Powered by the Private Sector: Supporting Moving from Emergency Response to Risk-Informed Humanitarian Assistance

This post was authored by William Martin of USAID's Bureau for Humanitarian Assistance (BHA), Laura Meissner of USAID BHA and the University of Arizona, and Melanie Mason of USAID BHA.

Over the past three years, we have watched the COVID-19 pandemic disrupt the global supply chain, depreciate currency, increase food and fuel prices, and more — all with lasting effects on local market actors and vulnerable populations. For the past year, Putin’s war on Ukraine has only exacerbated these ongoing challenges, severely impacting global markets and, consequently, pushing millions into food insecurity.

The 2022 UN Interagency Coordinated Appeal for humanitarian assistance received the highest level of funding to date, but only covered about half of targeted needs. The 2023 Coordinated Appeal estimates that one in every 23 people worldwide needs humanitarian assistance and asks for $51.5 billion.

Humanitarian actors are increasingly testing innovative risk-based financing to circumvent the limits of traditional crisis-driven approaches to funding disaster responses. These include anticipatory action as part of disaster risk financing (DRF) and innovative blended finance approaches that leverage the agility and expertise of the private sector.

USAID, through the Bureau of Humanitarian Assistance (BHA), takes a holistic look at humanitarian aid, providing assistance before, during, and after a crisis — from risk reduction through response and recovery. In line with the G7 Foreign Ministers’ statement on strengthening anticipatory action in humanitarian assistance, USAID also works to support communities prepare for and respond to disasters before humanitarian impacts become more acute. Crisis prevention, early warning, and anticipatory action can save lives and avoid human suffering. There is a growing body of evidence that acting in anticipation of a crisis, particularly in areas where there are functioning disaster response processes, is more cost-effective and dignified than simply waiting until the situation is dire. For example, an independent impact assessment of quickly released post-flooding cash transfers in Bangladesh found households receiving cash had better outcomes than those who did not.

Most people affected by humanitarian crises rely on markets, both before and after shocks, to meet their basic needs. A better understanding of markets helps us better support critical market actors or infrastructure before and during crises. This, in turn, ultimately strengthens local systems, ensuring that needed goods and services remain available and affordable to people who need them. 

This is where the private sector comes in. As the humanitarian community scales up anticipatory action, efforts such as providing cash transfers for people to spend on basic needs and livelihoods, or engaging with both disaster management agencies and the private sector — whether local, national or global — are key to success. By developing ready-to-go plans that include the private sector, anticipatory action can be scaled and successful in minimizing the disruptions to people’s lives, and let them continue to rely on markets to better anticipate or recover from a disaster.

We can see this firsthand in Indonesia, where the BHA-funded ADVANCE program provides small and medium enterprises in Jakarta with support to prepare for and reduce risk exposure from earthquakes, and improves information sharing and collaboration between the private sector and the local and regional disaster management agencies. 

Blended risk finance approaches may be helpful to support more localized business readiness activities as well. For example, USAID’s Caribbean Corporate Investment in Resilience (CCIR) Blended Finance Mechanism supports businesses and initiatives with sound economic models to ultimately scale their growth, sustainability, and resilience in the region. Using blended finance, CCIR mobilizes capital for investment, provides social and economic returns for local businesses, and strengthens communities. To build a pipeline for investable deals with local stakeholders, the BHA-funded project launched the Eastern Caribbean Business Resilience challenge.  

In addition, BHA’s Strengthening Humanitarian Assistance and Resilience Private Sector Engagement in Ethiopia (SHARP-SEE) project identifies solutions and opportunities to strengthen and mobilize investments in urban to rural market linkages and the transportation, trucking, and logistics sectors in the country. In addition to the private sector benefits such as reduced costs, SHARP-SEE should help make aid delivery faster and more efficient through stronger trucking and transportation services.

Engaging with market systems already is, and must continue to be, a crucial part of this new approach to disaster risk management and humanitarian response, which the Marketlinks community is well positioned to contribute to. How do the market programs you have worked on pull in private sector financing, include the private sector in disaster risk planning, or build in contingency funds in case of disaster? How might we better connect or overlap market systems programming with humanitarian response to respond more quickly — or before a disaster hits — for the benefit of vulnerable affected communities and the enterprises they rely on? Share this article on your feeds with your thoughts and comments!

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