The CBHA Early Response Fund (ERF)

Uploaded: 30/10/2012 Author: Lydia Poole

Delivery Domestic Response Financing Mechanisms Global Trends Governments
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CBHA members

The first pooled humanitarian funds were created in 2006 as part of the UN humanitarian reform agenda to facilitate more timely and efficient funding to crises, proportionate with needs and aligned with priorities articulated through UN coordination mechanisms. Volumes of funds channelled via the Central Emergency Response Fund (CERF), country-level emergency response funds (ERFs) and common humanitarian funds (CHFs) have grown from US$583 in 2006 to US$900 million in 2011.

Yet this represented just 5% of the total humanitarian funding from international governments and private donors in 2011. There may yet be scope therefore for increasing the volumes of funds channelled via these mechanisms and space for innovations on the pooled fund model.

To date, pooled humanitarian funds have been a UN-led initiative, but a new pooled humanitarian fund was created in 2010 by the Consortium of British Humanitarian Agencies (CBHA), a group of UK-based NGOs, which they are now looking to take to scale. In this article, we examine the particular features of the CBHA ERF and consider whether its global ambitions complement and enhance the existing humanitarian funding architecture.

Do we really need another pooled humanitarian fund?

Pooled humanitarian funds are generally thought to be a good thing on balance, channeling increasing volumes of humanitarian funds from a growing range of donors to both well known and some under-funded crises. In some cases pooled humanitarian funds have improved the timeliness of funding and they encourage humanitarian organisations to participate in inter-agency coordination forums.

For donors, pooled funds also have the very attractive quality of reducing transaction costs, transferring responsibility for fiduciary control and the identification of needs and suitable funding partners to the UN agencies managing the funds and the agencies or coordination bodies overseeing their allocation processes. This is particularly appealing at a time when many government donors are facing staff cuts and it also makes it easier for newer donors who have limited technical capacity and experience to assess proposals and prospective partners to participate.

But transaction costs are not necessarily reduced overall, rather in many cases they are shifted down the transaction chain. And the transaction chain itself may be lengthened and administrative costs extracted at each stage.

The CERF – the largest pooled humanitarian fund with annual funding of around US$460 million – can only pass on funds directly to UN agencies who in turn pass around a quarter of all CERF funds to NGOs to implement humanitarian programmes. While release of funds to UN agencies may be rapid, the lag-time between the award of CERF rapid-response funds and receipt of funds by NGOs receiving funds via UN agencies takes an average of up to 13 weeks.

We can’t track these multiple transactions at the moment – although the International Aid Transparency Initiative (IATI) would enable us to – so we don’t know what proportion of the original funds donated remain or how much time is lost in these multiple tiers of transactions. This is a major limitation in our ability to assess the timeliness and efficiency of pooled humanitarian funds.

But it is clear that both money and time may be lost in a system with multiple layers of transaction and implementing NGOs – including national NGOs who often struggle to access funds via pooled channels – are often at the end of the chain, last to receive funds and with limited influence over where, how and to whom funds are allocated.

The extent to which pooled humanitarian funds are a good thing currently depends to a certain extent then on who you are but also on where you are.

The CERF, reliant on channelling funds through UN agencies, can only direct funds to places where UN agencies have a footprint. Country-level pooled humanitarian funds are established in a limited number of usually protracted crises, where the UN has an established coordination presence. That potentially leaves a large number of crisis situations, where the UN does not have a substantial footprint and capacity to monitor and articulate needs, unlikely to benefit from pooled humanitarian funding. With an increasing number of small-scale emergencies associated with climate change and many ‘forgotten’ or ‘neglected’ sub-national crises, smaller crises may experience growing inequality in funding and response to needs.

In reality, when NGOs need to start-up somewhere new or scale-up fast, they can’t wait for the donor and pooled funding leviathan to crank into gear, so they do so with their own private resources. But many international NGOs have limited private resources and they may have many competing claims on these funds. Moreover, it may be extremely difficult for national NGOs to call on reserves to respond to crises.

So if a new mechanism could take the best of humanitarian pooled funds, and improve on some of the limitations, to make funds for NGOs more accessible (including national NGOs) and to channel funds to less high profile crises, then perhaps we do need one.

What is the CBHA ERF?

The CBHA was established in 2010 by 15 UK-based NGOs to strengthen the coordination and capacity of the humanitarian NGO sector. As part of this initiative a £4 million fund was established for member agencies to draw on during an emergency. The ERF provided immediate seed money for agencies to begin relief efforts before other funding became available. Programmes funded by the ERF must begin delivering aid within seven days of the start of a response and complete within 30 days.

Funding in this pilot phase of the fund was awarded based on proposal submissions which are evaluated through peer review by representatives of all the member agencies.

Since March 2010 the ERF has allocated £4 million to 12 humanitarian emergencies and the ERF peer review mechanism was used to disburse an additional £21 million in the context of the Pakistan 2010 floods.

What are the comparative advantages of the CBHA ERF?

The CBHA, while small in scale to date, has received some pretty convincing endorsements. The UK Department for International Development’s 2011 Humanitarian Emergency Response Review (HERR) for example, acknowledged the role of the ERF in improving the rapid response in certain disasters as a model for providing ‘greater equity in allocations, and coherence’. And two independent reviews of the ERF clearly indicate some important comparative advantages relating to timeliness, cost-effectiveness and funding in accordance with needs, particularly in less high profile crises.

Based on an independent review of the ERF after its first year of operation:

-          the ERF appears to have successfully driven up humanitarian funding to crises which did not have Consolidated Appeal Process (CAP) flash appeals and therefore where the UN system and bilateral donors were not focussing much attention (Bangladesh, Myanmar, and South Kordofan)

-          the ERF provided additional resources to NGOs in contexts where the UK, at least, was otherwise only channelling its humanitarian funds through UN agencies or the CERF

-          the ERF had markedly quicker disbursement and start-up times compared to other humanitarian funding modalities

-          on average, ERF-funded projects were approved and became operational two to three times quicker than other NGO projects as a whole

-          and in avoiding multiple layers of transaction costs, ERF funds are more cost effective in that a greater proportion of donor funds remains to deliver goods and services to crisis-affected populations.

While the amounts of funding awarded are relatively small and the implementation period short, recipient agencies report that ERF funds enable them to scale-up and to leverage more funding from other sources – including in the Horn of Africa in 2011. According to an independent review conducted by DARA, “The CBHA response to the crisis in Somalia long before it became a major news story reflects one of the key advantages of such a peer-managed fund – the ability to respond to humanitarian needs even when they are not on the news”.

In addition, and perhaps most importantly, 52% of all grants awarded via the CBHA were channelled on to local partner organisations. While many donors may recognise the critical importance of supporting domestic response capacity, they usually struggle to do this in practice. The CBHA offers an alternative channel for donors to domestic actors to international financing and to build domestic response capacity.

What are the challenges to going global?

In a relatively short space of time and with a relatively small amount of funding the ERF has demonstrated impact, cost effectiveness and major comparative advantages in responding to needs fast. The CBHA have ambitions to take the ERF to scale to build something like a global CERF for NGOs. If successful, this could provide an effective complement to the existing suite of pooled humanitarian funds. But with many government donors trimming their aid budgets, they may face some formidable challenges in accessing funds, while the demand for response, particularly in relation to climate-related disasters, continues to grow.

In reality, despite the potential of pooled humanitarian funds to broaden donor participation and a record 161 official and private donors contributing to pooled funds in 2010, just ten government donors (UK, Netherlands, Sweden, Norway, Spain, Canada, Ireland, Denmark, Germany and Australia) provided 90% of the total funding to all the ERFs, CHFs and the CERF from their inception in 2006 up to 2011, with the UK alone providing 29%. There are already many competing claims on these donors’ resources.

In targeting private donors, the ERF may come up against competition with the fundraising strategies of their member agencies and they may face some difficulties in achieving consensus among members on ethical and reputation considerations around accepting funds from corporate donors. Building relationships with non-traditional government donors requires time and resources.

The ERF’s peer review model, which currently functions transparently and efficiently, may need to develop new governance models for global scale operations, where informal networks, personal relationships and experience will not be adequate to evaluate partners and their proposals, and they will need to move away from their UK brand in order to appeal to a wider constituency of donors and implementing agencies.

Based on the impressive early successes of the ERF however, there is every reason to believe that the CBHA has the creative vision and drive to meet these challenges. What remains to be seen is whether donors will rise to their challenge to provide more timely, needs-driven and cost effective humanitarian funding.

You can read more about pooled humanitarian funding in GHA Report 2012, and our special reports on  CHFs and ERFs and you can access our unique dataset on financing flows through the UN OCHA managed CERF, CHFs and ERFs here.

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One comment

  1. oyugi alfred says:

    This is a very good piece of work and when read by an intellectual person would really see that there has been a lot of work that have been done.

    DATE:
    19/11/2012 11:54 am

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Lydia Poole

About the author:
Lydia Poole

Lydia currently works as an Independent Consultant and continues to support our GHA programme having previously worked for us for a number of years.

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