Disaster financing debate
Learning lessons from Malawi drought 2016
In 2015 a severe drought hit Malawi, one of the poorest countries in the world. By April 2016 over 6.5million people were estimated to need assistance just to meet their basic food needs. As previously blogged, in situations like these the international humanitarian system is typically slow and inefficient, usually mobilising many months too late to protect communities at risk.
However, in this case the situation should have been different. The Government of Malawi had purchased a $5million drought insurance policy from African Risk Capacity (ARC). ARC is an organisation mandated by the African Union to help African states to manage their own risks of natural disasters. The policy should have triggered in exactly this kind of drought situation. As acknowledged in a recent report published by ActionAid “speedy access to an insurance pay-out and international supplies of maize could have indeed helped avert a disaster.”
ActionAid’s recent report “The wrong model for resilience” documents how in this circumstance the policy, which is based on automatic triggers of modelled losses (primarily linked to rainfall), did not release. As the report describes in detail, a number of problems with the crop input data, and other factors, lead to a mismatch between what the model was telling us (small crisis) and the real situation on the ground (major crisis).
The result of this situation was of great consequence to poor Malawians, who were left exposed to the drought crisis, and dependant on a late and inadequate ‘traditional humanitarian response’. These communities will invariably take many years to recover from the crisis.
So what do we learn from this experience? Whilst agreeing with many of the suggestions made in this report, I drew some slightly different conclusions.
This situation, and this report, reminds us that index insurance schemes will not always trigger at the right time, but they can be complemented by other schemes. Lessons can be learnt from this experience, and significant improvements made to the ARC parametrisation process, including developing better channels of communication with vulnerable communities to improve model inputs (something civil society can support with). However the risk will never be eliminated. We need to be able to evaluate and be comfortable with the modelling work that underpins schemes like this, and be open about their limitations. As every A-level science student is told, ‘models are always wrong, but they are sometimes useful’.
If the model doesn’t always trigger at the right time then the next question we must ask ourselves is - is it worth it? The ARC cost-benefit study suggests that every $1 spent in early response is equal to over $4 spent in late response. The implication is that we can ‘afford’ to get it wrong some of the time. However risks need to be acknowledged upfront and managed carefully (for example by setting up a basis risk fund that can absorb overpayments or top-up underpayments), so that it’s impacts are not felt by the poorest.
Secondly, efforts to reform humanitarian response should not be seen as detracting from efforts to improve Disaster Risk Reduction; they are two different things. The report eloquently describes many different alternative resilience building initiatives that the Goverment of Malawi, and donors, could have invested in instead of an ARC policy. These range from social protection systems, to supporting cooperatives, to input subsidy programmes. Such initiatives absolutely need to be supported. However, this feels like a familiar argument about the importance of channelling more money into disaster risk reduction instead of humanitarian response.
The need for greater attention and funding of disaster risk reduction is an important argument is it’s own right. However, It should not be a binary either/or choice. We need to ensure that innovative attempts like ARC to reform or improve risk mitigation and response are not seen as drawing attention away from DRR.
Thirdly, we need tools, and transparent processes, to support with choosing between different risk management instruments. Imagine that you are a government with a $20million annual budget to spend on protecting citizens from risks of drought, how would you spend it? A sensible risk management approach tells us that you might spend a good proportion of that money on drought risk reduction, some on mitigation and put some to the side for a response that you can’t anticipate. It’s about taking a layered approach to your contingent liabilities.
Without a full view of the Government of Malawi’s expenditure on development and response, it’s hard to know whether putting $5million into a drought policy really is a sensible use of these funds. It’s an important but fairly conservative amount (the report points out that it only covers about 18% of the modelled response costs). However, everyone interviewed by the author seems to have a different view on how it should be spent, there is no consensus on the ‘right’ model for resilience.
What we should take from this is the need for better cost-benefit tools, a stronger evidence base and neutral advisory support to help governments (and wider humanitarian responders) decide between different risk management instruments. We also need open consultative processes to gain input and wider buy-in for these strategic decisions.
The drought crisis in Malawi was tragic, with a major and devastating effect on the most vulnerable communities. It is certainly the role of civil society organisations, like ActionAid, to point out failings where they seem them and advocate for improvements. However, I see this as the very start of a bumpy journey towards more reliable funding instruments for humanitarian aid, that go beyond the ‘begging bowl’ approach. We need to take learnings from this and continue to build the evidence base for the conditions in which these mechanisms do or don’t work.
In the meantime I am proud that African Risk Capacity is a partner of the Start Network, and I’m looking forward to taking learnings from this experience into our future collaborations to improve the effectiveness and local ownership of humanitarian aid.
The opinions expressed above are the authors own alone.
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