon and very quickly, severe criticism and what you’re doing. There are things that are just not rewarding from a brand effort perspective, right? Look, most of many, many of these investments suffer even just from a scale issue, which is, you simply can't do things at a sufficient scale early on to justify the headache.
Aly: Now, John, we were both at a meeting later that year, also organised by the WEF, I don’t know if you remember it, aimed at getting private sector investment into clean energy solutions in refugee settings. And I remember an investor saying, ‘it’s not realistic to ask someone who wants to buy a weekend house in the Hamptons to take an interest in this stuff. It’s fanciful to think that if investors were just more open minded, this would all happen’. And I remember you being quite frustrated after that meeting, because you felt there are plenty of investors in this space. And you know, the ones who don't invest in this space will eventually be left out.
But, you know, the whole reason the humanitarian sector exists, is that some situations are just not investable. So I guess my question is, if we’re honest, are we overestimating the private sector’s willingness to take risks and invest in these most unstable areas?
Kluge: We need to build an evidence base for investors that helps them find comfort in doing this work. This is a new investment thematic to investors. We’re talking about over 80+ million people, and counting. And there are different environments. We are now doing this work in the US, in Mexico, in Colombia, in Jordan, Uganda, Ethiopia, and Kenya. Now, there is a lot of variance across these places.
And the investors that we are talking to or advising or working with in the US are not all the same investors that are interested or will be interested in doing a deal in Ethiopia, especially given the context right now. But there is a reason that we didn’t start in Somalia or Yemen. We need to get people comfortable with this work and build that evidence base.
Aly: So you said you’re not going to start with the Somalias. And you want to start with a context where you can prove that this is doable. And yet, you know, we started this episode talking about the humanitarian financing gap, and the $40 billion and counting that humanitarians need every year to save lives.
So do you think this is a model that can eventually start to fill that gap? Or do you see your work as being the next kind of piece of the puzzle? Or I suppose, in building that kind of self-reliance, that you’re eventually moving people out of humanitarian dependency? How do you see it fitting in?
Kluge: We think of it as a piece of the puzzle, we need private capital at the table. And you know, being an active participant in this work. I don't think it is a replacement for emergency relief, when things are truly short term. The problem is that we don't have a lot of short-term issues anymore, we have long-term problems.
I'm here in Jordan, this is a country that has a long history and culture of being welcoming and generous. But when that happens for decades, and you have a donor apparatus that is stretched thin to pay for the ongoing needs of several million people, and that host government and community are struggling themselves, we have to create a bridge to development approaches. This can’t just be an endless humanitarian intervention. So the question then is how? And our job is to put something on paper that is grounded in data, informed by the communities themselves. That says, here are some options of where you can begin. And that doesn’t mean that in the next year or two, that we are suddenly going to have private capital taking the place of donor funding for all of the emergency needs here. It does mean that we are going to start expanding the opportunities to bridge people out of that humanitarian dependency into a state of self-reliance, and also economic contribution if they want it.
Aly: So final question for you. And I should admit that often I get the feedback on this podcast that people come away with more questions than answers, because they just have so much information going on in their heads that they don’t know what to do with it.
So if part of your job is to advise humanitarian agencies interested in impact investing or in how to leverage private capital, what would be some of the first pieces of advice that you’d give an organisation that’s thinking of getting into this space?
Kluge: I would consider making this part of your mandate as an organisation. And if you don't have the ability to put that in motion, then I would run this up the chain. I would say ‘look, we all know that resources are stretched and that we need other assets available, and other business models as well.’
You should hire for it. So, how many MBAs do you have in your organisation that are working on your programs teams? There is a disconnect in language and understanding between the humanitarian and development communities. There is an even broader disconnect between the humanitarian world and the investment world. But the first step is to understand each other, and one of the best ways to do that is just bring people into your team.
Aly: John, thank you very much for being here today and enjoy your time in Jordan.
Kluge: Thank you so much, Heba.
Aly: For more on John’s work, check out a report by the Refugee Investment Network on how to stimulate refugee lens investing. We’ll link to it from the show notes on our website: thenew humanitarian.org/podcast.
If you’ve got thoughts on this topic, as always, I’d love to hear them. How can the aid sector become less dependent on funding from Western governments? Have you seen alternative funding streams that have seen success? What are some of the obstacles? What does the future hold in this regard? Write to us or send us a voice note at [email protected].
Now before we go, you may recall a rather interesting Twitter exchange last month between billionaire Elon Musk and the World Food Programme’s executive director David Beasley. It followed an article on CNN that said $6 billion – the equivalent of two percent of Elon Musk's wealth – could solve world hunger.
Musk is the co-founder of Tesla of course, and the richest person in the world with an estimated fortune of $295 billion. So he responds to this article by tweeting that: “If WFP can describe on this Twitter thread exactly how $6 billion will solve world hunger, I will sell Tesla stock right now and do it.”
But Musk said he’d only do it if WFP could provide open source accounting.
Beasley then goes on to CNN to explain that $6 billion could help solve world hunger but not all in one go. So today we’ll leave you with a clip of that interview, where Beasley explains how the World Food Programme would use those $6 billion, transparently.
This podcast is a production of The New Humanitarian.
This episode was produced and edited by Marthe van der Wolf.
And I'm your host Heba Aly, about to go take a nap.
Thank you for listening to Rethinking Humanitarianism.
Clip, CNN, Nov. 2021
This is fantastic news because Elon is a very, very smart guy. For him to even enter into this conversation is a game changer because simply put, we can answer his questions, we can put forward the plan that's clear. We’re the world's largest operation now feeding about 120 million people.
But because of Covid impacting already, climate change, and conflict, we have a one time crisis of about 42 million people that are literally knocking on famine’s door of famine. It will cost about over $6 billion to reach those 42 million. And we can do that and I will show him we will put it out in front of him. We have all the cost accounting, public transparency, any and everything that he would ask, we will be glad to answer. And I look forward to having this discussion with him because lives are at stake.
I'm not picking on Elon Musk. I’m so happy that he’s making money. But as you know, during the height of Covid, billionaires made extraordinary amounts of money, governments are tapped out, we got people dying. And we’ve got an answer to this, and please help us on this one time ask. Please help us.