Role & Importance of Finance in Disaster Management

ROLE & IMPORTANCE OF FINANCE IN DISASTER MANAGEMENTA PRESENTATION BY ATUL PANDEY

1

PREVIEW

PART 1

WHAT IS A DISASTER, DISASTER MANAGEMENT(DM)& DM CYCLE

PART 2

IMPORTANCE OF DISASTER RISK FINANCE

PART 3

CHALLENGES TO FINANCING DISASTER RISK

PART 4

MECHANISMS OF FINANCING DISASTER RISK

PART 5

SOURCES AND TOOLS OF FINANCE IN DISASTER MANAGEMENT

CONCLUSION

2

PART 1:

DISASTER, DISASTER MANAGEMENT

& DM CYCLE

3

WHAT IS A DISASTER

A SERIOUS DISRUPTION OF THE FUNCTIONING OF A COMMUNITY

OR A SOCIETY INVOLVING WIDESPREAD HUMAN, MATERIAL,

ECONOMIC OR ENVIRONMENTAL LOSSES AND IMPACTS, WHICH

EXCEEDS THE ABILITY OF THE AFFECTED COMMUNITY OR SOCIETY TO

COPE USING ITS OWN RESOURCES.

A DISASTER CAN BE EITHER NATURAL [RAIN, FLOOD, CYCLONE,

STORM, LAND SLIDES, EARTHQUAKE, VOLCANOES] OR MAN MADE

[WAR INCLUDING BIOLOGICAL, ARSON, SABOTAGE, RIOTS, ACCIDENT

(TRAIN, AIR, SHIP), INDUSTRIAL ACCIDENTS, FIRES (FOREST FIRES), BOMB

EXPLOSIONS, NUCLEAR EXPLOSIONS AND ECOLOGICAL DISASTERS].

4

WHAT IS DISASTER MANAGEMENT

IT IS MORE THAN JUST RESPONSE AND RELIEF (I.E., IT ASSUMES A MORE

PROACTIVE APPROACH)

IT IS A CONTINUOUS SYSTEMATIC PROCESS (I.E., IS BASED ON THE KEY

MANAGEMENT PRINCIPLES OF PLANNING, ORGANISING, AND

LEADING WHICH INCLUDES COORDINATING AND CONTROLLING)

AIMS TO REDUCE THE NEGATIVE IMPACT OR CONSEQUENCES OF

ADVERSE EVENTS (I.E., DISASTERS CANNOT ALWAYS BE PREVENTED,

BUT THE ADVERSE EFFECTS CAN BE MINIMISED)

IT IS A SYSTEM WITH MANY COMPONENTS.

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WHAT IS THE DIFFERENCE

BETWEEN DM AND DRM

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A COLLECTIVE TERM

ENCOMPASSING ALL ASPECTS

OF PLANNING FOR

PREPARING AND

RESPONDING TO DISASTERS.

REFERS TO THE MANAGEMENT

OF THE CONSEQUENCES OF

DISASTERS.

DISASTER MANAGEMENT

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DISASTER RISK MANAGEMENT

A BROAD RANGE OF ACTIVITIES

DESIGNED TO:

PREVENT THE LOSS OF LIVES

MINIMIZE HUMAN SUFFERING

INFORM THE PUBLIC AND

AUTHORITIES OF RISK

MINIMIZE PROPERTY DAMAGE

AND ECONOMIC LOSS

SPEED UP THE RECOVERY

PROCESS

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WHAT IS A DM CYCLE

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PRE DISASTER PHASE

STRUCTURAL/ NON STRUCTURAL MITIGATION

CONSTRUCTION OF DAMS, RETAINING WALLS, EMBANKMENTS,

PLANTATION OF MANGROVES.

IMPLEMENTATION OF GOVT SCHEMES E.G.- WATER SHED

DEVELOPMENT PROGRAM IN WATER DEFICIT REGIONS.

MEETING THE REQUIREMENT OF MACHINARY & EQUIPMENTS.

HAZARD, RISK, VULNERABILITY ZONE MAPPING ETC.

NEED FOR FINANCE IN

DISASTER MANAGEMENT

POST DISASTER PHASE

RELIEF CAMPS FOR DISASTER VICTIMS IN SCHOOLS, COMMUNITY HALLS

ETC.

TO PROVIDE FOOD TO VICTIMS OF AN EVENT.

TO PROVIDE HEALTH OR MEDICINES FACILITY TO THE INJURED, SICK

ETC.

COMPENSATION TO OVER COME THE LOSS OF LIFE OR PROPERTY.

RECONSTRUCTION OF SOCIO ECONOMIC STRUCTURE.

NEED FOR FINANCE IN

DISASTER MANAGEMENT

PART 2:

IMPORTANCE OF DISASTER RISK

FINANCE

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DISASTER RISK FINANCE :

PROBLEM AREAS

NATURAL DISASTERS DEVASTATE LIVES AND LIVELIHOODS ACROSS THE

WORLD AND SLOW DOWN THE DEVELOPMENT PROGRESS ACHIEVED

THROUGH MANY DECADES OF HARD WORK.

ACCORDING TO THE IFRC WORLD DISASTERS REPORT (2012), THE

FREQUENCY AND INTENSITY OF NATURAL DISASTERS IS INCREASING.

THE RISKS ARE GREATER AS INCREASING NUMBER OF PEOPLE LIVE IN

VULNERABLE URBAN AREAS; CONSTRUCTION PRACTICES ARE OFTEN

SUBSTANDARD AND INSURANCE COVERAGE IS LOW.

CONSEQUENTLY THE FISCAL AND ECONOMIC PRESSURE OF DEVELOPING

COUNTRIES HAVING TO DEAL WITH THE ADVERSE EFFECTS OF NATURAL

DISASTERS IS INCREASING, TOO.

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ALTHOUGH BEST WAY TO COUNTER THE THREAT TO POVERTY

REDUCTION AND SUSTAINABLE DEVELOPMENT IS RISK MITIGATION

BEFORE A DISASTER, FOCUS STILL IS ON DISASTER RELIEF AND

RECONSTRUCTION AFTER A DISASTER.

‘LACK OF FINANCIAL RESOURCES’ OFTEN QUOTED AS THE

EXCUSE.

THE GLOBAL ASSESSMENT REPORT 2011 (UNISDR, 2011:100), SAYS

THAT GOVERNMENT INVESTMENT IN DRM IN COLOMBIA AND

MEXICO, FOR EXAMPLE, IS SIGNIFICANTLY LESS THAN THE

AMOUNT OF MONEY GIVEN OUT IN THE FORM OF TAX EXEMPTIONS.


PROBLEM AREAS

14

GOVERNMENTS DO NOT LACK THE FINANCIAL RESOURCES TO

INVEST IN DRM BUT THEY HAVE NOT IDENTIFIED IT AS A (POLITICAL)

PRIORITY.

DISASTERS BECOME POLITICAL PRIORITIES ONCE THEY HAVE

OCCURRED AND CAUSED LOSS OF LIVES AND DEVASTATION, AS

SAVING LIVES AND ASSISTING DISASTER VICTIMS IS A

HUMANITARIAN PARADIGM.

ON THE UP SIDE – MAJOR DISASTERS SOMETIMES ALSO TRIGGER A

REAL OR PERCEIVED SOCIAL DEMAND FOR IMPROVEMENTS IN

DRM.


PROBLEM AREAS

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HOWEVER, AFTER A DISASTER, THE WINDOW OF OPPORTUNITY

FOR DRM OPENS WIDER IN SOME COUNTRIES THAN IN OTHERS:

IN SOME COUNTRIES THE SOCIAL DEMAND FOR DRM EITHER TOO

WEAK OR IGNORED, THE STRENGTHENING OF DRM COSMETIC OR

THE INITIAL IMPETUS DIFFICULT TO SUSTAIN (UNISDR, 2011:101).

COUNTRIES WITH WEAK GOVERNANCE AND LOW INSTITUTIONAL,

FINANCIAL AND HUMAN CAPACITIES WHICH LACK THE

INFORMATION ON THE COSTS AND BENEFITS OF DISASTER RISK

REDUCTION UNABLE TO MEASURE THE OPPORTUNITY COSTS OF

INVESTING IN DRM AND, NEGLECT DISASTER RISK REDUCTION

(DRR).


PROBLEM AREAS

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SOCIAL AND ECONOMIC COSTS OF A DISASTER BE MADE MORE

VISIBLE (FOR EXAMPLE, IN COLOMBIA, ESTIMATED LOSS FROM

DISASTER IS ABOUT 1% OF GDP WHICH IS COMPARABLE TO THE

COST OF ARMED CONFLICT WHICH WAS ESTIMATED AT 1.1% OF

GDP FOR THE PERIOD 1991-1996, UNISDR 2011:105), AND IF

GOVERNMENTS TO ACCOUNT FOR RECURRENT DISASTER

LOSSES AND FUTURE LIABILITIES INSTEAD OF TRANSFERRING

IMPACTS TO AFFECTED LOW-INCOME HOUSEHOLDS AND

COMMUNITY

DRM BE MADE A PUBLIC POLICY PRIORITY SIMILAR TO

CONTROLLING INFLATION OR RESOLVING ARMED CONFLICT.


SOLUTIONS

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PART 3:

CHALLENGES TO

FINANCING DISASTER RISK

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DATA AND REPORTING

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DATA ON CONSTITUENTS OF DRR SPENDING DIFFICULT TO COLLECT.

EXISTING DATA OFTEN NOT REPORTED.

NO SYSTEMATIC EFFORT TO COMPARE SUCH DATA WORLDWIDE.

ALTHOUGH MOST COUNTRIES REPORT THE INTEGRATION OF DISASTER

RISK REDUCTION IN PUBLIC INVESTMENT AND PLANNING DECISIONS,

ONLY FEW COUNTRIES ABLE TO PROVIDE DISAGGREGATED

INFORMATION AS TO SPECIFIC INVESTMENTS IN DRR ALLOCATED

FROM NATIONAL BUDGETS.

DEVELOPING COMPLETE ESTIMATIONS FOR DRR ALLOCATIONS

DIFFICULT AS SPECIFIC ACCOUNTING PROTOCOLS OR CODING FOR

DRR INVESTMENTS DO NOT EXIST.

RESPONSIBILITY

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THE DISASTER RISK MANAGEMENT FUNCTION IS OFTEN NOT OWNED BY

ANY ONE DEPARTMENT.

IMPLEMENTATION OF DISASTER RISK REDUCTION ACTIVITIES NOT

BUDGETED AT DEPT LEVEL OR INTEGRATED INTO NORMAL DAY-TO-DAY

OPERATIONS DUE TO LACK OF UNDERSTANDING OF RESPONSIBILITIES.

CAPACITY CONSTRAINTS, POST-DISASTER

ASSESSMENTS, MONITORING AND EVALUATION AND

TIMELY RELEASE OF FUNDS

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REGIONAL AND NATIONAL REPRESENTATIVES LACK CRITICAL SKILLS

VITAL FOR DISASTER ASSESSMENT VERIFICATION MISSIONS.

RECONSTRUCTION PROJECTS BADLY IMPLEMENTED, PROCUREMENT OF

FUNDING FOR PROJECTS DELAYED, FUNDS TO THE AFFECTED

POPULATION RELEASED MONTHS, IF NOT YEARS, AFTER A DISASTER HAS

HAPPENED AND MISUNDERSTANDINGS ABOUT PROCEDURES FOR THE

RELEASE OF FUNDS.

MONITORING AND EVALUATION OF REHABILITATION WORK AT TIMES

NOT EVEN PLANNED FOR, LEADING TO MISAPPROPRIATION OF FUNDS

AND BADLY RECONSTRUCTED FACILITIES THAT AGAIN DO NOT

WITHSTAND FURTHER DISASTERS.

LACK OF POLITICAL WILL

22

LOCAL, PROVINCIAL AND NATIONAL POLITICAL LEADERS DO NOT

UNDERSTAND THE CRUCIAL ROLE OF DISASTER RISK MANAGEMENT.

LACK OF WILL TO FUND SOMETHING THAT ‘MIGHT NOT HAPPEN’

WHICH MAKES IT DIFFICULT TO GET FUNDS FOR PRO-ACTIVE DISASTER

RISK-REDUCTION PROJECTS.

POLITICAL LEADERS STILL VERY OFTEN CONSIDER DISASTER

PREVENTION A COST AND NOT AN INVESTMENT.

PART 4:

MECHANISMS OF FINANCING

DISASTER RISK

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World Conference on Disaster Reduction

18-22 January 2005, Kobe, Hyogo, Japan

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HYOGO FRAMEWORK FOR ACTION

GOVERNMENTS AROUND THE WORLD HAVE COMMITTED TO TAKE

ACTION TO REDUCE DISASTER RISK.

ADOPTED A GUIDELINE TO REDUCE VULNERABILITIES TO NATURAL

HAZARDS, CALLED THE HYOGO FRAMEWORK FOR ACTION (HYOGO

FRAMEWORK, HFA).

THE HYOGO FRAMEWORK ASSISTS THE EFFORTS OF NATIONS AND

COMMUNITIES TO BECOME MORE RESILIENT TO AND ABLE TO COPE

BETTER WITH THE HAZARDS THAT THREATEN THEIR DEVELOPMENT GAINS

(UNISDR, 2005:1).

ITS GOAL IS TO BUILD RESILIENCE OF NATIONS AND COMMUNITIES TO

DISASTERS, BY ACHIEVING SUBSTANTIVE REDUCTION OF DISASTERLOSSES BY 2015 – IN LIVES, AND IN THE SOCIAL, ECONOMIC AND

ENVIRONMENTAL ASSETS OF COMMUNITIES AND COUNTRIES.

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THE FRAMEWORK HAS THREE STRATEGIC GOALS (UNISDR, 2005:4):

1. THE INTEGRATION OF DISASTER RISK REDUCTION INTO SUSTAINABLEDEVELOPMENT POLICIES AND PLANNING;

2. DEVELOPMENT AND STRENGTHENING OF INSTITUTIONS, MECHANISMSAND CAPACITIES TO BUILD RESILIENCE TO HAZARDS; AND

3. THE SYSTEMATIC INCORPORATION OF RISK REDUCTION APPROACHESINTO THE IMPLEMENTATION OF EMERGENCY PREPAREDNESS, RESPONSEAND RECOVERY PROGRAMMES.

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FURTHERMORE, THE HFA OFFERS FIVE AREAS OF PRIORITIES FOR

ACTION (UNISDR, 2005:2-4):

1. ENSURE THAT DISASTER RISK REDUCTION IS A NATIONAL AND A LOCALPRIORITY WITH A STRONG INSTITUTIONAL BASIS FOR IMPLEMENTATION;

2. IDENTIFY, ASSESS AND MONITOR DISASTER RISKS – AND ENHANCE EARLYWARNING;

3. USE KNOWLEDGE, INNOVATION AND EDUCATION TO BUILD A CULTURE OFSAFETY AND RESILIENCE AT ALL LEVELS;

4. REDUCE THE UNDERLYING RISK FACTORS; AND

5. STRENGTHEN DISASTER PREPAREDNESS FOR EFFECTIVE RESPONSE AT ALLLEVELS.

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FOUR CORE INDICATORS FOR THE PRIORITY AREA 1:

1. NATIONAL POLICY AND LEGAL FRAMEWORKS FOR DISASTER RISKREDUCTION EXIST AND INCLUDE DECENTRALIZED RESPONSIBILITIES ANDCAPACITIES AT ALL LEVELS;

2. DEDICATED AND ADEQUATE RESOURCES ARE AVAILABLE TO IMPLEMENTDISASTER RISK REDUCTION PLANS ACTIVITIES AT ALL ADMINISTRATIVELEVELS;

3. COMMUNITY PARTICIPATION AND DECENTRALIZATION ARE ENSURED BYDELEGATING AUTHORITY AND RESOURCES TO LOCAL LEVELS; AND

4. A NATIONAL MULTI-SECTORAL PLATFORM FOR DISASTER RISK REDUCTIONIS FUNCTIONING.

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STAKEHOLDERS IN DISASTER RISK

REDUCTION (DRR)

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DISASTER FINANCING AS A PROPORTION

OF TOTAL INTERNATIONAL AID, 1991-2010)

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THE INTERNATIONAL

COMMUNITY COMMITTED

OVER $3 TRILLION IN TOTAL

DEVELOPMENT AID IN THE

PERIOD 1991-2010.

OF THIS, $106.7 BILLION WAS

ALLOCATED TO DISASTERS, AND

OF THAT JUST A FRACTION

(12.7%), $13.5 BILLION,

WAS ON RISK REDUCTION

MEASURES BEFORE DISASTERS

STRIKE, COMPARED WITH $23.3

BILLION (21.8%) SPENT ON

RECONSTRUCTION AND

REHABILITATION AND $69.9

BILLION (65.5%) SPENT ON

RESPONSE.

OF THE OVERALL AID

FINANCING OVER 20 YEARS,

THE $13.5 BILLION SPENT ON

DRR ACCOUNTS FOR JUST 0.4%

OF THE TOTAL AMOUNT SPENT

ON INTERNATIONAL AID.

THE IMPACT OF DISASTERS : BY COUNTRY

INCOME CLASS

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HIGH AND

UPPER

MIDDLE

INCOME

COUNTRIES

TOGETHER

ACCOUNT

FOR THE

MOST

NUMBER OF

DISASTERS

(67%) AND

THE BIGGEST

FINANCIAL

LOSSES

(72%) BUT

FOR THE

LOWEST

NUMBER OF

DEATHS

(19%).

LOWER-

MIDDLE

AND LOW

INCOME

COUNTRIES

ACCOUNT

FOR ONLY

33% OF

DISASTERS

BUT FOR 81%

OF ALL

DEATHS.

DRR FINANCING ORGANISATIONS

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THE WORLD BANK

ALONE MANAGES

MORE THAN 63%

OF ALL DRR MONEY

FROM

DEVELOPMENT

BANKS, FUNDING

MECHANISMS AND

AGENCIES:

$4.8 BILLION OF THE

$13.5 BILLION OF

ALL DRR

FINANCING OVER

TWO DECADES.

$36 OF EVERY $100

ALLOCATED TO DRR

OVER THE PERIOD

WAS MANAGED

IN ONE WAY OR

ANOTHER BY THE

WORLD BANK

DRR FINANCING COUNTRIES

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JAPAN IS THE LARGEST

SINGLE DIRECT DONOR TO

DRR.

OVER THE LAST 20 YEARS IT

HAS ACCOUNTED FOR

$3.7 BILLION OF TOTAL

FINANCING.

IN TERMS OF FUNDING

COMING DIRECT FROM

DONORS, IT ACCOUNTS

FOR 64% OF THE TOTAL.

THIS IS OVER EIGHT TIMES

MORE THAN THE SECOND

LARGEST DONOR, THE

EUROPEAN COMMUNITY

($479.5 MILLION) AND

DOUBLE THE AMOUNT

CONTRIBUTED BY ALL

OTHER DONORS

COMBINES.

PART 5:

SOURCES & TOOLS OF FINANCE

IN DISASTER MANAGEMENT

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SOURCES OF DISASTER FINANCE37

TOOLS OF DISASTER RISK FINANCE

A VARIETY OF RISK FINANCING AND OTHER FINANCIAL TOOLS

DEVELOPED TO FACILITATE MANAGEMENT OF RISKS.

HOWEVER THEY PRIMARILY BENEFIT UPPER AND MIDDLE INCOME

FAMILIES, LARGE BUSINESSES, AND WEALTHY GOVERNMENTS FOR

WHOM THE MARKETS ARE READY TO PROVIDE SUCH TOOLS.

THOSE LIVING IN POOR COMMUNITIES AND IN AT-RISK, DEVELOPING

COUNTRIES TYPICALLY HAVE LITTLE ACCESS TO FORMAL FINANCING

OPTIONS FOR DISASTER RISK MANAGEMENT.

THIS IS DUE TO A RANGE OF MARKET GAPS AND FAILURES OF

FORMAL MARKET PRODUCTS TO MEET THE NEEDS OF THE POOR,

PARTICULARLY THOSE WORKING IN THE INFORMAL ECONOMY AND

WITH IRREGULAR CASH FLOWS.

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COMBINED WITH GREATER EXPOSURE TO RISKS, LACK OF ACCESS TO

EFFECTIVE RISK MANAGEMENT TOOLS MAKES MANY POOR

COMMUNITIES AND PARTICULAR GROUPS VULNERABLE.

POST-DISASTER ASSISTANCE FROM GOVERNMENTS OR

HUMANITARIAN AGENCIES MAY STEM THE IMPACTS OF THE MOST

DRASTIC EMERGENCIES, BUT THIS ASSISTANCE IS TOO OFTEN ADHOC,

POORLY TARGETED AND FAILS TO REACH OR ASSIST THE MOST

VULNERABLE.

ROBUST FINANCING TOOLS CAN HELP THE POOR TO BREAK THE

POVERTY CYCLE BY PROTECTING THEIR DEVELOPMENT GAINS,

REDUCING IMPACTS AND LOSSES OF DISASTER SHOCKS, AND

PROVIDING RESOURCES FOR DISASTER PREVENTION AND RISK

MANAGEMENT.

TOOLS OF DISASTER RISK FINANCE39

DEVELOPMENTAL LOOP

SAVINGS

ACCESS

TOCREDIT

INVESTMENT

DEVELOPMENT/

LIVELIHOOD GAINS

RISK

PREVENTION

INSURANCE

/

40

MAPPING OF KEY RISK

FINANCING TOOLS

FINANCING MODE

SAVINGS CREDIT INVESTMENT INSURANCE

POOR

HOUSEHOLDS

SMALL

BUSINESSES

MIDDLEINCOMEHOUSEHOLDS

MICRO FINANCE MICRO INSURANCE

CATASTROPHE

POOLS

COMMUNITY SOCIAL FUNDS

NATIONALCATASTROPHE

POOLS/BONDSREGIONAL/INTERNATIONAL

L

E

V

E

L

S

41

TARGETS OF RISK FINANCE TOOLS

POOR HOUSEHOLDS

VULNERABLE TO DISASTERS AND OTHER SHOCKS NOT JUST BECAUSE

OF A LACK OF FINANCIAL ASSETS BUT ALSO AS A RESULT OF SOCIAL

AND POLITICAL EXCLUSION (BASED ON CASTE, ETHNIC

IDENTIFICATION, OR GENDER).

OFTEN MARGINALIZED FROM THE FORMAL ECONOMY, THEY ARE THE

ONES WITH THE LEAST ACCESS TO EFFECTIVE AND EFFICIENT

FINANCING TOOLS. WHEN DEVELOPING INNOVATIVE SOLUTIONS IN POOR COMMUNITIES,

IT IS IMPORTANT TO LOOK AT WHICH SEGMENTS OF THE COMMUNITY

ARE REALLY BENEFITING AND WHICH ARE NOT.

FREQUENTLY THE POOREST OF THE POOR ARE LEFT OUT AND THE

INNOVATIVE PROGRAMS SERVE ONLY TO BROADEN MARKET ACCESS

WITHOUT REALLY ADDRESSING THE MARKET GAPS THEMSELVES.

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SMALL BUSINESSES

SMALL BUSINESSES PARTICULARLY VULNERABLE TO DISASTER RISKS.

OFTEN OVERLOOKED AS PROGRAMS ORIENTED MAINLY TOWARD

HOUSEHOLDS AND FAMILIES.

EFFECTIVE FINANCING FOR RISK MANAGEMENT IS INTIMATELY TIED TO

THE PROMOTION OF STRONG, RESILIENT LIVELIHOODS AND HEALTHY

LOCAL ECONOMIES, AND THE RESILIENCY OF SMALL BUSINESSES IS

CRITICAL FOR EACH OF THESE.

TARGETS OF RISK FINANCE TOOLS43

COMMUNITIES

COMMUNITIES REPRESENT AN IMPORTANT PART OF RISK DECISION-

MAKING.

OPERATES BETWEEN THE LEVEL OF INDIVIDUAL FAMILIES AND THAT OF

GOVERNMENT. MANY ASPECTS OF RISK MANAGEMENT (E.G. ENSURING THAT

COLLECTIVE WATER AND SANITATION SYSTEMS ARE PROTECTED AND

ABLE TO PROVIDE SERVICES EVEN AFTER DISASTER) NEED TO BE

PLANNED AND MAINTAINED AT THE COMMUNITY LEVEL IN ORDER TO

BE SUSTAINABLE.


NATIONAL GOVERNMENTS

POOR COMMUNITIES ALSO DEPEND ON EFFECTIVE REGULATORY

GUIDANCE AND FINANCIAL ASSISTANCE FROM THEIR NATIONAL

GOVERNMENTS FOR BOTH PRE- DISASTER RISK REDUCTION AND POST-

DISASTER RELIEF AND RECOVERY ASSISTANCE.

TO DO THIS, NATIONAL GOVERNMENTS NEED TO PROTECT THEIR OWN

INVESTMENTS AND MAINTAIN ACCESS TO SUFFICIENT AND READILY

AVAILABLE FINANCIAL RESOURCES. YET TOO OFTEN GOVERNMENTS THEMSELVES LACK ACCESS TO

EFFECTIVE RISK FINANCING.


RISKS FROM INJURY, SICKNESS, OR DISASTER ARE A CRITICAL DIMENSIONOF POVERTY AND CAN EASILY THREATEN THE SMALL SAVINGS ANDFRAGILE LIVELIHOODS OF POOR FAMILIES.

MICROFINANCE IS AN EFFECTIVE MEANS FOR STRENGTHENING ACCESSTO CREDIT, SAVINGS, AND OTHER FINANCIAL SERVICES IN POOR ANDVULNERABLE COMMUNITIES AND HAS CHANGED PERCEPTIONS OF THEPOOR, AND WOMEN IN PARTICULAR, AS UNCREDITWORTHY AND‘UNBANKABLE’

MICROFINANCE CAN INCREASE FINANCIAL RESILIENCE BY PROVIDINGACCESS TO CREDIT AND OTHER FINANCIAL SERVICES TO

ENABLE INVESTMENT IN HIGHER YIELD LIVELIHOOD STRATEGIES.

DIVERSIFY LIVELIHOOD STRATEGIES.

ENABLE INVESTMENT IN RISK REDUCTION MEASURES TO LIMITEXPOSURE OF LIVELIHOODS TO DISASTER SHOCKS.

TOOLS OF DISASTER RISK FINANCE:

MICROFINANCE

46

SOCIAL FUNDS ARE PROGRAMS THAT PROVIDE BLOCK GRANTS FOR PROJECTSTO BUILD UP COMMUNITY ASSETS SUCH AS COMMUNITY FACILITIES,INFRASTRUCTURE OR IMPROVED SERVICES, INCLUDING MICROFINANCE ANDMICROINSURANCE SERVICES TO BUILD LIVELIHOOD SECURITY AND RESILIENCEFOR POOR AND VULNERABLE HOUSEHOLDS.

REPRESENT INNOVATIVE APPROACH TO COMMUNITY-DRIVEN DEVELOPMENT,ALLOWING LOCAL STAKEHOLDERS TO PRIORITIZE ACTIVITIES AND GUIDEIMPLEMENTATION DECISION-MAKING.

TYPICALLY SETUP AND COORDINATED AS AUTONOMOUS GOVERNMENTAGENCIES AND MAY SERVE AS A CHANNEL FOR FINANCIAL SUPPORT COMINGFROM INTERNATIONAL FINANCIAL INSTITUTIONS OR OTHER DONORS.

HOWEVER IT IS THE COMMUNITY ROLE THAT DISTINGUISHES SOCIAL FUNDSFROM OTHER APPROACHES. THE COMMUNITIES THEMSELVES SUBMITPROPOSALS AND THE LOCALIZED ADMINISTRATION ALLOWS QUITE SPECIFICGEOGRAPHIC AND POVERTY TARGETING AND ENCOURAGES PROPOSALSDIRECTLY FROM POOR AND VULNERABLE COMMUNITIES.


SOCIAL FUNDS

47

A POTENTIAL SOLUTION FOR EXTENDING INSURANCE COVERAGE IN POOR

COMMUNITIES

PROVIDES ACCESS TO POST-DISASTER FINANCIAL RESOURCES IN FAST,RELIABLE AND PREDICTABLE MANNER ALLOWING THE POOR TO PROTECTTHEIR INVESTMENT AND RETAIN THEIR FINANCIAL GAINS IN THE FACE OFDISASTERS.

PROMOTES DIGNITY AND SELF-RELIANCE BY PROVIDING IMMEDIATELIQUIDITY TO THE POOR.

PROMOTE INCREASED LEVELS OF RESILIENCE BY

INCREASING ACCESS TO FINANCES AFTER SHOCKS THUSSTRENGTHENING COPING AND REDUCING THE LIKELIHOOD OFDISASTROUS IMPACTS.

PROVIDING GREATER DISCRETION TO HOUSEHOLDSAND SMALL BUSINESSES IN PURSUING COPING ANDRECOVERY STRATEGIES.


MICRO INSURANCE

48

PROVIDE A MECHANISM FOR CATALYZING THE PROVISION OF INSURANCE INMARKETS WHERE THERE HAVE BEEN IMPEDIMENTS TO PRIVATE INSURERSOFFERING DISASTER COVERAGE.

THESE POOLS TYPICALLY COMBINE A RANGE OF GOVERNMENTAL, PRIVATESECTOR AND DONOR SUPPORT – OFTEN FOCUSED ON ADDRESSING DISTINCTLAYERS OF RISK – TO ENGAGE MARKET INTEREST AND ESTABLISH A VIABLEINSURANCE FUND.

THE POOLING CAN BE EITHER AMONG CITIZENS IN A PARTICULAR COUNTRYOR SET OF COUNTRIES OR AMONG GOVERNMENTS TO LIMIT THEIR OWNEXPOSURE TO DISASTER RISKS.

CATASTROPHE POOLS CAN PROMOTE INCREASED LEVELS OF RESILIENCE BY

INCREASING ACCESS TO FINANCIAL LIQUIDITY AFTERDISASTER SHOCKS (FOR BOTH INDIVIDUALS AND GOVERNMENTS)

TRANSFERRING A PORTION OF THE RISK TO EXTERNAL AND/ORCAPITAL MARKETS


CATASTROPHE POOLS/BONDS

49


OTHER TOOLS

CONDITIONAL CASH TRANSFERS

CASH TRANSFERS AND PUBLIC WORKS BOLSTER SAFETY NETS AND

PROMOTE HOLISTIC SOCIAL RISK MANAGEMENT.

SUPPORT LOCAL CHOICE AND SELF-MANAGEMENT IN DRIVING

RECOVERY AND PRIORITIZING INVESTMENTS FOR LIVELIHOODS

DEVELOPMENT AND RESILIENCE.

USED IN PARTICULAR TO PROTECT CHILDREN’S SCHOOL ENROLMENT

FROM BEING AFFECTED BY ADVERSE RISK COPING.

THE INCOME HELPS POOR HOUSEHOLDS AVOID SALE OF ASSETS,

FOREGOING OF HEALTH EXPENDITURES, OR WITHDRAWAL OF

CHILDREN FROM SCHOOL.

PUBLIC WORKS PROGRAMS USED TO STRENGTHEN LABOR MARKETS

TO PROTECT AGAINST THE RISK OF UNEMPLOYMENT AND ALSO TO

SUPPORT PUBLIC INVESTMENTS THAT CAN LINK TO PREVENTION

STRATEGIES.

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OTHER TOOLS

CASH FOR WORK PROGRAMS.

BASIC EMPLOYMENT PROGRAMS WITH THE WORK TARGETED

TOWARD SOCIAL OR COMMUNITY OBJECTIVES.

HELP TO RESTORE EARNING CAPACITY AND LIVELIHOODS, REPAIR

AND RECONSTRUCT DISASTER DAMAGE, AND CONTRIBUTE TO LONG-

TERM DEVELOPMENT.

AFTER THE INDIAN OCEAN TSUNAMI IN 2004, A NUMBER OF

AGENCIES ESTABLISHED CASH GRANT PROGRAMS TO SUPPORT THE

HOUSING RECONSTRUCTION.

IN SRI LANKA THE GOVERNMENT-ORGANIZED OWNER-DRIVEN

HOUSING RECOVERY PROGRAM REQUIRED THAT HOUSES

RECONSTRUCTED UNDER THE PROGRAM BE BUILT ON REINFORCED

CONCRETE PILLARS TO REDUCE DAMAGE IN FUTURE TSUNAMIS.

COMBINATION OF TECHNICAL ASSISTANCE AND CASH GRANTS USED

EFFECTIVELY FOR THE TRANSITIONAL SHELTER PROGRAM ORGANIZED

BY THE IFRC IN YOGYAKARTA AFTER THE EARTHQUAKE IN 2006.

51


OTHER TOOLS

ALTERNATIVE CURRENCIES

COMPLEMENTARY OR LOCAL CURRENCIES USED IN A NUMBER OF

LOCATIONS TO STIMULATE LOCAL ECONOMIC ACTIVITY BY ISSUING A

SCRIP CURRENCY TO FACILITATE THE EXCHANGE OF LOCAL SERVICES

IN AREAS WHERE AVAILABILITY OF THE NATIONAL CURRENCY IS

LIMITED (AS IT MIGHT BE IN POOR COMMUNITIES).

THESE TYPES OF ALTERNATIVE CURRENCIES HAVE BEEN USED TO

SUPPORT LOCAL DEVELOPMENT, INCLUDING IN POST-DISASTER

RECOVERY CONTEXTS.

52


OTHER TOOLS

INSURANCE FOR DISASTER RESERVES FOR PRIVATE COMPANIESUNITED NATIONS ENVIRONMENT PROGRAMME FINANCE INITIATIVE

(UNEP FI) CURRENTLY EXPLORING A PROGRAM THAT WOULD OFFER

INSURANCE TO COMPANIES IN LIEU OF MAINTAINING RESERVES FORRESPONDING TO DISASTER EVENTS, THUS ALLOWING THOSE COMPANIES

TO INVEST MUCH OF THE FUNDS THAT WOULD HAVE BEEN PUT IN THESE

RESERVES IN OTHER WAYS.

CONTINGENT CREDITGOVERNMENTS OR PRIVATE SECTOR COMPANIES OBTAIN THE RIGHT TO

TAKE OUT A PRE-SPECIFIED POST-DISASTER LOAN THAT IS REPAID ON

FIXED TERMS , PROVIDING IMMEDIATE LIQUIDITY AFTER A DISASTER.

SUCH CREDIT MIGHT BE OFFERED AS PART OF A DEVELOPMENT AID

PACKAGE TO GOVERNMENTS OR IN EXCHANGE FOR AN ANNUAL FEE.

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CONCLUSION

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RECAPITULATION

THE COST OF DISASTERS IS INCREASING, AND VULNERABLE PEOPLE

(ELDERLY, WOMEN, CHILDREN), AND NATIONS (DEVELOPING

COUNTRIES) ARE BEING DISPROPORTIONALLY AFFECTED.

DEVELOPMENT ASSISTANCE FOR DRR IS A SMALL FRACTION OF TOTALINTERNATIONAL AID FINANCE. ONLY A SMALL AMOUNT OF FUNDS

ARE ALLOCATED SPECIFICALLY FOR DRR PURPOSES.

WITHIN DRR FUNDING, MUCH OF THE EXPENDITURE AND ATTENTION IS

FOCUSED ON DISASTER PREPAREDNESS AND RECOVERY, RATHER

THAN ON UNDERSTANDING AND MITIGATING THE UNDERLYING

CAUSES OF VULNERABILITY.

DEVELOPMENT ASSISTANCE FOR DRR IS CONCENTRATED IN A SMALL

NUMBER OF COUNTRIES. POORER AND DROUGHT PRONE COUNTRIES

ARE INADEQUATELY REPRESENTED.

FUNDS FOR DRR COME FROM VARIED SOURCES AND TARGET

MANIFOLD ASPECTS OF DISASTER RISK; THIS MAKES UNDERSTANDINGFUNDING MECHANISMS, AND THEIR IMPACT ON DRR, DIFFICULT.

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DATA ON NATIONAL EXPENDITURE FOR DRR ARE SCARCE BUT

EVIDENCE THAT DOES EXIST DEMONSTRATES ITS IMPORTANCE.

NEW FUNDS ARE INCREASINGLY BEING ALLOCATED TO MITIGATE THE

EFFECTS OF CLIMATE CHANGE AND BUILD RESILIENCE TO EXTREME

CLIMATE EVENTS.

RISK REDUCTION AND MANAGEMENT SHOULD BE PUT AT THE CENTREOF THE DEVELOPMENT AGENDA. HOWEVER DRR FINANCE INVOLVES

MORE THAT JUST DEVELOPMENT ASSISTANCE.

GOVERNMENT (PUBLIC SECTOR) AND PRIVATE SECTOR CAN BOTHPLAY A CRUCIAL ROLE IN FINANCING DRR. THE PRIVATE SECTOR IS

INVESTING IN RISK REDUCTION AND MAKING CHOICES BASED ON

RISK AND RESILIENCE CONSIDERATIONS.

INTERNATIONAL AGREEMENTS (E.G. SENDAI FRAMEWORK FOR DRR

2015- 2030) CAN PLAY A HUGE ROLE IN CATALYSING DRR ACTIVITIES

IN DISASTER-PRONE COUNTRIES.

RECAPITULATION

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THANK YOU

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Role & Importance of Finance in Disaster Management

Education

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