Start Network and Pakistan government collaborate on new way to finance drought response

Start Network members have begun working with Pakistan’s disaster authority to develop a new way of funding preventative action, aimed at helping vulnerable families threatened by drought.

The initiative is the first of its kind involving aid agencies. The planned pilot facility will release funds based on scientific triggers of drought, using insurance tools and principles. Aid agencies would be able to draw on the new source of funding to intervene before the worst effects of a drought are felt, enabling farmers and their families to protect their livestock and other assets.

Pakistan’s National Disaster Management Authority (NDMA) and Start Network members in the country began sketching out how such a financing facility could work in Islamabad this month.

Launching the partnership on February 16, the NDMA’s deputy chairman, Ahmed Kamal, said:

“We need to give this innovation our full backing…ultimately it will pave the way for reducing the poverty index and levels of vulnerability in those areas.”

Drought is a major challenge in Pakistan that is increasing in magnitude due to the impacts of climate change. At present, tens of thousands of people are suffering from the effects of a major drought in Sindh province. Such droughts have an impact on the poorest for decades after the immediate crisis has passed. In order to survive, communities sell off their cattle and other assets, a move that can tip them into a spiral of destitution and severe malnutrition.

The Drought Financing Facility is intended to develop into an NGO-led network of national facilities, of which Pakistan is the first pilot. The facilities would require financial support by humanitarian donors, including governments. They are being developed in partnership with GlobalAgRisk, with funding from the Humanitarian Innovation Fund until June 2017.

The basis of each facility is a risk management approach that supports NGOs with:

• Scientific modelling of drought risks
• Focused scenario-based contingency planning
• Pre-positioned financing, including parametric insurance mechanisms that automatically release funding based on pre-defined triggers of emerging major drought.

The objective is to deploy donor funds in a faster, more efficient way to civil society responders, to protect communities at risk of major droughts. The scheme is emerging as a promising new approach to financing early intervention in the event of drought.

Josh Ling, Senior Microfinance Specialist for Mercy Corps, who took part in the first meetings, said:

“This initiative has huge potential to improve the lives of those affected by drought in Pakistan. The approach is different to traditional microinsurance schemes that sell coverage to individuals one by one. It’s the first scheme of its kind to draw on the reach and expertise of NGOs, applying insurance principles to a rapid funding mechanism for early and coordinated humanitarian response. “It is designed with the input of NGOs and their staffs who know and understand the environment, its risks, and the most effective response mechanisms.”

The Drought Financing Facility design group in Pakistan is made up of Acted, ActionAid, Muslim Aid, Catholic Relief Services, Community World Service (Asia), Concern, Islamic Relief, Mercy Corps, Oxfam, Tearfund and Welthungerhilfe, with technical input from NDMA and the Pakistan Meteorological Department.

The next step will be to run an active pilot in Pakistan and one other country. Mr Kamal of the NDMA said:

“We need to take this to a pilot… and build on this from drought to also include other fast onset disasters.”

The Start Network is a network of 42 national and international NGOs, leading for change in humanitarian aid.

Emily Montier, project manager for new business models, who is leading the work on the Drought Financing Facility, said: “Unlocking new forms of finance that enable more effective humanitarian assistance is central to the long-term aims of Start Network.

“This new drought financing initiative is one of many ways Start Network is working to build a new humanitarian economy, more responsive to the real needs of people and communities affected by crisis.”