Innovative financing for refugee situations

How can the world better fund its response to humanitarian crises? This question is critical because humanitarian financing currently falls short in supporting people facing imminent, new or ongoing crises. The post-hoc, grant-based mainstay is well known to be too small, too slow, too short-term, too unpredictable and too reliant on the discretionary contributions of a small number of governments.

Refugee crises bring a particular subset of these familiar financing challenges – including of scale, duration and type.

Meeting these funding challenges requires a transformative shift, towards a collaborative approach with a range of solutions better suited to today’s risks and crises. There was also an explicit call for a shift in refugee financing in the 2018 Global Compact on Refugees, which agreed to strengthen the collective global effort to sustainably support refugees and those who host them.

Keeping track of this shifting and growing agenda can be hard: it is a foreign financing language for ‘traditional’ aid donors and responders; initiatives are fragmented and progress is hard to track.

Many are looking to ‘innovative financing’ to generate new ways of mobilising this public and private financing, in ways designed to answer the specific challenges. If innovation seeks to do things better by exploring options for doing things differently, then innovative financing seeks to bring new sources of investment and expertise to create a better toolkit.

This background paper is not a comprehensive technical inventory but a digestible guide to the essentials. It looks at three categories of innovative financing – insurance-related, blended finance and crowdfunding – and sets out the key concepts and models of these for crisis financing more widely, examining examples of how these apply to refugee financing. It also suggests key lessons and highlights questions arising from these.