Unlocking Sustainable Solutions: Bridging the Humanitarian-Private Sector Divide

In the face of unprecedented global displacement, a new paradigm is emerging where humanitarian organizations and private investors are joining forces to address the complex challenges facing refugee communities. From infrastructure development to entrepreneurial ecosystems, this collaborative approach is paving the way for long-term stability and resilience in crisis-affected regions.

Catalyzing Private Capital for Humanitarian Outcomes

Bridging the Divide: Humanitarian Needs and Private Sector Expertise

The traditional humanitarian response model, reliant on short-term grants, is proving inadequate in the face of protracted crises that now last an average of 17 years. Recognizing this, global humanitarian organizations are actively seeking to engage the private sector, leveraging their expertise and resources to deliver sustainable solutions. This shift is driven by the realization that the private sector's capabilities in infrastructure development, service delivery, and job creation are precisely the tools needed to address the long-term needs of displaced communities. By fostering collaboration between the humanitarian and private sectors, innovative financing models can be unlocked, unlocking new pathways to stabilize and rebuild crisis-affected regions.

Innovative Financing for Lasting Impact

Humanitarian organizations are pioneering new approaches to mobilize private capital for social impact. Initiatives like in-house venture capital funds and impact investment advisory services are enabling these organizations to bridge the gap between humanitarian needs and private sector expertise.The International Rescue Committee's (IRC) Airbel Impact Lab, for instance, is working to catalyze private investment in refugee communities by advising and assembling deals for other investors. This includes building critical infrastructure, strengthening entrepreneurial ecosystems, and adapting climate finance models to humanitarian contexts.By leveraging concessional capital and financial derisking mechanisms, the IRC is able to "incentivize private capital at the scale it's needed," according to Ellen Brooks, the former banker leading the Airbel team. This approach not only stretches limited aid budgets but also fosters long-term, sustainable solutions that can outlast the cyclical nature of humanitarian crises.

Procurement as Investment: Unlocking New Pathways

Humanitarian organizations are also exploring innovative procurement strategies as a means of driving investment. The IRC, for example, has formed a partnership with the startup AquaPro Ventures to capture water from the air and supply it to health clinics at lower costs than their current water supplier.This "procurement as investment" approach allows the IRC to test new technologies and business models while also serving as an early off-taker, providing a critical source of demand and revenue for the startup. By leveraging their purchasing power, humanitarian organizations can help de-risk and scale innovative solutions that address the needs of the communities they serve.

Refugee-Lens Investing: Unlocking Opportunities

Alongside these efforts, a growing ecosystem of "refugee-lens investing" is emerging, with organizations like the Refugee Investment Network (RIN) advocating for policy change and connecting investors to opportunities in refugee communities. Investors such as Acumen, Developing World Markets, and Kiva have developed dedicated strategies and fund vehicles to channel capital towards refugee-led businesses and initiatives.Development finance institutions and multilateral development banks are also playing a role, using tools like loan guarantees and blended finance to de-risk and leverage limited capital for refugee-focused projects. In Lebanon, the World Bank's International Finance Corporation provided a million loan and million risk-sharing facility to a microfinance organization to increase lending to refugee-led micro businesses.By adopting a "refugee-lens" in their investment decision-making, these investors are not only addressing the unique needs of displaced communities but also unlocking new opportunities for sustainable growth and development.

Climate Migration: Addressing the Nexus of Crisis and Opportunity

As the world grapples with the growing threat of climate change, the issue of climate migration has become increasingly pressing. Experts estimate that more than 200 million people could become climate refugees in the next 25 years, with the impacts disproportionately affecting already vulnerable and under-resourced countries.Recognizing this, the IRC is exploring innovative financing mechanisms, such as debt swaps for social outcomes, that could help debt-burdened countries refinance a portion of their sovereign debt in exchange for commitments to humanitarian outcomes. This approach, inspired by successful debt-for-nature swaps, could channel much-needed funding to frontline communities responding to the climate crisis.By addressing the intersection of climate change, migration, and humanitarian needs, the IRC and its partners are working to develop holistic solutions that build resilience and create new pathways for sustainable development.

Collaboration and Iteration: The Path Forward

The humanitarian sector's embrace of private capital and expertise is a significant shift, one that acknowledges the limitations of traditional aid models and the need for innovative, collaborative approaches. As Ellen Brooks of the IRC emphasizes, "We're not trying to say we have the answer. We're saying we have an answer. So let's work together, let's iterate, let's try new things."This spirit of collaboration and experimentation is crucial as the world grapples with the unprecedented challenges of global displacement and climate change. By bridging the divide between the humanitarian and private sectors, new solutions can emerge that not only address immediate needs but also lay the foundation for long-term stability and resilience in crisis-affected regions.