Development in the 21st Century is About Financing,...
Saadia Madsbjerg

Saadia Madsbjerg Managing Director, The Rockefeller Foundation

August 20, 2015

Development in the 21st Century is About Financing, Not Giving

Saadia Madsbjerg

Saadia Madsbjerg Managing Director, The Rockefeller Foundation

August 20, 2015

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“If a solution like African Outbreak and Epidemic Insurance had been in place, Sierra Leone, Guinea, and Liberia would have had funds available when they were needed most to execute targeted plans for managing the Ebla crisis.”

Twenty-seven thousand nine hundred twenty-nine cases and 11,283 deaths. That’s the latest official WHO statistic from the recent Ebola outbreak for the three African countries that were at the heart of the epidemic: Sierra Leone, Guinea, and Liberia. As sobering as these statistics are, they do not even begin to capture the deeper emotional and socioeconomic shock that these countries have suffered as a result of the crisis. Nor do they reflect the panic that the crisis sparked across other African countries and further ashore in the U.S., Europe, and Asia.

The local health systems in these West African countries were not resilient enough to respond to the crisis, and the international development community’s handling of the epidemic was marred by miscalculations and inefficiency. Like natural disasters, the Ebola outbreak created immediate funding requirements. However, it was almost 5 months into the epidemic before the World Bank made the first major assistance pledge of $200 million and WHO declared Ebola a public health emergency. A year later, we have managed to raise just 69 percent of the $2.27 billion requested to fund the country response plans for Sierra Leone, Guinea, and Liberia.

This was not a proud moment for the global international development community. As we take a moment to dissect our shortcomings one thing stands clear—the international system for responding to natural disasters is not nearly as timely, inclusive, and effective as it needs to be.

Innovative Finance: New Solution to an Old Problem

If the definition of insanity is trying the same thing over and over expecting a different result, then it really is time to look for new solutions. African Risk Capacity (ARC)—a specialized agency of the African Union—is charging ahead with a solution that does not rely on humanitarian appeals or executive decisions from international development organizations to contain future disease outbreaks in Africa. ARC is targeting a 2017 launch for the first-ever sovereign insurance product for outbreaks and epidemics, which would enable African countries to tap into the $100+ trillion available in the global capital markets. When early signs of a disease outbreak are detected, insured African governments will receive payouts to execute prepared and vetted response activities. Insured countries will benefit not only from having immediate funds available to fight the disease, but also from having built their own capacity to respond to the crisis.

“If the definition of insanity is trying the same thing over and over expecting a different result, then it really is time to look for new solutions.”

The idea is far from a naïve pipedream. ARC has used a similar mechanism to provide drought insurance since 2014, with five countries signed up to date. ARC’s drought insurance helps countries build resilience to extreme weather events and protect vulnerable populations from food insecurity. Receiving relief funds at an early stage allows countries to begin combating the situation before any calls for humanitarian aid are even made.

If a solution like African Outbreak and Epidemic Insurance had been in place, Sierra Leone, Guinea, and Liberia would have had funds available when they were needed most to execute targeted plans for managing the crisis. According to the U.S. Centers for Disease Control, had the Ebola response launched much earlier, the total number of cases could have been contained at less than 5,000, instead of 27,929 and counting.

Shifting Power: The New Kids on the Block

The ARC Outbreak and Epidemic Insurance effort is emblematic of three major shifts that are changing the dynamics of global development today:

  1. The Friendly Capitalist: The nonprofit and public sectors have historically carried the torch along with the moral obligation to promote the well-being of the world’s poor and vulnerable populations. Though this remains the dominant stance, we are seeing increasing cases of private sector engagement and commercial market mechanisms—such as private insurance for drought and soon disease outbreak and epidemic—being used effectively as a tool for achieving critical social outcomes.
  2. Shifting Capital CentersAnnounced in 2013, the Asian Infrastructure Investment Bank (AIIB) is challenging the role that G7 countries and institutions such as the World Bank and International Monetary Fund (IMF) play in global development finance, and traditional DFIs are at risk of ceding their preeminent roles to newcomers and increasingly also to private capital providers. A timely example: The UN estimates that it will cost $3.9 trillion a year to achieve the Sustainable Development Goals in developing countries alone, and we are relying on the private sector and capital markets to provide a substantial portion of this funding.
  3. Local Intellectual Hubs: The question of how best to address and implement solutions to development challenges has traditionally resided with internationally acclaimed academics and experts at international development organizations. Yet examples from the Millennium Village Project (2006), post-earthquake rebuilding efforts in Haiti (2010), and the recent Ebola outbreak (2014) illustrate how well-intentioned efforts fail because they neglect to factor in the local realities, expertise, and capacity. The model of “expert-donor-knows-best” is becoming outdated as local entities like ARC are shaping solutions to meet real needs.

There is no need for a formal call to totally rethink development finance or reform the global development sector—change is already happening. Instead, we must recognize that as the dynamics of the global development world are shifting, we need to actively collaborate with both private and public sector partners, embrace risk-taking, and continue to invest in innovation. Only then do we have a chance to effectively deliver on our social mission and goals.

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