Flexible and Innovative Financing for Refugee Crises and Other 21st Century Challenges

Last week, CGD co-hosted an event with the International Rescue Committee (IRC) with a simple premise that contradicts much conventional wisdom: refugees are not a burden, but a development asset. That premise compels the question: what policies, financing, and partnerships are needed to realize the promise of mutual benefit?

Jordan is among the pioneering countries trying to flip the script. The country hosts more than a million Syrian refugees and is partnering with the World Bank, European Union, and others to recognize and support refugee rights, while expanding development gains for all. A key anchor for this effort is funding from the World Bank’s Global Concessional Financing Facility (GCFF), which provides lower-rate loans to middle-income countries to help meet the development needs of refugees and host communities. These loan subsidies are a recognition of the public good generated by the investments. By promoting refugee protection and well-being, Jordan is providing benefits beyond its borders, such as supporting regional stability and fulfilling international moral and legal obligations.

GCFF’s efforts to incentivize investments in global public goods come at a critical time. So we brought together some of the leading actors and thinkers in this space to discuss the successes and challenges in implementing this new approach. How we can build on GCFF’s innovation in differential pricing of loans to spur investment in other public goods, such as disaster preparedness and climate change mitigation and adaption? World Bank CEO Kristalina Georgieva, Jordanian Minister of Planning and International Cooperation Imad Fakhoury, CGD President Emeritus Nancy Birdsall, and International Rescue Committee President and CEO David Miliband engaged in a candid and lively discussion steered by Devex Editor in Chief Raj Kumar.

Our five key takeaways

1. We must keep our focus on displacement, even when the headlines stray. These new approaches will be ineffective if the international community loses focus as the 2015 wave of migrants to Europe recedes in memory. The fact remains that there are still over 20 million refugees around the world, and more than 40 million internally displaced people who could become tomorrow’s refugees. We need to stay focused to address the crux of the humanitarian-development divide: displacement is often protracted, and requires longer-term partnerships. The need for sustained effort is even more needed when it comes to prevention and preparedness.

2. We need to reshape our approach so that support follows need. In an era of global challenges, the level and type of response cannot be based on rigid classifications. As Georgieva noted, Syrians fleeing the war are as—or more—vulnerable than many in low-income countries. But before the creation of the GCFF, the World Bank did not have a way to offer concessional financing to Jordan to help meet the needs of Syrian refugees or cope with the shock of the crisis. Beyond the near-term fiscal cost of hosting refugees, Jordan has lost important trade and economic opportunities that could stall development gains for years to come. Funding and attention are frequently directed to places where responses fail. Minister Fakhoury emphasized the need for incentives that encourage the international community to offer support throughout the cycle of a crisis that matches the changing needs.

3. Developing appropriate incentives requires clarity on the desired outcomes. Having financing available to host countries is one challenge, but structuring implementation in a way that delivers tangible results is another. As we lay out in our new policy paper with the IRC and as highlighted by Miliband, incentives could have been better aligned with desired results in the Jordan Compact. A quota on refugee work permits does not necessarily translate to creating jobs for refugees and hosts. An emphasis on work permits has largely led to the formalization of existing jobs; while this has important benefits, greater attention to other measures (such as formalizing home-based businesses) may have done more to increase incomes and spur the local economy. A clear and shared definition of success can help ensure incentives and programs are pulling toward the same outcomes.

4. The GCFF changed the game by introducing a financial innovation to better meet needs. In 1960, the Bank’s International Development Association (IDA) brought new and groundbreaking innovation to how the global community did development assistance, creating a platform to lend to developing countries on favorable terms by leveraging multinational donor backing. As Birdsall noted, half a century later, the GCFF has potential to push the envelope further. The Bank has raised the level of ambition in responding to protracted displacement crises through the GCFF and a $2 billion IDA sub-window for low-income refugee-hosting countries—and is setting the example on how flexible financing can help tackle 21^st century problems.

5. This innovation can and should be adapted and applied to a host of 21^st century challenges. As we detail in the CGD-IRC policy brief, based on the initial funding provided through the GCFF, we have strong evidence that the model can enable a better and more sustainable approach to refugee crises. Building on proposals for the World Bank and other institutions to focus on global public goods, this innovation could be adapted to help respond other current and emerging challenges, such the need for low-carbon energy or pandemic preparedness. During the World Bank/IMF Spring Meetings this past Saturday, the Bank announced a capital package endorsement by shareholders, part of which encourages a boost to engagement around global public goods.

Minister Fakhoury perhaps captured the discussion best in one simple point: if we don’t get the financing right for refugee hosting countries, it will be impossible to get the moral responsibility right—for refugees and for host communities. The same could be said of other global challenges of our time.