Financing in Fragile and Conflict Contexts: Evidence, Opportunities, and Barriers

Abstract

Interconnecting, compounding and protracted crises affect a growing number of countries. Globally, 1.5 billion people – one in five of the world’s population – live in fragile and conflict affected situations (FCAS), yet financing to key sectors is not keeping pace with need. Regular social protection financing and programme coverage in FCAS are far below the global average, and levels of financing to humanitarian assistance, while growing in overall terms in the past decade, have remained static when compared to levels of need. Risk and climate finance face a series of barriers to their application in FCAS, where the potential for ‘non-traditional’ financial sources – such as remittances – to connect the most vulnerable to social protection have traditionally been underexplored. The Covid-19 pandemic has again exposed these fault lines and highlighted the need both for more investment in regular social protection systems and programmes, and for more ‘shock-responsive’ forms of support that can scale flexibly when faced with a diversity of risk factors. This paper provides a summary of the main trends and issues regarding both regular and risk financing in FCAS. It considers the main lessons observed in financing social assistance in FCAS and provides reflections on further avenues of research for the Better Assistance in Crises (BASIC) Research programme. It identifies useful examples now emerging from countries developing risk-informed programmes for the most vulnerable, but argues that a lack of comparable data is hampering research and learning, requiring more detailed in-country engagement. The paper notes that answers to a range of political economy questions are needed. This is both to make risk-aware financing, policymaking and programming more effective in FCAS; and to strike a balance between financial instrument requirements on the one hand, and programmatic and institutional capacity on the other. Likewise, new forms of risk ownership and client-facing accountability are needed to reframe the financing landscape and its applicability to FCAS.