Risk Financing


The Start Network is harnessing the power of blockchain to speed up distribution of aid funding and trace exactly how it is spent.

Our ultimate aim is to enable every pound in aid to be tracked from donor to the people helped.

Sorce and her son Abdallah in the drought-stricken Oromia region of Ethiopia. Credit: UNOCHA/Charlotte Cans

Why is it needed?


The lack of transparency within the sector heightens the risk of misuse of funds and makes it more difficult for communities affected by crisis to hold the aid system to account.

Added this, funds can take weeks to arrive and up to 10 per cent may be lost if banking fees, poor exchange rates and currency fluctuations are particularly adverse.

These inefficiencies and opaqueness mean that ensuring the effectiveness of aid remains a challenge for governments, international charities and for the people we aim to serve.

The Drought Financing Facility


Envisaged as a network of national facilities, each facility will mobilise the collective capacities of NGOs and donors to protect populations at risk of emerging drought crises.  
 

 

How it works


The risk management approach of the facilities involves three key components:

 

- Science-based risk modelling that allows us to understand and quantify the risks of drought in our areas of operation. This draws on a scientific model developed by our partners that can capture drought risk in any country using estimates of soils moisture combined with knowledge of agricultural cropping patterns and land cover topology

- Contingency planning/Scenario Based Response Planning that outlines what drought mitigation activities will be carried out when and by whom under different crisis scenarios, thereby facilitating a more timely and coordinated response

- Pre-positioned financing to deliver response plans, including insurance mechanisms that automatically release funding based on pre-defined triggers of emerging major drought. The model takes a risk-layering approach with contingency funds used for more frequent but relatively minor events, while insurance reacts to only less frequent but severe events.

 

Piloting the facilities

We are prototyping the Drought Financing Facility in two locations, Pakistan and Zimbabwe and Start Network's members and wider stakeholders are being supported through the design steps required to establish a national pilot. This is a participatory process that involves the Start Network NGOs, their community partners and wider stakeholders such as Government, UN or other.

 

The preliminary design process is concluding mid 2017, with active pilots scheduled for 2018. 

 

This programme, the first of its kind, is led by Start's member NGOs, with the facilities being developed in partnership with GlobalAgRisk, with funding from the Humanitarian Innovation Fund until June 2017.

The African Risk Capacity Replica Programme


African Risk Capacity (ARC) is an organisation mandated by the African Union to help African Union Member States manage natural disaster risk.

 

ARC provides a three-pronged approach to self-management of climate risk by its member states (early warning, contingency planning and access to financing) by offering parametric insurance which unlocks the finance needed to implement an early response to a pending disaster. 

 

Member States can purchase drought insurance policies from ARC Ltd,  and receive payouts for pre-approved contingency plans.

 

Replica Insurance supports, mirrors and builds on this approach to disaster risk management. Non-governmental partners (like the Start Network) are supported by donors to pay matching insurance premiums. If rainfall levels fall below a pre-defined threshold, they will receive matching pay outs at the same time as the government, to implement timely and coordinated actions to protect communities at risk.

 

The Start Network and World Food Programme are the first designated partners of the ARC Replica initiative. This initiative will be piloted in early 2018, with support from the German Government (KFW).

Latest news


Blog Post

The African Risk Capacity Replica

What are the significant challenges that humanitarian organisations face today when responding to disasters?

16Oct18

News Article

Start Network signs ‘game-changing’ drought insurance policy for early humanitarian response in Senegal

The Start Network has signed a ‘game-changing’ insurance policy, intended to pay out if a drought hits Senegal, enabling aid agencies to offer live-saving help before a famine threatens to take people’s lives.

30Aug18

Blog Post

Commentary on InsuResilience Global Partnership

Last week was the official launch of the G7 and G20 initiated InsuResilience Global Partnership. The partnership aims to better protect poor and vulnerable people against the impacts of disasters, by using climate and disaster risk finance and insurance solutions. It has a strong coalition of partners involved, including governments, private sector, UN and civil society organisations, such as the Start Network.

24Nov17

News Article

Start Network signs on to the InsuResilience global partnership

The Start Network has signalled its intention to support and join the efforts of the InsuResilience Global Partnership (IGP).

16Nov17

Further Information

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