A few years ago a number of development agencies working together had a bright idea. They asked themselves why most projects were being planned without considering the risks to the project from disasters. They could see how projects were being undermined by predictable crises such as droughts, floods or heatwaves. These were severely impacting the poor communities the agencies were helping, often wiping out investments made in tackling poverty and building resilience. The bright idea that these agencies came up with was called “crisis modifiers”.
Crisis modifiers are designed to be ring-fenced budget contingency lines, built into existing multi-year grants. These are set up to be released when agreed early warning triggers of emerging crises are met. The funding flows to early action activities to mitigate the crisis and/or provide a vital bridge until a humanitarian response arrives.
Crisis Modifiers are an exciting and innovative mechanism, and they’re in line with Start Network’s commitments to more anticipatory, earlier action in crises. However, in practice this approach suffers from three challenges that I think are currently preventing it from going to scale:
1. Predictability: Holding the crisis modifier as a budget contingency line has its limitations. There may be a big crisis in year 1 and there is none left for the rest of the project. Or,in other circumstances, the line is not needed at all and the implementing organisation is left scrambling to spend it in the last few months of the project.
2. Efficiencies: Each project sets up its own crisis modifier in a different way, with its own early warning indicators, thresholds and decision making structures. Whilst contextual relevance is very important, starting from scratch is expensive and prevents scalability.
3. Timeliness: Evaluations of pilots suggest that the crisis modifiers are usually still triggered too late to protect communities at risk. This is due to weaknesses in early warning systems or natural human bias (dithering!) over whether or how to release funding.
So what is the solution?
Imagine a national, collectively owned facility that could support NGOs, donors and agencies to protect development projects from predictable shocks. It would do this by providing cutting edge science to understand and quantify the risks to projects, support to plan the response actions needed to mitigate these risks and financing mechanisms that can automatically release the funding needed to protect the project, no matter the scale of event.
A Start Network initiative, called the Drought Financing Facility, could provide a proof of concept for this new generation of collective crisis modifiers focussing on the particular hazard of drought.
The Drought Financing Facility is envisaged as a network of national facilities, enabling faster and more coordinated response to protect communities in emerging droughts. What this means is that we use science to plan in advance when and where droughts are likely to happen and to pre-position the donor funding to respond early.
How this links back to crisis modifiers is that the facility can support an existing resilience programme, releasing funding to protect programme outcomes when abnormal soil moisture levels indicate an emerging drought.
This provides predictability – the risk is no longer held in the project budget, but is converted into an annual ‘premium’ and transferred out to a collectively owned facility that can pool this across different contexts and/or purchase re-insurance where needed. This ensures that there is the right money available to surge into the project, regardless of the scale of the crisis.
This provides efficiencies – by sharing the ‘science’ across different facilities, and creating a toolkit of standard operating procedures that can be adapted to each context.
This provides timeliness – by removing some of the human bias in decision making, through setting clear and automatic triggers for funding that can then be validated and targeted effectively using on-the-ground assessments.
Last week these concepts were explored through a number of workshops in Zimbabwe bringing together Start Network NGOs including Welthungerhilfe, ActionAid, Care, MercyCorps and Christian Aid. The next step is to try this as an active pilot and generate evidence for whether and in what conditions facilities like this can enable more effective protection for poor communities.
What do you think of this idea? Please get in touch Emily.montier@startnetwork.org
The development of the Drought Financing Facility is supported by the Humanitarian Innovation Fund