8 Feb 2022, 11:28 a.m.
Supporting refugees in effective and sustainable ways remains a complex subject. Alexander Betts, Professor of Forced Migration at the University of Oxford, describes it as “one of the defining issues of our time.” In a recent Engaging with Evidence webinar, the Government Outcomes Lab explored the challenges in this area and asked experts if innovative financing and cross sector-collaborations can be part of the solution.
More than 82 million people are displaced around the world, of whom 26 million have crossed borders and are therefore refugees. Long-standing conflict in fragile states, climate change, authoritarian regimes, and prolonged socioeconomic crises continue to fuel migration, and so these numbers are likely to increase.
As shown by Europe’s experience over the past few years, supporting refugees is challenging. On the one hand, the current system is outdated and insufficient to deal with modern drivers of migration. Designed in the aftermath of World War II, it responded to migration driven by contextual factors of the time and was therefore mostly restricted to short-term humanitarian relief (Betts and Collier, 2017). On the other hand, most states’ political will to offer solutions and support refugees is also declining. This makes it difficult to offer compassionate and durable solutions.
Durable solutions for refugees include repatriation, resettlement to a third country, and local integration. In reality, most refugees spend many years in uncertainty and very few end up accessing durable solutions. They lack opportunities for long-term local integration, which goes beyond immediate needs for food, safety, and shelter, and promotes self-reliance through access to education, employment, housing, and wellbeing resources. Meanwhile, existing public services are often fragmented or suffer from resource constraints.
While significant reforms are needed in the global refugee system overall, innovative financing and cross-sector collaborations can play a meaningful part in addressing service fragmentation and resource constraints at a more local level. Recent research by the Government Outcomes Lab and the Sorbonne Business School looked at two interesting examples in Europe – the Hemisphere Social Impact Fund in France and the KOTO social impact bond in Finland. The former is an innovative project combining social impact funding with infrastructure to provide accommodation for refugees. Meanwhile the latter focusses on employment, and was launched as one of the world’s largest and first impact bonds to support refugees.
Launched in 2017, the Hemisphere Fund consists of €100 million equity investment from six institutional investors as well as a €100 million loan. This funding was used to purchase, renovate, and repurpose 62 hotels across France to operate as accommodation. The project is innovative in how it combines social impact funding with infrastructure. It aims to provide 10,000 units of accommodation to refugees and homeless people over 10 years, with 3% of return on investment conditioned on the achievement of social outcomes. Outcomes metrics included school enrolment, personalised support, access to social rights, and access to accommodation.
Launched in 2017, the £14.2 million KOTO social impact bond (SIB) aims to support employment for 2500 refugees and immigrants over three years. It aims to speed up entry into employment for service users, while also reducing public sector expenditure for central government. Payment to providers is based on achievement of outcomes, rather than inputs or activities. Initial outcomes metrics are based on successful employment and training of refugees. However, the project’s eventual success will be determined by a randomised controlled trial (RCT), which will compare tax collections and benefit payments for service users with those of a control group. Finnish government will pay 50% of any money saved through the project back into the fund (to investors).
While both projects are yet to report final results, some key learnings are already emerging:
New initiatives in this space are building on the learnings from earlier projects. These include the Refugee Transitions Outcome Fund in the UK (a £14 million outcomes fund to support refugee employment, housing and wellbeing) and the Refugee Impact Bond in Jordan (a $10 million project to support refugee employment, focussing on women, youth and vulnerable host communities).
Stakeholders in these projects found it challenging to design and price outcomes due to lack of relevant data sources. However, they found it helpful to start with data that was available and quantifiable and to further build on this through consultation with peers elsewhere. Close collaboration with project partners based on co-design and mutual gains, frequent adaptation, and openness to listening and learning proved fundamental. They also recommended caution around perverse incentives and cherry picking, especially when designing rate cards. Finally, they corroborated the need for more creative financing which leverages the private sector and goes beyond humanitarian relief to incorporate a development focus.