The IKEA Foundation, Novo Nordisk Foundation, Norad, the U.S. Development Finance Corporation (DFC), Ferd, and KOIS today announced the first tranche of a new Development Impact Bond (DIB) for refugees in Jordan and Lebanon. This will fund a micro-enterprise creation programme, delivered by the Near East Foundation UK (NEF), to help refugees and vulnerable host communities recover their livelihoods and build their resilience.
Worldwide, conflict and climate crises are forcing more people than ever from their homes, with displacement and its impacts lasting years beyond the crisis. The Syrian conflict has driven 6.6 million people to flee Syria with 80% settling in neighbouring countries. Lebanon has the largest refugee population per capita in the world and Jordan the fifth largest. This puts a strain on local economies and infrastructure. It also leaves refugees and their host communities struggling to access safe and dignified work, basic services, and affordable housing.
Refugees and conflict-affected communities need to be able to develop skills, earn an income, and become self-reliant once again. As well as improving their well-being, this can transform a host country’s demographic expansion into an economic opportunity. It can also support refugees’ economic inclusion in their home country, or a third country, in case of return or resettlement.
To be effective, job creation programmes in humanitarian settings must be tailored to diverse community needs and adaptable to local contexts. This means accepting a level of risk often too high for traditional development funders, especially when addressing the needs of the most fragile. The DIB offers a solution through multi-year, outcome-driven funding that shares performance risk between investors and donors.
DFC, through its Portfolio for Impact and Innovation (PI2) Initiative, and Ferd will provide a four-year results-based risk investment to fund a vocational, entrepreneurship and resilience-building programme. This will support 4,380 refugee and host population trainees and provide 3,400 business start-up grants in Jordan. Communities with large refugee populations will be selected based on higher than national average rates of food insecurity, poverty, indebtedness, and unemployment. Women and youth, who are disproportionately impacted by crises, will take priority.
The programme aims to improve business survival and the ability of households to meet their basic needs. An independent evaluator will rigorously assess these outcomes. Maximum success will generate a 5.1% annualized return for investors. NEF is also incentivized through outcome payments tied to the level of success achieved.
In case of failure to achieve the desired results, the IKEA Foundation, Novo Nordisk Foundation and Norad will support 80% of programme costs. NEF and its local delivery partners will have the flexibility to adapt programming and innovate to maximise results.
Per Heggenes, CEO of the IKEA Foundation expressed his support saying, ‘We are supporting the development impact bond as an outcome funder because we can see its huge potential to attract new social investors to support refugee livelihoods programmes. We believe this innovative finance model can secure long-term funding to help refugees find pathways towards self-reliance and boost the economies of their host countries. By paying for success, we can attract more funding to improve refugee livelihoods and encourage programmes that have the biggest impact.’
Algene Sajery, VP of External Affairs and Head of Global Gender Equity Initiatives at DFC said, ‘Refugees, especially women and youth, face extraordinary challenges accessing economic opportunity, but investments in displaced populations and their host communities can yield transformative results in those societies. Through DFC’s support for the Refugees DIB, NEF will mobilize private sector investment to help support economic inclusion and resilience for vulnerable refugee populations in Jordan and Lebanon.’
Fundraising for the second tranche of the DIB, focused on Lebanon, is underway with an expected launch in the near future.
By focusing on lasting outcomes, empowering NEF and sharing learnings, the partners expect the ‘Refugee Impact Bond’ to deliver cost-effective and transformative impact. They hope it will become a template to help humanitarian actors and impacted communities better respond to the impacts of forced displacement and protracted crises.
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