The Swiss-run International Committee of the Red Cross (ICRC) has launched the world’s first ‘Humanitarian Impact Bond’, which encourages private sector investment in humanitarian programmes.
The innovative “payment-by-results” model centres on a five-year private placement programme entitled the ‘Programme for Humanitarian Impact Investments’, or PHII, which will be executed with the support of the Swiss government and Swiss bank Lombard Odier.
A total of CHF26 million ($27.5 million), funded via initial payments from ‘social investors’ selected by Lombard Odier, will enable the ICRC to set up and run three physical rehabilitation centres in Nigeria, Mali and the Democratic Republic of Congo.
At the end of the fifth year, “outcome funders” — the governments of Switzerland, Belgium, Italy, Britain and "La Caixa" Foundation — will contribute funds to the ICRC based on the results achieved by the three centres. Those funds will then be used to reimburse the initial social investors, either partially, or entirely with interest.
To calculate, independent auditors will verify the ICRC's reported efficiency in the three new centres. If the efficiency is above a set benchmark, the social investor will receive their initial investment plus an annual return. If the performance of the new centres is below the benchmark, then the investor will lose a certain amount of the initial investment.
In a statement on Friday, ICRC President Peter Maurer said that the new instrument would give the organisation “the opportunity not only to modernise the existing model of humanitarian action, but also to test a new economic model conceived to better aid persons in distress”.
swissinfo.ch and agencies/cl