Resilience Must Come First


Magazine article

One can only be deeply moved by the devastation in the Philippines caused by Typhoon Haiyan at the end of November – the lives shattered and up to 10,000 dead. As you look at the eyes of the orphaned kids in the devastation of what was Teplocan if ever there was a moral case to be made for quick and effective grant giving here it is, surely. However as the relief operation winds down and the storm recedes into memory along with the worse disasters of the 2010 Earthquake in Haiti that killed 300,000 or the Tsunami in 2004 that killed 250,000, we must ask ourselves whether we have learned anything about effective disaster relief. The historical anecdotes are legion: the relief package after the Tsunami containing ski jackets and Viagra that was sent to Indonesia, a country with no snow and to my knowledge limited après ski, or Haiti where hundreds of thousands remain living in tents, threatened by a re-emergence of Polio and imported Cholera, yet half the official aid pledged has still not been disbursed (according to the Center for Global Development).

If we are failing to deal with symptoms of natural disasters, can we do more to protect communities from their effects by building resilience?Mr Cameron’s 2006 vision remains valid. At the end of the day, social entrepreneurship and impact investing are simply the injection of modern capital and commercial practices into the provision of social goods. In financial and strategic terms, the opportunity and paradox is that in the traditional “for” profit world we are reaping the whirlwind of over-leverage, whilst in the “not for profit” world there is under-leverage. Yet if the social sector can leverage capital effectively through new financial products, the incentives for collaboration and scale will change fundamentally.

At Total Impact Advisors we have just completed some work on resiliency for the Rockefeller Foundation. We began by asking what are the causes of a lack of resiliency and identifying five key market failures:

1. Lack of savings/resources - Many poor individuals and communities lack access to financial resources, which inhibits their ability to save and invest in activities to promote their livelihoods, including spending on health and education. This is exacerbated in times of macroeconomic crisis.

2. Lack of risk mitigation tools - Limited or no access to insurance or other risk mitigation tools, including forecasting, manifests at the micro-level as a lack of insurance options for the poor and at the macro-level as a dearth of larger-scale, more sophisticated insurance tools for key sectors of the economy, including financial services, agriculture, healthcare, and others.

3. Lack of functioning domestic capital markets - Limited credit (at customer level and bank level) and liquidity in many rural and developing markets inhibits the ability to mobilize resources. Inability to align domestic capital markets in developing countries ($2+ trillion) with national development needs.

4. Lack of economic activity - Limited access to financial or other resources creates a vicious cycle that inhibits the development of a commercial value chain and a functioning economy. The target populations are not integrated into the economic landscape.

5. Lack of incentives to collaborate and scale - Lack of large-scale system of incentives for multi stakeholder collaboration. This prevents otherwise innovative tools from scaling and an inability to look at problems at a systemic level where the incentives are aligned for tangible, auditable social outcomes.

Returning to natural disasters, these market failures were manifested, for households, communities, and countries, as:

a) Limited Private Sector Engagement: the private sector, while often engaged in disaster response from a philanthropic and business perspective, does not invest at the nexus of development and humanitarian efforts to prevent disaster. There needs to be a proactive business response to mitigating the risk of disasters as opposed to the current reactive investment model after disaster strikes.

b) Inadequate Use of Big Data: developing countries utilize outmoded methods to access, integrate and use crucial data and information to reduce vulnerability and risk, if they use data at all. The Information budget for UN OCHA (responsible for co-ordinating disaster relief) in 2012 was $12.4 million. This is a big opportunity that is currently being missed. Your local supermarket does it better.

c) Lack of Evidence-based Methodology: Few players active in the field use rigorous methodologies to determine the resilient investments that matter most.

d) Insufficient Collaboration: Humanitarian and development actors rarely work together in a complementary manner.

The same Centre for Global Development report noted - Where has all the money gone? Three years after the quake, we do not really know how the money was spent, how many Haitians were reached, or whether the desired outcomes were achieved. Or as was noted by Akashar Kapur writing in Bloomberg about the Tsunami “it was clear that much of the outside world’s largesse was utterly removed from the needs and priorities of aid recipients”. These natural disasters pose a fundamental question of philanthropy - perhaps we need to move from a reactive system of a myriad of fragmented bilateral un-coordinated actions supported by a 19th century financial / legal mechanism of Grants and Aid to one where we apply the full tool box of modern capitalism to real multi stakeholder collaboration with social mission hardwire to capture the value of Innovation, Collaboration and Economies of Scale (ICE)? Ask that Orphan where the real moral case rests.

This article is tagged under:

  • Philanthropy Advice
  • Promoting philanthropy