Introduction to Innovative Finance British Red Cross Int’l Directorate Briefing 6 Dec

Contents What is Innovative Finance? Why is it important ? How is it relevant ?

Innovative financing refers to a range of non-traditional mechanisms to raise additional funds for development aid through "innovative" projects such as micro-contributions, taxes, public-private partnerships and market-based financial transactions. https://en.wikipedia.org/wiki/Innovative_financing Not just about finance and funding- its strategic response to external environment

Economic Resource Flows Total flows to low and middle income countries 1990 ODA = Traditional Flows Overseas Development Assistance (ODA) Includes International Humanitarian Assistance (IHA) Remittances Foreign Direct Investment (FDI) Portfolio Flows Why is it important? External Environment ODA was the single major North-South resource flow. Private Capital was c. 48% of flows 2016 Private Capital c 87% of economic flows 1990 - IHA 3% (1.6% total) 2016 - IHA 13.8% (1.4% total) Source: World Bank, OECD

Traditional Flows have change Overseas Development Aid has boomed, but has become less important compared to other resource flows and international humanitarian assistance is <10% of the total resource flows. World Bank . ICRC In 1990 ODA was the single major North-South resource flow. Of that, international humanitarian assistance accounted for less than 3% of official assistance to developing countries. ODA increased by 88% between 2003 and 2016—from $100bn to $188bn.[2] Over the same period, official humanitarian assistance (OHA) grew much faster. OECD data reveals a 400% increase in OHA, from $5.2bn to $26bn. As a result, the share of humanitarian assistance in ODA increased from 5.2% to 13.8%. even if we only look at the 20 countries that received the largest amount of humanitarian assistance over the past few years. FDI and remittances consistently dwarf humanitarian aid.[4] It is important to note that North-South resource transfers in Figure 1 fail to capture increasing South-South cooperation involving trade, investment and aid flows between emerging and less developed economies. As significantly, Figure 1 says nothing about the amount of resources that flow in the other direction—i.e., from developing to industrialized countries. By some accounts, South to North transfers in the form of loans,[5] interest repayments, profit or income repatriation and illicit financial flows could be twice as large as North to South transfers,[6] which has become a major issue in global development debates.

ODA in Context Resource mix in the 20 countries receiving the most international humanitarian assistance, 2016 What’s happening in traditional Sources of Funding Humanitarian aid is dwarfed by other flows Source: World Bank, OECD

DFID Strategy (Jan 2017) “Aid is changing. The significance of aid alone is decreasing….” “Our focus is on economic empowerment to ensure that the poorest and most marginalised benefit from new opportunities.” Five Topics - New approaches, finance and partnerships We will work with the insurance and risk finance industry to expand access to climate and catastrophic risk insurance…. This can reduce the need for expensive humanitarian relief, reassure private investors and help people rebuild their lives. Harnessing financial technology and new financing models DFID is partnering with firms to test new business models, scale up existing successes and encourage replication by others Key messages of the Strategy 4 1. Rising to the challenge 6 2. New approaches, finance and partnerships 10 3. Our sector priorities and commitment to inclusion 15 4. Stability, governance and sustainability 23 5. Assessing and reporting progress 29

Strategy 2030 Consultation with over 100 Red Cross and Red Crescent National Societies and external experts. https://future-rcrc.com/ Conflict & Poverty New Communities & Cities Power & Governance Climate & Disaster Health of the Future Emerging Tech Participation & engagement Future of Work Future of Finance The gap between humanitarian and development needs and financing is growing, yet largely we still rely on just a few traditional sources of funding. How do we mobilize alternate sources of capital to support communities? BRC Strategy / London Business School – Kim has submitted a project that should inform BRC, ICRC, IFRC movement Strategy. I have provided a definition of the subject – we could argue about the definition or add qualifications And where Inv Fin fits into the movement its part of future and strategy (not finance or resources mobilisation although connected to both) Now I’ll explain why it is part of the strategy and the impetus for the creation of team and its role

Global Innovative Finance Team (GIFT) Aim is to build innovative finance capacity, alternative financing mechanisms, and access to private capital within the movement’s 191 National Societies. Innovation Programmes Resource Mobilisation FBF Cash One WASH GIFT Activity s2030 Futures & Foresight CPs Philanthropy Govts Donors Currently a partnership with British, Danish, and Kenyan National Societies convened and coordinated by the IFRC. Shaun Hazeldine (Geneva), Ramya Gopalan (Beruit), Adam Bornstein (Addis Ababa), Simon Meldrum (London), What is Innovative Finance ? Team & Activities

Innovative Finance Innovative financing refers to a range of non-traditional mechanisms to raise additional funds for development aid through "innovative" projects such as micro-contributions, taxes, public-private partnerships and market-based financial transactions. Not just about doing things differently but also about being able to do different things Lot of examples and case studies to present and bring alive but no time Working with Ben / Displacement FBF / Disaster Response – Caroline Overseas Branches in Carribean WASH – Islamic Bond with the Islamic Development Bank (public announcement next April) / MOU Zakayt Financing in Kenya Aviva Comic Relief UHNI

How GIFT can support International Directorate Promotes Sustainability Flexibility Supports new approaches Risk Transfer Leverage (Scale) Professional Development Develop Organisational Capacity Additional Skills How you can help Develop Awareness & Dialogue Build & Expand Capacity Find [Qualified] Opportunities How is it relevant? Application of Innovative Finance It is not just about funding & financing

Next Steps Are you developing a programme? Let’s talk - We could consider adding or including new/different financing mechanisms Restricted Fundraising colleagues Format of further sessions / training Examples & Case Studies How to develop the dialogue ? Relevant & Important? Interaction What is useful / not useful Awareness