Making Way for Homegrown Aid

Key strategic issues on the topic of humanitarian actions

Six trends are shaping the field of humanitarian actions:

1. Giving money, cash or vouchers. Involve local players: banks, businesses, local NGOs.
2. Digitalization (data, cybersecurity, etc)
3. The ‘Customer’ Knows Best
4. Making Way for Homegrown Aid Paying for Growing Needs
5. Solve cause, not symptoms
6. Defending Humanitarian Principles

Gooddler believes that money (in any form) should empower local economy, engaging local businesses to cover local needs. Efforts are underway to boost the presence of local aid groups during disasters.

(Source: World Economic Forum, Mapping Global Transformations)

Local, on-the-ground aid groups should get a far bigger slice of the humanitarian funding pie - as a matter of principle, and as a means to cut costs. While that is already the policy of major donor countries and aid agencies, it has proven difficult to implement. In 2017, IRIN News, the non-profit humanitarian newsroom based in Geneva, found that two thirds of international relief funding (some $14 billion) went to just 12 international organizations. Meanwhile grassroots non-governmental organizations with local knowledge and networks are at the bottom of a sub-granting chain, providing frontline relief but not getting the recognition or financing they deserve. Some claim they feel more like disposable sub-contractors than partners, as international groups hog resources. As a result, grassroots organizations are unable to mature as organizations in their own right, especially as their staff are frequently poached. There is plenty to value in the internationalism of emergency aid, so an equilibrium needs to be reached - because local aid groups that can rapidly operate at scale are not always present during humanitarian situations, and often need greater skills and expertise, and because neutral, external organizations may be more ideal for helping civilians during conflicts.

Relief aid should be as local as possible and as international as necessary, according to a World Humanitarian Summit resolution and the Grand Bargain - an alliance of donors and international aid groups. The alliance has set a target to increase funding to local groups to 25% from less than 3% by 2020. Big donors aiming to help must overcome barriers. For example, the European Commission’s humanitarian department is restricted to funding European Union entities, and stringent donor reporting requirements and financial rules present a steep learning curve to smaller NGOs. Also, the donor civil servants who approve grants argue they do not have the capacity to sign up dozens of smaller new partners. As a result, donors are increasing their contributions made through UN-administered pooled funds, which can funnel cash to local NGOs. Some countries find a balance. Indonesia has said it does not need new international relief groups to deploy there, and instead calls in specific aid such as airlift capacity as needed. After the Sulawesi earthquakes and tsunami in 2018, Jakarta’s local NGOs and faith-based groups took the lead, alongside the government and the Indonesian military. 

Social innovation is driven by purpose, partnership, and accountability, in order to develop solutions that enable traditionally excluded people to participate in the economy. It is the process of applying new solutions to global problems, by creating or improving products, services, business models, and markets - and more effectively responding to unmet needs. Collaboration among businesses, the government, and civil society that cuts across boundaries is essential for social enterprises to increase the scale of their impact. These enterprises can be non-profits like First Book, which provides books for children in need, or for-profits that embed a social mission in their business, like outdoor clothing company Patagonia. 

This briefing is based on the views of a wide range of experts from the World Economic Forum’s Expert Network and is curated in partnership with Vanina Farber, Professor and elea Chair for Social Innovation, IMD Business School.

Giving Money, Not Stuff

More humanitarian aid is arriving in the form of cash, and this is a good thing

Planes, trucks, and tents are often what people imagine when they think about humanitarian aid. But from Indonesia to Yemen, people in need are increasingly receiving aid from an ATM or mobile phone. A number of studies have found that sending cash is better than sending stuff; it’s cheaper, more versatile, and more respectful. Donors and big aid agencies have committed to supplying more help in the form of cash. In 2016, cash transfers and vouchers increased by 2.5% compared with the year earlier, to $2.8 billion - or 10% of all international humanitarian aid. The international non-governmental organization World Vision, for example, expects fully half of its spending to be in the form of cash by 2020. Cash aid offers a practical solution for buying goods or renting a place to stay, and injects funds directly into local economies (though health care, counselling, and education can remain elusive, as commercial service providers are rarely an option in crisis zones). In practice, cash aid requires monitoring, and advisory and protective services, especially for those liable to fall through the cracks.

As the provision of unconditional cash aid grows in scale, United Nations agencies and NGOs are having to redefine their purpose. Cash threatens the traditional “business model” of many aid groups, because a highly-specialized agency focused on supplying food or shelter, for example, makes little sense for families accustomed to making their own purchasing decisions. On the flip side, greater giving in cash means financial service providers are taking on a more significant role - alongside a percentage of the money transferred. In Turkey, for example, the European Commission provides cash transfers for 1.3 million Syrian refugees, in collaboration with the Turkish government, state-owned Halkbank, the Red Crescent, and the UN (their two-year contract is worth €650 million). Why not cash should be the first question asked before starting any aid project, according to a study published by United Kingdom-based think tank the Overseas Development Institute in 2015. Yet, institutional and technical hurdles remain, some based on misperceptions. For example, cash aid is not actually more exposed to fraud than boxes filled with goods and provisions. And, fears that recipients will spend cash unwisely - say, on tobacco or alcohol - have proven to be unfounded. 

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Systems Change

In order to have the broadest possible impact, social entrepreneurs must focus on connections.

Social entrepreneurs have posted a string of successes, whether it has been through VisionSpring’s provision of eyeglasses to millions of poor people in developing countries, or the more than 160 million books and other essentials provided to educators of children in need by First Book. Yet, the social innovation sector is coming to terms with the limits of incremental growth, according to Beyond Organizational Scale: How Social Entrepreneurs Create Systems Change, a report published by the World Economic Forum in 2017. Society’s needs are significant, and models for scaling up in size to meet them are still too narrow, or take too long to implement. While simply replicating private sector service delivery models is often ineffective, some forward-thinking social innovators are moving towards a model of systems change - meaning, transformation on a broad scale that even small organizations can help facilitate. True systems change requires an inclusive approach that focuses on the connections that link an ecosystem together, rather than focusing on delivering a predefined solution to intended beneficiaries. Social innovation has helped transform beneficiaries into actors who can help expand a business, as clients or employees.

Social innovators need to adapt to the local environment. A continuous flow of data and evidence is necessary in order to create feedback mechanisms in systems, according to the Forum’s report; the monitoring and evaluation enabled by this flow can serve as tools for continuous improvement and reassessment, potentially enabling social entrepreneurs to alter course as needed. Systems change also requires developing a shared understanding of problems facing a multitude of different stakeholders, with differing motivations. For systems change to occur, social innovators must convene these disparate players, who are often from sectors that may not have worked together previously. Governments, in particular, can be a crucial partner for achieving large-scale, systemic change. Social innovators therefore need to develop skills such as coalition building, and negotiating legislative reform - and organizations need to either create new roles for people who have these skill sets, or invest in educating existing employees. 

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Impact Investing

Finance is an essential force for systemic change, and must find its way to projects and innovation that can actually improve lives. The United Nations estimates that $2.5 trillion in funding is needed to achieve the UN’s Sustainable Development Goals - the 17 goals established in 2015 to guide global development until 2030. They encompass a broad range of targets, including reducing the portion of the population living in poverty by at least half, ending hunger and all forms of malnutrition, and achieving the sustainable management and efficient use of natural resources. Recent financial innovation has helped to better harness investment to fund social innovation, and a deeper pool of capital is available than what had been established previously through philanthropy alone in order to support organizations aiming to have a social impact. For example, “blended finance” is an increasingly popular way to fund impact investing by tailoring risk for individual investors within a group - including those from the private sector.

Impact investing is distinct from the growing trend of “ESG” investing, which involves funding publicly traded companies already demonstrating good environmental, social and governance practices. Impact investing focuses on creating measurable, positive impact, and several related, significant funds have been formed such as Vital Capital Fund, which is primarily focused on sub-Saharan Africa. A set of tools and resources has evolved to help impact investors measure the social and environmental benefits of their investments, such as the IRIS metrics developed by the Global Impact Investing Network, and GIIRS Ratings. However, a single, standard set of metrics has yet to be adopted by the impact investment industry as a whole. That means that investors use a combination of approaches to measure the impact of their investments, including qualitative and anecdotal evidence in addition to standardized tools. The greatest challenge to the growth of impact investing is a lingering lack of high-quality investment opportunities with measurable impact. In addition, social entrepreneurs, especially in the so-called “valley of death period” prior to realizing the initial revenue generated by a venture, often require additional training and support in order to gain a deeper understanding of their investment needs.  

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Social Entrepreneurship

Entrepreneurs are finding many ways to inject a social mission into their business

Social enterprises can be non-profits (like Goodwill thrift shops in the US), for-profits (like Ethiopia-based fair trade footwear maker Oliberté), or a hybrid of both. They are entrepreneurial organizations designed to solve problems in innovative ways, and produce benefits that blend positive social and environmental impacts with financial returns. They also try to provide innovative solutions for big, societal problems in a self-sufficient way by using market-based mechanisms - and tend to maximize resources for the greatest possible impact, while placing a social mission at the core of their business. Much like traditional entrepreneurs, social entrepreneurs often have a unique ability to sense and act on opportunities by applying creative thinking, and they can benefit from a tireless determination to create new products, services, and markets. What distinguishes a social entrepreneur is his or her targeting of underserved populations, and their commitment to disrupting the status quo by generating social impact at a grand scale. 

Social enterprises deploy a diverse range of models and focus on a variety of different areas. In their 2008 book The Power of Unreasonable People, John Elkington and Pamela Hartigan, founding partners of the consultancy Volans Ventures and leading figures in the field of social innovation, defined several possible models for social enterprises: a Leveraged Non-Profit makes innovative use of financial and other resources in order to respond to social needs; a Hybrid Non-Profit is willing to use profits generated by some activities to sustain other operations that have a social purpose; and a Social Business Venture is set up as a for-profit business designed to spur social change. Because the public sector is the primary provider of social services to the poor, many social entrepreneurs partner with governments in roles such as service providers, providers of technical assistance to public employees while teaching them new skills, and as advocates that help craft new laws and policies. While the field is growing, social entrepreneurs still face significant challenges. They are often plagued by a lack of funding, a shortage of business skills, problems with scalability, and a dearth of supportive regulation. Because their business ideas include bold, novel concepts, investors often assign them a high-risk profile. 

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Corporate Social Innovation

Some of the world’s biggest companies are finding ways to address the world’s biggest challenges

Society faces major challenges, including a lack of access to education and healthcare, income inequality, widespread unemployment, and environmental problems like climate change and ocean pollution. Experience shows that solutions cannot be found solely in government policies, and instead require collaboration with businesses - which have the power to create and distribute across borders in order to have real impact. Business leaders no longer focus solely on financial results; they increasingly face expectations from shareholders, customers, the media, their employees, and others to consider the broader impact they are having on society and the environment, and whether or not they are creating meaningful jobs. Corporate engagement has evolved from philanthropy, to corporate social responsibility, to social innovation. Unlike more traditional initiatives, corporate social innovation is embedded in corporate strategy, R&D, employee development, and partnerships. Rather than one-off projects, the focus is on sustainable social change, and developing long-term strategies to address social problems. It is a strategic direction, rather than an isolated initiative. And, instead of a top-down approach, it relies on a participatory, collaborative model that takes into account feedback from customers and employees.  

Examples of corporate social innovation include Unilever’s Sustainable Living Plan, which is designed to double the size of the consumer goods company’s business over ten years while at the same time reducing its environmental impact; the company’s Sustainable Living-branded products have actually seen sales increase 50% faster than the rest of its products. Meanwhile General Electric’s (through GE Healthcare) “Healthymagination” program develops affordable products designed to address global health issues - in one case, the program worked with a social enterprise to develop and distribute low-cost incubators that address India’s high infant mortality rate. Other examples: IBM established “Corporate Service Corp,” a volunteer initiative that sends 500 young leaders a year on team assignments in more than 30 developing countries; and Danone’s Nutriplanet group analyses socioeconomic and cultural data in order to better understand health issues in developing countries. The Danone group reformulated a best-selling cheese in Brazil, for example, to improve health outcomes by reducing sugar and adding vitamins. The group also developed a nutrient-rich yogurt targeted at children in Bangladesh. As more demands are made of companies for greater transparency, accountability, and impact measurement, these types of initiatives will become increasingly common. 

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Government Role

A smart, well-run public sector can help facilitate social innovation

Due to government spending cuts, growing investor interest, and a new generation of social entrepreneurs, more governments are experimenting with ways to harness private enterprise for the public good. This is increasingly seen as essential for achieving large-scale, systemic change while reforming public services. However, as neither a conventional business nor a traditional charity, social enterprises blur policy boundaries. Traditional corporate legal structures do not support the dual-purpose business models of social enterprises, and tax systems rarely distinguish between companies that benefit society and the environment and those that harm them. And, while traditional regulation is designed to protect investors from excessive financial risk, it does not recognize that risk can also stem from a desire to create a positive impact. A more innovative public sector could better enable social innovation, by supplying well-designed policy and incentives; governments can also invest directly in social enterprises, act as intermediaries for private investors backing social enterprises, and provide resources and technical assistance (in some countries, issues such as political upheaval and a lack of budgetary support create related obstacles). 

One example of positive government support for social innovation is the social impact bond, a financing tool where creditors fund improved social outcomes for underserved communities - which in turn can result in public sector savings. These bonds are contracts signed by local governments, banks, and foundations to do things like help the homeless find shelters, or rehabilitate young criminal offenders. The repayment of related financing depends on how successful a program has been in achieving defined targets, and backers often recycle that repayment back into other projects. The bonds enable governments to partner with innovative service providers and private investors that are willing to assume the upfront costs and risk. Other policy instruments benefitting social innovation include Benefit Corporation and “B Corp” legal statuses, which help for-profit corporations create a public benefit, generate sustainable value, and more carefully measure their impact on society and the environment. Companies operating under these statuses must report to shareholders on how they are balancing interests. Benefit corporation legislation has been passed in more than 30 jurisdictions in the US, while Italy has also adopted related provisions; examples of the thousands of registered benefit corporations include Patagonia and Kickstarter.  

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Source: Mapping Global Transformations, WEF