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Why there is a need to invest in humanitarian markets

  • By KCV
  • February 3, 2021

Over two billion people worldwide live in countries where development outcomes are derailed by fragility, conflict, and violence. According to the Organization for Economic Cooperation and Development, without intervention, roughly two-thirds of the world’s extreme poor will live in fragility conflict and violent settings by 2030. Studies reveal that over 80 percent of countries experiencing fragility conflict and violence (FCV) lack data and are not on track to achieve even the most critical Sustainable Development Goals. This, therefore, means that there is an increasing risk that the 2030 agenda will not be achieved. Conflicts drive 80 percent of all humanitarian needs, it reduces the Gross Domestic Product Growth by two percentage points annually on average. Against this background, there is a growing realization that stability and peace are not just general goals but also necessities that have benefits that impact communities across the globe.

Over the years, different organizations have made efforts to bring investment capital into projects or activities that benefit those in humanitarian need. These efforts have been summarized as humanitarian investing. Therefore, humanitarian investing can be summarized as capital invested in ways that measurably bring benefit to the communities faced by fragility, conflict, and violence while creating financial returns. Humanitarian investing, therefore, involves blended financing, which combines investment capital seeking risk-adjusted returns and concessionary or donor capital.

From the definition and statistics, the benefits of investing in humanitarian markets are broad and wide. First and foremost is the role of the investment in achievement of sustainable development goals. As highlighted above, countries or societies faced by fragility, conflict, and violence have a huge challenge, realizing even the most basic SDGs. Through investing in humanitarian markets, therefore, can help communities attain goals such as eliminating poverty (SDG 1), eliminating hunger (SDG 2); Quality education (SDG 4), clean water and sanitation (SDG 6), among other goals.

Other direct benefits of investing in humanitarian markets include organizations getting more responsive to the affected people’s needs. Notably, market-based products are specifically designed for the affected people. These products are therefore in a good position to meet the needs of the customers. Organizations that undertake humanitarian investing ensure the agency and dignity of the affected people. This is so since market competition places customers in a role with choice and power.

Investing in humanitarian markets also addresses inefficiencies in aid and aid-delivery systems witnessed in other aid channels. Organizations that invest in humanitarian markets insist on financial performance and as a result pressure innovation and improvement. Through investing in humanitarian markets, organizations can overcome restrictions that characterized the traditional aid systems. Through well-established systems within the organization, it can better identify the high-need communities and even facilitate their stability better as the investors’ interests align with those of the affected community.

Organizations that invest in humanitarian markets often build relationships that help them gain influence with local communities, governments and international organizations. These relationships facilitate the use of non-market strategies and future market entries. Besides, investing in humanitarian markets may be seen as means of mitigating losses and reducing risks. Summarily, investing in humanitarian markets leads to a win-win situation for both society and businesses. The society can overcome challenges associated with fragility, conflict, and violence while the businesses achieve their profits, among other goals.