Financing tools

The World Bank’s financing through the IDA18 RSW to host and refugee communities has been substantial, although it has been challenging to drive policy reform through this mechanism. Bangladesh became eligible for support through the RSW in June 2018, ^[1] which enabled a portfolio of projects amounting to US$590 million in grant support for the benefit of the refugees and host communities. The World Bank therefore has been active in Cox’s Bazar district since an early stage of the crisis. The implementation of this portfolio is primarily based on the continued adequacy of the refugee protection framework. Projects funded through the RSW were designed to provide support for host and refugee communities in a range of sectors including health, gender-based violence, social protection, basic services and infrastructure. The third aspect of the RSW eligibility criteria (to formulate a policy reform for long-term solutions benefiting refugees and host communities) has been most challenging. As the World Bank put it in 2020, “some elements of policy and practice in this regard have improved, while many remain constant, and some new risks have emerged” since Bangladesh’s initial eligibility for the IDA18 RSW in 2018. ^[2] For instance, the World Bank is concerned by the government’s restriction of telecommunication services in the camps and construction of a fence around the camps as this might hinder an effective disaster response, among other things. However, in consultation with UNHCR, the World Bank assessed that overall the protection framework in Bangladesh continues to be adequate. ^[3] It will therefore be a continued discussion between the Government of Bangladesh, the World Bank, relevant UN agencies, bilateral donors and national civil society to establish further long-term solutions for refugees and host communities. The approval of the use of the Myanmar curriculum by the government was highlighted as a sign of progress, but there remains much room for improvement across education, health, social protection and access to gender-based violence prevention services. To aid the process of advancing policy dialogue, the World Bank is developing the Refugee Policy Review Framework as part of the IDA19 WHR policy commitment. This presents an opportunity to progressively measure and assess refugee protection policies and practices over time and build on those insights with the relevant stakeholders.

The ADB’s grant support to the Rohingya refugee response was the first of its kind and generated institutional learning. Unlike the World Bank, the ADB does not have a standing mechanism to support grant funding for displacement situations. Bangladesh is also usually not able to access grant funding from the ADB through the Asian Development Fund as its strong, sustained growth and creditworthiness allow it to access a blend of concessional and non-concessional loans. ^[4] Still, after the Government of Bangladesh requested grant support from the ADB in May 2018 to provide high-priority infrastructure and basic services as part of the Rohingya refugee response, the ADB was able to conceptualise the project and approve funding within only two months. ^[5] The US$100 million of grant funding provided by the ADB for the project is co-financed with US$20 million from the Government of Bangladesh. There is the possibility of financing a second phase of the project with an additional US$100 million, although that depends on the progress achieved during the first phase, existing needs and the availability of additional grant funds. The learnings from conceptualising and rolling out the Emergency Assistance Project for the Rohingya refugee response informed the ADB’s approval of the US$500 million Covid-19 support loan to address livelihoods and economic impacts from the pandemic, building on lessons learnt from bolstering social sectors in times of crisis. While guidance within the ADB on the provision of emergency assistance loans exists as part of staff instructions, it could be useful for other contexts to capture and formalise the learnings from the emergency grant provided to the Rohingya refugee response.

Strong political will and acute funding needs can fast-track development financing, despite otherwise lengthy bureaucratic procedures. The planning and budgeting process for development finance is usually slower than for humanitarian finance. To some extent, this is necessary – development planning is carried out jointly with the national government and sometimes other UN or NGO partners, is longer term and often involves larger volumes of funding for larger scale projects. Development donors with crisis financing vehicles and established modalities for engaging in crises (e.g. the World Bank’s RSW) can often react more quickly and engage earlier. Nonetheless, where there is a strong rationale and political support, decision-making and funding approval can happen quickly, even when development institutions lack experience of crisis financing and don’t have established procedures. The case of the ADB’s emergency grant in support of the refugee response is one example of this, but it was also reported in the context of Covid-19. Several bilateral development donors, MDBs and the IMF (see the ‘ International financing landscape ’ sub-section) were able to release additional funds quickly for long-term support of the health sector or to support the recovery from economic impacts caused by the pandemic. For development donors newly engaging in crisis contexts this provides an opportunity to build on their learnings to establish protocols and best practices for future crises.

Strictly separate budgets for development and humanitarian funding, without sufficient coordination between the two, can provide challenges for an effective response. Multi-mandate implementers operating in the refugee camps reported that there remains scope to employ additional development funds to improve the camp infrastructure, for instance with regards to DRR or site development. Interviewees from these organisations welcomed the investments by the ADB and World Bank and emphasised that going forward the MDBs should continue to capitalise on their comparative advantage in improving infrastructure and tackling longer term issues. This notion was shared by key informants from the respective MDBs. These longer term investments, however, require close coordination between MDBs, the national and local government, and the humanitarian actors in charge of the camps. As outlined above, this coordination process can be challenging. Multi-mandate actors also reported that there is a reliable donor base providing humanitarian funding to meet the refugee’s essential needs. However, it is much more difficult for these actors to secure funding from the same donors for longer term projects, such as for the empowerment of women in the host community through micro-grants for businesses. Strict delineation between humanitarian and development budgets among many on the donor side – in place to ensure funding to life-saving assistance cannot be diverted – can then be a challenge for multi-mandate implementers if emergency needs are met but development needs are not. Flexible financing such as that provided from Australia to WFP allows for funds to be directed where needed most – whether for short or long-term needs. On the humanitarian side, multi-year funding for the refugee response is also very limited according to interviewees. This restricts humanitarian actors’ ability to jointly plan ahead with the government on multi-year programmes to reduce needs and build resilience. Donors should therefore consider providing a greater proportion of their funding through multi-year agreements to enable longer term planning with the government for a sustainable response in Cox’s Bazar district.

Contingency financing mechanisms at the national or programmatic level are reportedly rare with international development actors but more common among national NGOs. ^[6] Of the interviewed development donors, very few had designated contingency funds available to scale up activities in sectors relevant to unforeseen disaster needs. Several bilateral donors reported that there is a degree of flexibility in shifting funding between sectors if justified by evidence on needs, as occurred in response to the Covid-19 pandemic by shifting funds to the health sector. Implementers highlighted that funding provided for a specific crisis context but otherwise fully flexible can act as contingency funding once unforeseen needs arise. For instance, as the pandemic hit, WFP used the flexible funding from Australia to adapt its response while waiting for further funding to become available following re-negotiations with other donors. Interviewees from other UN agencies highlighted that donors were overall flexible and quick in approving additional emergency funding for Covid-19 or the reprogramming of non-critical activities towards the pandemic response. In terms of the total volumes of funding for a programme or the national portfolio, most bilateral donors reported less flexibility. Usually an application would need to be submitted to the global headquarters to secure additional funding, for example for the pandemic response or flood recovery. While this leaves open the opportunity to boost development assistance in response to higher needs, it brings with it a delay through application, approval and disbursement processes. In terms of implementing organisations, several national NGOs noted the existence of their own contingency funds. The size of these funds ranged from 3% to 15% of the operational budget among the interviewed organisations and tended to be from private donations or self-generated revenue. For instance, CSO BRAC encompasses several entities alongside its NGO arm, including for-profit social enterprises and social investments. The generated profit is reinvested and used for BRAC’s emergency response and to supplement its contingency funds. Interviewees from national NGOs with contingency funds, however, also recognised that large-scale events such as Covid-19 deplete resources quickly. Contingency funding efforts therefore might have to be supplemented through pooled fund arrangements to sufficiently support response and recovery.

There are several funding mechanisms for local and national NGOs following disasters, although they remain small, focused on emergency responses and driven by humanitarian actors. For instance, the Start Network established Start Fund Bangladesh with UK funding in 2017, a national pooled fund that gives local and national NGOs direct access to funding and decision-making power in the fund’s management. The fund transferred 60% of its funding in the second half of 2019 to local and national NGOs. ^[7] An interviewee from a national NGO however pointed out that the Start Fund’s localisation efforts could be progressed further by seeking to mobilise local resources and reduce dependency on international funding. It was also pointed out that it could go even further in transitioning decision-making power and funding allocations from international to local and national NGOs. In addition, Oxfam established a pilot humanitarian response grant facility in Bangladesh, which funds local and national NGOs and strengthens their voice in shaping the humanitarian agenda. ^[8] Interviewees from local and national NGOs highlighted the Manusher Jonno Foundation (MJF) as another positive example of a pooled funding mechanism in support of localisation efforts. MJF provides grants and capacity building to local and national NGOs for a wide range of activities including human rights, prevention of gender-based violence and community resilience against climate change. ^[9] It has also provided funding for the provision of relief during the Covid-19 pandemic. MJF receives direct funding from international bilateral donors such as the UK, Sweden, Denmark and Canada. Interviewees valued that the organisation is governed by a Bangladeshi board. While progress has been made in setting up these inclusive funding mechanisms, the volume of funding channelled through them remains small relative to the total volume of ODA directed to Bangladesh. Comparable pooled funds available to local and national NGOs for disaster recovery or longer term needs also seem to be lacking. NAHAB therefore recommends establishing government-run contingency funds, accompanied by contingency plans. ^[10] These funds could exist at the district and/or sub-district level, depending on subnational vulnerability to disasters, and could boost efforts for locally led disaster response and recovery. An example of a pooled funding mechanism to address immediate infrastructure issues following natural hazards is the Disaster Recovery Fund set up by Japan to support the Ministry of Disaster Management and Relief. It was activated for projects following cyclone Amphan but is still in its pilot phase.