You can’t rethink humanitarianism without also rethinking the money. Here’s one way to do it.

December 11, 2020

     By Duncan Green     

I have a confession to make. I don’t listen to podcasts, even though I inflict them on others. When I’m at my desk, I’m much happier skimming documents (using my mad speed reading skills). If I’m out and about, I hate having something jabbering away in my ears.

But my resolve is being sorely tested by the new series on ‘Transforming Humanitarianism’, co-hosted  by Heba Aly, director of The New Humanitarian, and Jeremy Konyndyk, senior policy fellow at the Center for Global Development, is testing my resolve.

The latest (fifth) episode is entitled Money! Money! Money! In the end I cheated and found the transcript, which is great, but long (9,000 words). So here’s some highlights (tidied up a bit from the raw transcript) from a conversation between Heba, Jeremy, Tara Nathan and Sema Genel. First they deal with the money problem, then a smart initiative on how to fix it.

‘In many ways, the humanitarian aid system is like a set of monopolies. Funding is concentrated in the hands of a few big agencies. And that’s actually at the heart of a lot of the sector’s problems. The way money flows incentivises all kinds of counterproductive practices: layering on transaction costs, siloing cash programmes, depriving local frontline groups of resources.

So you can’t rethink humanitarianism without also rethinking the money.

In the Grand Bargain, the humanitarian community committed to channelling much more funding to local actors. That is are potentially transformative, but depends heavily on challenging some of the funding monopolies that currently exist.

We’ve been spending the last couple of years digging into the humanitarian business model. We talked to donors that represent about 60% of the funding in the system. We asked every donor about the Grand Bargain commitment on localisation, and particularly we asked them: Do you have the bandwidth to actually give more money directly to local and national NGOs? And every single donor said no.

What you have right there is a recipe for a lot of trouble with localisation. If the donors don’t have the bandwidth to do that, then that inherently creates the need for an intermediary layer somewhere between the donors and the frontline responders.

Instead of talking about how much goes to international and how much goes to local, we need to think about how to redefine that intermediary layer. If that intermediary layer is to exist, what are the incentives and how can it be shaped?

Right now, about 60% of the funding in the system goes to the UN and about 50% of the total in the system goes to just three big UN agencies: UNHCR, WFP, and UNICEF. The incentives for those, based on how donors fund them, is to capture as much money as possible. Not just because of delivery impact, although that’s legitimately part of it. But also because donors would much rather fund programme delivery than core costs.

If you’re a big UN agency, if you’re UNHCR, one thing you have to do in the world is advocate for the protection of refugees and for refugee rights, but no one wants to fund you to do that. Well, then you fund that by in fact, taxing a lot of the programme delivery costs and the more that you can get for programme delivery, the more that you can fund your core mandate. So the incentives for these big UN agencies really are to capture as much money as possible.

So what we’ve ended up with is a system that requires an intermediary layer, and then incentivises that intermediary layer to capture a lot of funding and not necessarily be very efficient. I think that makes change really difficult because no one in that construct, neither the donors nor the UN agencies, have a really strong incentive to do things differently – whether that’s on cash, whether that’s on localisation, whether that’s on accountability. We have these normative commitments that we make that are up against these really hard financial incentive realities.

One of the things that also came through really clearly in our interviews with donors was the degree to which institutional history and personal relationships still shape a lot of decisions. If there is a known partner that a donor has worked with for 30 or 40 years, like a UN agency, it’s very easy to justify giving money to that institution. The trust is there. That doesn’t exist between donors and the private sector; it doesn’t exist, really importantly, between donors and local national organisations. Some of those informal but very real barriers also have a lot of shaping effect on the system.’

Sema Genel then described what sounds like a brilliant attempt to construct the right kind of intermediary organization:

‘Looking at how we can create different intermediaries, I can mention briefly the research that we’ve been doing as the NEAR Network. We have been looking precisely at alternative financing strategies and what we propose is to convene and to incubate local civil society actors, local leaders and their networks at the local level.

This also includes involving the private sector, Islamic funding, community philanthropy. There are a plethora of actors at the local level, at the national level, that are actually willing to engage, they want to be a part of the solution, and we’re just leaving them out of the picture. It would still be a pooling of funds, but it would be a pooling of funds at the country level, and donors, if they so wish, can actually contribute to what’s being created and what’s been convened at the national level.

At NEAR, we actually have designs for local funding mechanisms in Somalia and Nepal, and we’re now working on one for West Africa. It’s basically decentralising the way the money flows, not a centralised system as we have now, with its big players, monopolising those resources, but actually decentralising it.’

The transcript is long (9,000 words) and full of great content (I haven’t got space to include the fascinating discussion on digital cash transfers). Or you could just listen to the podcast……

December 11, 2020
Duncan Green