Forecast-based financing : transformation or a faster way to transfer funds?

In this thesis I focus on a novel disaster response and preparedness mechanism called forecast-based financing. The mechanism is linked to the changing paradigm of humanitarian response that calls for more localized and more resilience building solutions to addressing and preventing humanitarian crisis. It is also in the core of the anticipation agenda which argues that waiting for disasters to happen is not a sustainable option and that forecast data and pre-agreed triggers and actions should be used in order to prevent both loss of lives and mitigate the cost and impact of disasters. Main hypothesis is that climate related hazards to livelihoods and food security seems to be the sector where forecast-based financing could have most potential for increasing resilience and sustainability. Slow onset crises with long lead-time allow for better targeting and more variety of actions. As the lifetime of the action is longer, there is less chance of action which is in vain. Furthermore, the actions which are more localized, for example direct support to farmers, can decrease their vulnerabilities. I aim at taking a critical approach to assessing this potentiality associated with the forecast-based financing mechanism through case study. The three cases (Mongolia, Kenya, Zimbabwe) were selected from pilots implemented by the main actors: the Red Cross, World Food Programme (WFP) and Food and Agriculture Organization (FAO) and Start Network. This thesis uses a combination of evaluative and heuristic approach to qualitative case study analysis. To answer the first research question, 1) is the forecast-based financing mechanism successful in prioritization of actions in a way that best address the needs and resources of vulnerable populations, I aim at finding out if mechanism is effective (or potentially effective) in delivering impact. For the second research question, 2) are the actions sustainable and do they bring socio-economic benefits that go beyond meeting acute humanitarian needs, I will see if new pathways are found for confirming the defined hypothesis. I am using heuristic approach in terms of finding new links e.g. between actions and needs of either donors, actors or beneficiaries. I asses and analyse available reports and evaluations (secondary data) of the selected operations. I conducted eleven (11) semi-structured key informant interviews (primary data) using practitioner’s perspective for retrieving qualitative data, for further understanding and for triangulation. All key informants were affiliated to the cases. My analysis show that the potentiality for development impacts and long-term transformation of the forecast-based financing is there but it is not utilized in the cases reviewed nor is it perceived in a same way across practitioners of different backgrounds. Currently the mechanism is used more for effective response, not for addressing the root causes of vulnerability. In general, the entitlement or empowering of a person who is affected by disaster currently does not go beyond securing bridge over lean season, avoiding negative coping mechanisms or e.g. better yield or survival of livestock. Sustainability potential of the forecast-based financing seems to be currently underutilized and international funding envelopes do not offer an alternative to the humanitarian funding launched case-by-case. Most of the practitioners interviewed were clearly in favour of linking and using forecast-based financing in some way to long-term programming, thinking outside of the framework of humanitarian response, extending lead time significantly and adding positive reinforcement inputs. I argue that with a lead time that goes long in advance, towards development actions, the mechanism needs to be reframed for the donors and the sources of funding might need to be reconsidered. To implement meaningful resilience actions in slow onset cases, triggers need to be early enough and actions in two phases: 1) anticipatory and benefiting from forecast and 2) early response. At beneficiary level the actions should be geared up to better address underlying socio-economic vulnerabilities and take advantage of the long lead time.