Islamic Social Finance & the Future of Humanitarian Action

4 November 2015

“We look to the World Humanitarian Summit to generate strong global support for bold changes in humanitarian action. This is the only way we will meet the enormous challenges we face in the coming years and decades.”

20 April 2015

Istanbul, 23-24 May 2016

“The Summit will be a platform for Heads of State and Government, and leaders from civil society, the private sector, crisis-affected communities and multilateral organizations, to announce how they intend to act on the priority areas” – Ban Ki-moon

In total…*

80% aid distributed

to conflict areas

60mn+ peopleDisplaced - Highest since 1945

*as of October 2015

17 years average number

of years displaced

Islamic Social Finance & the Future of Humanitarian Action

• A total of US$24.5 billion was International humanitarian response in 2014

• 3x growth in 10 years!Source: GHA Report 2015

Current Humanitarian Funding System & widening funding gap

80% 20%Traditional Donors

(OECD-DAC)/Multilateral

Institutions

UN Central Emergency Response Fund(CERF)

International NGOs

UN Agencies

UN Country Based Pooled Fund (CBPF)

Private

Sector/

Giving

Islamic Social Finance Funds

?

NGOsCountry

Level OrgsLocal

Responders

Out of total $19.5bn pledged by the humanitarian system in 2014, <70% UN funding

requirement were met last year, leaving $7.5bn in unmet funding gap.

Source: GHA Report 2015

Widening Gap between Funding & Unmet Requirement 2005-2015

There is insufficient funding to provide assistance to everyone in need…

Islamic Social Finance & the Future of Humanitarian Action

Watch the elliptical space

The OIC Countries

The global conflict map in 2013

Islamic Social Finance & the Future of Humanitarian Action

The global conflict map in 2014

In 2015, more than 95% of the world’s conflicts are occurring in the Muslim dominated countries

Poverty & Unequitable growth = protracted conflict & impaired resilience

> 1 billion people still live on less than $1 dollar/day (World Bank)

> 3 billion live on less than $2/day and in abject income poverty (World Bank)

~805 million people or 1/9, routinely go hungry (FAO)

~750 million people around the world lack access to safe water (WHO)

~2.5 billion do not have access to adequate sanitation (WHO & UNICEF)

Approximately 100 million people without any kind of shelter, whatsoever (UN)

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Urgent need for “social finance” because capital is not yet aligned with social, economic, and political justice

State of the World We are In…

The conditions are worse in the Muslim countries…

5 of the OIC member countries account for over 0.5 billion of the world’s poor with incomes below $2 a day or national poverty line.

Another 5 OIC countries, account for over 600 million of the world’s poor

Most OIC member countries rank among the lowest as per standard development Indicators

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Hence, crises perpetuate in these fragile states, some aid dependent for more than 10 years, unable to lift themselves out of poverty cycle let alone prepare for future impacts of climate change and disasters

Islamic Social Finance & the Future of Humanitarian Action

With more than 60 million people currently displaced

Living in camps such as this one - Zaatari camp, Jordan

OCHA/Federica Gabellini – Central African Republic

“Over half the world's refugees are children”

- UNHCR 2015

Photo: UNHCR

“We cannot solve

our problems with

the same thinking

we used when we

created them”

- Albert Einstein

5 Key Action Areas

*Islamic Social Finance Report 2014 & 2015 (study for 40 OIC countries with excess zakat funds & conservative estimate after accounting for domestic poverty alleviation needs)** India and assuming 10% return p.a.

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• Latest studies by IDB* showed that at a minimum of USD600 billion of excess

zakah from the Organization of Islamic Cooperation (OIC) member countries is

potentially distributable annually for humanitarian action; and

• It is estimated that the market value of waqf assets in a country** could be as

much as USD24bn and generate USD2.4bn per year.

• To put things in perspective, only 1% of the annual excess Islamic Social

Finance funds were sufficient to plug the humanitarian funding gap last year.

How Islamic Finance can plug the funding gap

Potential Pilot ProjectsEducation - School Feeding Program

Aims at helping the children overcome damage – physical and mental – caused by years of isolation, deprivation and conflict and provide hope for the larger refugee communities

Potential Instruments: Zakat – Provision of daily meals to ensure the children gets at least 1 meal a day to for

proper nutrition & to keep them at school Waqf – Facilities for school compound Sadaqah – School uniform & stationery

Potential Pilot ProjectsCash Based Interventions for Refugees & IDPs

To enable refugees to meet their priority needs through flexible and appropriate assistance and prevent harmful coping strategies, such as survival sex, child labour, family separation and forced marriage.

Potential Instruments: Zakat & Sadaqah – Cash assistance through various transfer modalities. This can take

the form of a commodity vouchers, cash vouchers or direct cash deposit through identified financial service providers, through competitive tenders with the lowest overhead and relating banking fees

Potential Pilot ProjectsCommunity Rebuilding Post Earthquake in Indonesia

Address immediate needs such as clean water, food and livelihood during period of emergency as well as long term infrastructure, shelter rebuilding & also investment in preparedness for future events

Potential Instruments: Zakat – Provision of clean water, food, and livelihood during period of emergency Awqaf – Blanket, tents, shelter, clothing & basic cooking equipment Sukuk – Infrastructure rebuilding & also investment in preparedness for future events

(where taqaful (risk insurance) could also be considered)