A new funding model launched by the Red Cross aims to attract private capital to conflict zones to help some of the world’s neediest people, while giving investors a return on their money.
The “Humanitarian Impact Bond” set up by the International Committee of the Red Cross’ (ICRC) with a value of 26 million Swiss francs ($27.5 million), has attracted capital from New Re, part of global reinsurer Munich Re Group, among other investors.
The money will be used to build and run three rehabilitation centres for disabled people in Nigeria, Mali and Democratic Republic of Congo, the ICRC said, complete with staff who will be trained in physiotherapy and in producing prosthetic limbs.
It is the first time the ICRC has used such a funding model - channelling private capital investments rather than relying only on government or philanthropic donations for humanitarian projects.
“If it works well, we will implement, scale up and use our expertise in other centres around the world,” Yves Daccord, ICRC’s director general, told the Thomson Reuters Foundation.
The initial investment will be repaid with an additional return by the Belgian, British, Italian and Swiss governments and Spanish foundation “la Caixa”, after five years if the centres outperform expectations.
If the scheme does badly, however, both the investors and the ICRC face the risk of losing money.
“We thought that for us and for everyone, it’s good that we also have skin in the game,” said Daccord.
In an era of more and more protracted humanitarian crises and where traditional funding sources are over-stretched, there is a need for new funding tools, Daccord said.
“We need to have new corporate investors willing to join us and take risks to invest in us,” he said.
The construction of the disability centres was chosen for the scheme because of the ICRC’s wide experience in the field.
In 2016, the ICRC operated 139 projects in 34 countries, helping almost 330,000 people with physiotherapy and providing wheelchairs, artificial limbs and braces, the Red Cross said.
“This funding instrument is a radical, innovative but at the same time, logical step for the ICRC,” Peter Maurer, the ICRC’s president, said in a statement.
"It is an opportunity not only to modernise the existing model for humanitarian action, but to test a new economic model, designed to better support people in need."
Thomson Reuters Foundation