Following the Refugees: New Global Concessional Financing Facility

October 4, 2016

  • Middle income countries currently host around six million refugees worldwide but struggle to find affordable and sustainable means of coping with the additional costs associated with an influx of refugees.
  • A new global facility aims to close the financing gap by providing a source of long term concessional financing for middle income countries worldwide hosting large numbers of refugees.
  • The Global Concessional Financing Facility will expand to a global scale a facility launched earlier to support Jordan and Lebanon, to ensure there is a coordinated international response to refugee crises in middle income countries.

Imagine living in a neighborhood where, during a fire, most of the houses burned down, except for yours. You open your doors to your neighbors and they come to stay with you, first for months, then years—which is fine, except where once you could manage your household expenses, now you are struggling to pay the extra bills.

If you yourself earned less, you might qualify for federal or state financial aid to help look after your guests but, although you are spending much more, your income is still much the same, so you don’t get any help.

This is the situation in which middle income countries such as Jordan, and Lebanon find themselves six years into the Syrian crisis. Middle income countries currently host roughly six million refugees across the globe, but many struggle to find affordable and sustainable means of coping with the additional costs associated with an influx of refugees. On Tuesday, September 20, at the Leaders’ Summit on Refugees, United States President Barack Obama announced the launch of an international initiative to support middle income countries around the world hosting large refugee populations. The very next day, a conference was convened on the sidelines of the United General Assembly for government leaders, ministers and heads of international organizations to discuss the potential of the Global Concessional Financing Facility (GCFF).

“We want to use this as a platform to have a coordinated, international response to refugee crises wherever they may occur,” announced World Bank Group President Jim Yong Kim, who co-chaired the event with Jan Eliasson, Deputy Secretary-General of the United Nations. The GCFF expands to a global scale the Concessional Financing Facility for the Middle East and North Africa (MENA CFF), which was launched to support Jordan and Lebanon, the two middle income countries that host the largest number of refugees in relation to the size of their populations. The GCFF is a key element of Global Crisis Response Platform, developed by the World Bank Group to enable more systematic and scaled-up support in the face of a range of crises by bringing together knowledge, resources, and current and emerging financial tools under a single umbrella. For low income countries, the Platform aims to significantly increase the crisis response capacity of the International Development Association (IDA), the Bank’s arm for the world’s poorest countries.

“It is revolutionary because, for the first time, we are following the people in need, “said Kristalina Georgieva, European Commission Vice-President for Budget and Human Resources, one of the panelists at the event. “A middle income country that is hosting millions of refugees deserves subsidized credits,” added Georgieva, “it is just, and it is a way for a global public good – the hosting of refugees – to be recognized by the international community.”

The MENA CFF aimed to fill the financing gap for Jordan and Lebanon. Through the innovative use of grants from donor countries, whereby US$1 in grants is leveraged to create about US$4 in concessional financing, the facility is providing vital longer term and low cost financing. In July, three months after receiving initial pledges of US$140 million in grants, the CFF approved funding to support two projects in Jordan -- amounting to US$340 million in concessional financing – that, subject to the approval of their implementing organizations, will provide work permits for 130,000 Syrian refugees and reinforce water infrastructure in communities hosting refugees. To prepare for future crises, and to make sure there is no delay in support to affected countries, the GCFF aims to help middle income countries address refugee crises, including protracted situations, wherever they occur.

By offering longer-term finance, the CFF also complements and bridges the gap with humanitarian assistance, which by necessity must focus on short-term, emergency needs.  “We have never had long term financing for education and jobs, which is something we, humanitarian organizations, have been after for a long time,” said United Nations High Commissioner for Refugees, Filippo Grandi, another of the panelists at the event. Using an open platform that brings together humanitarian organizations, multilateral development banks, and both benefiting and supporting countries, the GCFF will ensure there is a coordinated international response to refugee crises in middle income countries world-wide.

The new global facility will remain focused on providing support to Jordan and Lebanon, with a goal of raising US$1 billion in grants over the next five years explicitly for the two countries. The GCFF seeks to raise an additional US$500 million in grants over the next five years to be ready to help middle income countries address future refugee crises. In total, the facility seeks to raise US$1.5 billion to be able to provide US$6 billion in concessional financing. At the Leaders’ Summit on Refugees, the United States pledged at least US$50 million toward that goal, with Japan pledging US$100 million, Sweden US$20 million, and Denmark US$15 million.

“We are reaching a stage where we can say we are taking historic steps,” said UN Deputy Secretary General Eliasson, “in the direction of combining humanitarian and development action to address humanitarian crises in the short term while also helping to build societies over the long term.”