Saving lives and making money: Can humanitarian impact bonds marry the two?

‘There is quite a bit of distance between the talk and the walk.’


Great expectations, slow start

Worldwide humanitarian needs have grown fast in recent years, driven by conflicts as well as natural disasters. In 2006, UN-led relief operations aimed to help 31 million people. In 2019, the figure is some 106 million. Funding has not kept pace: response plans coordinated by the UN missed fundraising targets by an average of $9 billion from 2015–2018. Meanwhile, income depends heavily on the European Union, the United States, and a handful of other wealthy nations.

How they work

In the case of the ICRC’s bond, if the project meets all its targets — including patients being successfully treated at a rate 80 percent faster than in existing centres — the investors will get their money back, plus interest payments. If not, they can lose 40 percent of their investment.

Principles and stumbling blocks

To justify the added expense, the bonds should meet a particular financing problem that can’t otherwise be addressed with cheaper sources of funds, suggests Poole. The ICRC could, she believes, have found ways to structure traditional grant funding rather than embark on the bond — which, Poole says, is perhaps mislabelled as a “humanitarian” bond, since the long-term nature of the project and services could equally be tagged “development”.

Toward the future: Billionaires, bandwagons, and silver bullets

The hope among some analysts in the sector is that the model, as it becomes more widely understood, could attract unconventional funders, such as Silicon Valley billionaires.

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