Innovative Finance for Peacebuilding: Key Resources

By Paige Arthur and Liran Braude

Overview

Financing the sustaining peace agenda, the Sustainable Development Goals, and the prevention of conflict requires innovative thinking about new methods of generating resources. There is an emerging conversation in the peacebuilding field—drawing on work already being done in the development sector, as well as ideas in the humanitarian sector—about innovative ways to increase resources and foster collaboration with new partners.

This page provides a comprehensive resource on these emerging ideas and practices. Where possible, we have linked to specific instances of implementation of these ideas in peacebuilding contexts. As these remain rare, however, we have identified some of the most promising examples in non-conflict-affected contexts. We will update the resource continuously as new ideas and practices emerge.

The resource is organized first by types of innovative financing solutions, followed by a list of the most relevant actors working in the innovative financing space. For the latter, we have again tried to identify organizations working in peacebuiding contexts, but have also included others that may have relevant and adaptable solutions.

Scroll down to see the full resource, or click on these links to go directly to the section you are interested in:

Types: Bonds — Revenue Generation — Risk Management/Insurance — Investment Strategies — Marketing — Philanthropy — Other

Organizations: Private Sector — Multilaterals — NGOs — Philanthropies

[ Read: Innovative Financing to Sustain Peace: An Explainer ]

Bonds

Social Impact Bonds

Social impact bonds—also known as Pay for Success Financing, Pay for Success Bonds, Social Benefit Bonds, or Social Bonds—are public-private sector investments that are used to finance social outcomes. They generally operate over a fixed term like regular bonds, however, the return that investors can receive is contingent upon the success of the project in accordance with achievement of a pre-determined set of metrics.
Social impact bonds can also be defined by their outcomes, for example, development impact bonds, health impact bonds, or humanitarian impact bonds. So far, there have not been any peace impact bonds.

Diaspora bonds

These government bonds are specifically geared towards diaspora communities, building on expatriate ties to family and country to help fund national projects.

Community bonds

Recently launched in Scotland, this instrument is designed to attract small-scale, grassroots investors to a "loan fund" that will provide affordable, micro, unsecured loans to social enterprises.

Taxes: micro-levies, solidarity taxes, import taxes, and financial transaction taxes

Taxes on goods and services are used to pool finance for social initiatives. One innovation is the use of "solidarity" taxes on airline tickets (applied under certain travelling conditions), which finances UNITAID, raising approximately $160 million annually for global health causes. Other ideas include micro-taxes on industries specific to conflict-affected countries (like extractives), and financial transaction taxes. Also known as a “Robin Hood Tax,” the idea for a financial transaction tax is to implement a micro tax (anywhere from 0.025 – 0.2%) on select financial transactions – in particular, high volume and high frequency trading in stock markets – and utilize those funds to pay for social goods and services, as well as provide aid in different forms to developing countries. Finally, there are many ideas for regular taxes on imported goods to finance social projects; one that has been operationalized is a 0.2% levy on eligible imports to AU member countries to support, among other things, the AU Peace Fund.

National Postcode Lotteries

A lottery scheme that collects small amounts of money each month from anyone within the country who wants to participate, allocating various levels of winnings on a frequent basis by postcode, with considerable amounts (~30% or more) going towards designated charities and causes. According to the 2017 report of the Foundation Center, the Dutch national postcode lottery is the largest private human rights funder in the world, giving $291.8 million (in 2014). The UK national postcode lottery supports a variety of trusts funding initiatives both in the UK and in devleoping countries.

​Risk management/insurance

Mutualization of Risk Schemes / Insurance Funds

The pooling together of funds between several governments (or other entities) for emergency situations is a recognized method to lower the risk and the overall cost of dealing with those emergencies for any one government. Such insurance funds offer members quick and ready finances during time-sensitive emergency situations, when international aid would otherwise take longer to be mobilized and transferred to the effected countries.

Catastrophe bonds

Catastrophe bonds are bonds intended to alleviate some of the risk and significant financial losses for insurance companies (or governments) that are incurred through major natural disasters (such as weather events), and they can provide ready and available funds for governments to respond to those emergencies

Investment strategies

Advance Market Commitments (AMC)

AMCs are financial commitments that are used to guarantee a market for a product once it has been developed. AMCs are generally used in situations where there is uncertainty regarding the level of demand, or lack thereof, for a product were it to be developed, and acts to encourage the product’s development with the assurance that it is a financially-protected endeavor.

Blended Finance

Sometimes referred to as “blended capital,” blended finance is the strategic combination of development finance and philanthropic funds to bring in additional private capital in order to have greater investment potential and results for investors and communities.

Impact Investing

Impact investments are socially-minded investments made into companies, organizations, and funds with the intention of generating social or environmental impact in addition to a financial return on investment.

Outcome Funds

Funds created for investing in outcome-based, social impact opportunities. These opportunities include social impact bonds, small and medium-sized enterprises, and any other financial arrangement where the financial return is dependent on the outcomes.

Small and Medium-Sized Businesses (SMBs)

Investment in SMBs (also known as Small and Medium-Sized Enterprises, “SMEs”) is seen as a recognized way to develop capacity in developing countries, providing the resources to local communities that know what their communities need, but that just need some financial assistance to get going.

Social Entrepreneurship

Similar to SMBs, investment in social entrepreneurs can provide the financial and technical support that change-makers need to positively impact their communities.

Marketing

Cause Marketing

Cause marketing generally involves some sort of partnership between for-profit companies and non-profit organizations. Viewed as a type of corporate social responsibility, the partnership can be mutually-beneficial, mobilizing much-needed finances for social causes while also enhancing the brand of the company.

Investment Promotion Agencies (IPAs)

IPAs are generally government-affiliated bodies, though not always, whose purpose it is to attract foreign investment into a country, state or city. IPAs engage in image building, investment mobilization, project management and more to accomplish their foreign investment goals.

Prize-Linked Savings (PLS) / Prize-Linked Savings Accounts (PLSA)

PLSAs – also known as “lottery-linked deposit accounts” or “prize-linked financial products (PLPs)” – are bank accounts used in countries around the world in an effort to incentivize savings, especially amongst unbanked and low-income people. Rewards are given on a randomized basis using some of the interest from participating accounts or from alternative sources. PLSAs represent a creative innovation intended to address financial issues amongst economically-vulnerable communities.

Philanthropy

Fundraising Tournaments / Competitions

Charity sporting (and non-sporting) events have proven that they can raise significant finances for causes. Partnering high profile international sports competitions, like the FIFA World Cup or the PGA Tour, with social causes can help to generate significant additional funding for them.

Government Matching Fund for Public Donations

A creative government initiative to encourage the public to donate towards causes that the government will then match (and usually exceed) in an effort to generate additional funding.

Voluntary Donations with Purchase/Service

Hundreds of millions of dollars are raised each year for charities and causes through various request-for-donation schemes at grocery stores, restaurants, retailers, etc.

Other

Blockchain

Blockchain is a revolutionary, cyber infrastructure technology that has the potential to unlock far-reaching opportunities for development and humanitarian operations in fragile and conflict-affected countries.

Diaspora Remittances

Diaspora remittances are money transfers sent from diaspora communities, usually immigrants or foreign workers, back to their home countries. Diaspora remittances, along with international aid, constitute one of the largest sources of international capital into developing countries.

Private Sector

 
The Blended Capital Lab (The bc.lab)—A company that looks at blended finance, blended capitals, and blockchain technology to help facilitate peace.
Relevant cause marketing examples
Creative Associates International—A minority, women-owned professional services firm” that works around the world, helping to find creative ways to transition communities from conflict to peace.
Cross Boundary—CrossBoundary is a mission driven investment firm committed to unlocking the power of capital to make a strong return while creating a lasting difference in frontier markets. We take a transaction centered approach to frontier markets. CrossBoundary provides investment advisory services, having developed a specialized expertise in unlocking investment across all sectors in fragile and frontier markets.”
Impact Investment Exchange (IIX)—A global impact investment organization in Asia that connects investors and capital to entrepreneurs in order to affect social change. It includes the IIX Foundation, which is a registered charity foundation associated with IIX, dedicated to creating a more inclusive world and peaceful world through women’s empowerment, climate action and community resilience.
  • The Innovative Finance for Sustainable Peace Initiative is a 5-year initiative led by IIX Foundation that will use innovative financial mechanisms to unlock $1 billion, impacting 100 million lives, to drive forward sustainable peacebuilding efforts across the globe – in post-conflict countries, countries with high-risk of conflict and countries seeking to mitigate rising threats of violence by creating systemic social-economic resilience.
KOIS Invest—A firm specialized in impact investing. It deploys capital in impact businesses and funds that generate a competitive financial return, as well as a positive impact on society and the environment.
Peace and Community Development Network (PCDN)—An online network of over 40,000 changemakers that use the platform to “foster connections, share information and inspire the work of those in social change.”
Sou Sou Investment Solutions (Sou Sou)—A global financial technology and consulting firm that specializes in financial literacy, loan brokerage and financial consulting services.
Strategic Good – A social enterprise that supports mission-driven organizations and initiatives to ensure their work is effective, efficient, and aligned to maximize social impact.” They offer their clients “an array of services spanning the full spectrum of project-level support from innovative design to implementation to evaluation as well as the organizational strategy that directs those initiatives.
TerraBlanca – An impact investing fund working with the Kellog School of Management at Northwestern and the Rockefeller Foundation’s Rural Displacement Fund (RDF) to build sustainable agricultural business models in rural areas of Colombia, with the objective of giving the participating families an opportunity to own a parcel of land, a house, and to become smallholder farmers.
Topl – The Topl protocol is a public, permissionless blockchain built to enable development and emerging market investment. Our architecture connects both economically and socially motivated investors with businesses and projects around the world, in addition to providing the necessary support infrastructure. It is the purpose of Topl’s design and feature set to provide businesses and projects with lower borrowing costs by increasing transparency, accessibility, and information access for investors while also leveraging the use of socially-motivated capital.
 
 

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Aug 03, 2018
Paige Arthur
Financing, Peace Operations
Peace and Security

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