Finance case study

Finance Case Study

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Ian Gray and Kurt Hoffman

May 2015

This document reports on a project conducted by the Centre for Research in Innovation Management (CENTRIM) at the University of Brighton, funded by UK aid from the UK ’s Department for International Development (DFID). The views expressed are those of the authors and do not reflect opinions of DFID.[pic 2]

Executive Summary

Humanitarian needs have increased over the past few decades and are projected to increase dramatically in the coming years. The world that is emerging is urban, increasingly buffeted by the effects of climate change. The old paradigm of state vs. state conflict no longer covers the rise in non-state actors bringing instability and conflict to every continent . Generations are growing up and having their own children in the same refugee and IDP (Internally Displaced People) camps they were born in .

Funding for humanitarian response is lagging behind the rising needs. The current ways of working are b ecoming outmoded in many ways, adding further strain to the system . This report seeks to understand how products, processes, services and organisations that are seeking to make positive changes are being funded and supported.

There have been innovations t hat have emerged in the past decades which start to meet these new challenges. The rise of cash transfers, the use of social media and the change in the treatment of acute malnutrition to name just a few . These three innovations alone have saved the lives and livelihoods of hundreds of thousands, if not millions of people. In order to be fit for purpose, the humanitarian challenges of today and the future require the humanitarian system to increase the number and impact of such innovations.

In the past five years there has been a growing movement of support for innovation within the sector. In a few donors and a number of implementing agencies and private sector organisations humanitarian innovation funds have been developed, jobs, teams and labs created, and innovations piloted. These steps have been small, when set against the size of the system, but they have been significant. These initial steps need to be followed with a second wave of financial and non -financial support if the current humanitarian system is to be able to respond to the increasing number of lives and livelihoods that will be impacted by disasters in the coming years and decades.

This Finance for Humanitarian Innovation report is one of five topic -specific studies conduc ted as part of the Humanitarian Innovation Ecosystem Mapping Project being carried out by CENTRIM of the University of Brighton on behalf of DFID. The overarching goal of the project is to map and assess the drivers, elements and process of innovation with in the humanitarian sector, using an ecosystem framework and analytical approach derived from the field of innovation management.

The other case studies focus on the shelter; cash based programming , WASH and health sectors. The aim of these studies was to provide an, in -depth and comparative look at the nature and character of innovation within each sector and to situate these against our evolving interpretation of the Humanitarian Innovation Ecosystem.        This innovation finance study seeks to understand the level of financing and support for innovation across the humanitarian

system.

Through nearly 40 int erviews, reviews of data from the other studies and secondary data

analysis, we have been able to piece together a sense of what is happening regardi ng financing of humanitarian innovation. The key finding is that the humanitarian system has made a start in funding innovation, but that it is still a long way from where it needs to be.        Our research leads us to estimate that , although growing, funding for humanitarian innovation is low. We estimate that innovation funding by OECD DAC members is around US$37.5 million per year, the equivalent of 0.27% of their humanitarian response funding in 2013. This percentage would be exceptionally low in an indus try that had little material consequence, such as paper milling.        In an industry seeking to save and support millions of lives and livelihoods in the face of disaster, i t is not exceptionally low; it is breathtakingly low.

The structure of the report looks at the methodology, concepts and frameworks, before moving on to an overview of the sector. In the overview section, there is an outline of the financing by actor group, followed by comparisons with the private sector and social innovation sector. In the next section we provide an analysis of different actors in order to give a flavour of what is happening in the sector . We then identify 14 challenges that are impeding greater investment and support for innovation. These include:

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