Launching the World’s First Humanitarian Impact Bond
By admin September 11, 2017

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As global humanitarian needs continue to rise in numbers, the International Committee of the Red Cross (ICRC) announces a commitment of 26 million Swiss Francs ($27.3 million USD) as the world’s first humanitarian impact bond. Through the investment model, private investors can provide capital through a five-year funding scheme in which their repayments, with interest, depend on the overall success that the associated project makes to benefit its clients.

Beginning with Nigeria, Mali, and the Democratic Republic of Congo, the capital raised will be used to build and manage three physical rehabilitation centers in conflict-areas for several thousands of people affected by violence, injury, and disease. According to DevEx, the money will be repaid to investors in full, with interest, or only partially depending on the overall success of the rehabilitation centers’ performance, as measured through an external evaluation. Through this model, investors have the potential to earn as much as 7 percent in interest per year or lose upwards to 40 percent of their overall investments. The actual interest realized will be dependent on the overall number of people the centers have assisted or helped. Through this impact bond, the capital raised is at once put directly into the development of the projects, but also allows for investors to absorb part of the financial risk.

With a new economic model advancing initial privatized funds to launch and scale projects with the repayment of such funds by national governments as determinant by overall success, the ICRC is paving the forefront to humanitarian financing. With this diversified sourcing model, socially-conscious financial gains are realized through the impact that projects make on the lives of local communities. Peter Maurer, the IRCR President, in statement said: “We hope that once the pilot project is proven, it will demonstrate that non-traditional financing models can work.” Upon completion of the development of the centers, the keys will be handed off to each country’s respective national health administration. During the first three years of operation, the ICRC will retain the rights to train staff on equipment application usage, production of prostheses, and provide rehabilitation. The ICRC will continue to provide support and help after the three year period as needed. According to DevEx, the centers are expected to help approximately 6,000 disabled people per year.

To date, the ICRC is the world’s leading physical rehabilitation provider for developing countries. In a 2016 media release, the ICRC completed 129 projects in 34 countries helping over 300,000 people with wheelchairs, artificial limbs, mobility devices, and physiotherapy. While there had been discussion on how to invest in rehabilitation projects in the developing world on a larger scale, the challenge for ICRC was to develop a branding product to sell investors about the market opportunity that exists in investing a post-conflict zone. In doing this, the ICRC was tasked with collecting and mining data over the past decade in physical rehabilitation centers to create targeted benchmarks that the impact bond could be supported by. The results of this impact project has the potential to change the paradigm of using privatized money for aid projects in conflict zones.

Further Reading:

A New Bond taps Private Money for Aid Projects in War Zones

The World Economic Forum on the ICRC Humanitarian Impact Bond

The ICRC Launches the World’s First Humanitarian Impact Bond

Pete Maurer, President of the ICRC and a Few Words

Red Cross Links Investors to War Zones by Reuters

Thanks for sharing !

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