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Better financing needed to manage broader fragility risks

The need for better financing solutions to tackle the challenges of fragility, conflict and violence, across a diverse group of low- and middle-income countries, was the focus of this high-level discussion. How to work with the private sector and scale up innovative approaches were key themes.

In recent years, the world has witnessed an “expansion of the footprint of crisis,” said World Bank CEO, Kristalina Georgieva. What is needed is to bring private finance and trade to places where it would normally not go: “If you bring down the risk for private investors, the money will flow,” she said.

For Colombia, a middle-income country transitioning to peace, how to pay for peace is a central issue. Sharing his country’s experience, “We have just passed a comprehensive tax reform, including green taxes on carbon emissions that will help to finance peace.  We have also created tax benefits for private sector actors willing to invest in conflict-affected parts,” said Mauricio Cárdenas, Minister of Finance and Public Credit.

“Fragility is not an island of problems. The spillovers are regional, continental and global,” said Donald Kaberuka, Co-chair, LSE-Oxford Commission on State Fragility, Growth and Development. He called for greater investment in local people and capacities and to shift investments from response to prevention. “Prevention of conflict is so cost-effective. Investing upstream is the best way to invest in peace.”   

Director General of International Cooperation and Development, European Commission, Stefano Manservisi emphasized the importance of combining public and private investments to help strengthen security, address the weaknesses of the state and to show benefits to citizens. “The final objective should be to build resilience of states and society”, he said.

Laure Wessemius-Chibrac, Managing Director, Cordaid Investment Management, pointed out the need to prioritize financing to support “the missing middle” – Small and Medium Enterprises (SMEs). “The vast majority of jobs are created by SMEs, but most of the financing channeled by the private sector in conflict affected states are for bigger projects, or for infrastructure.” 
 
Peter Maurer, President, International Committee of the Red Cross, spoke of the ICRC’s challenges to raise money differently, with the upcoming launch of a Humanitarian Impact Bond which will fund physical rehabilitation centers in Africa and bring returns to investors based on results in 5 years. “Hopefully, this will be the model of the private sector not as donor or philanthropist, but a private sector which will invest in impact and results.”