Innovative humanitarian financing: what options are there?

The first thing is not to be fooled: humanitarian aid funding has never been sufficient; not even in its best years. Although over the last few decades the available funding has progressively increased, humanitarian needs seem to have increased as well. For this reason, it has always been close to 60% of what was considered a priority. In addition to being insufficient, it was unevenly distributed (both among humanitarian settings and among the humanitarian actors who received the funds to be able to intervene), and it arrived through mechanisms with little flexibility.

Those humanitarian financing mechanisms, for the most part (80%), have been funded by voluntary donations from high-income countries' governments. It is common for the cooperation agencies of these countries to choose which countries, organizations, and projects they want to finance, either directly (mostly) or through global or national funds, and for organizations to compete for a share of this funding in open calls, presenting projects aligned with the donor’s priorities.

There has been talk for years about the inadequacy of the model and the need for reform that has never come to pass. Besides, now, the main donor country, the United States, which in 2023 contributed around 37% of all public humanitarian funding and in 2024 almost 40%, seems to disappear from the map. Without other alternatives to this source of funding, the international response in humanitarian crises and emergencies becomes unsustainable.

Some international organizations have opted for this type of fund. They seek private investors to provide capital to finance initiatives that have a clear social impact. Investors are expected to recover their capital through the economic benefit generated by the projects (which is unfeasible in complex humanitarian crises and emergencies), or by receiving contributions from governments that offer payments for results.

Although there is life beyond the calls for proposals from bilateral international cooperation agencies, no alternative seems, by itself, sufficiently promising, to fill the gap that, at least for now, USAID seems to be leaving.

First of all, many of these innovations are not actually as new as they seem. Some have been studied or attempted on a small scale for over a decade, without having reached the expected scope. Others are still not well enough understood to guarantee their potential. Even the most interesting or promising ones have had only a relatively small reach compared to the total volume of official development assistance. Many of these options also don’t seem easy to implement or within the reach of many humanitarian organizations, both international and national. Finally, practically none of these alternative options manage to escape the common denominator: the dependence on the voluntariness of donors, whether public or private. It is precisely this dependence that has led the humanitarian system to the situation it faces today.

Today more than ever, we cling -with some fear and much hope- to the more solid mechanisms of humanitarian financing based on the mandatory contributions to which member countries commit themselves by belonging to the United Nations (CERF), the European Union (ECHO), the African Union (ARC), or the Multilateral Development Banks. These mechanisms, together with the voluntary commitment of public and private donors with the determination and capacity to increase their contributions or improve the way they are channeled, will be essential until other innovative options are truly consolidated.