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There was some welcome news out of Addis Ababa last month after an agreement to generate financing for new sustainable development agenda was reached.
Following up on the rolling out of Sendai Framework in Japan in March this year, rich and poor countries agreed in July to overhaul global finance for development, unlocking money for an ambitious agenda to end extreme poverty, protect the environment and improve economic opportunity by 2030.
Central to the agreement is a framework for countries to generate more domestic tax revenues in order to finance their development agenda, rather than relying on foreign aid. Countries agreed on widening their domestic tax base, improving tax collection and combating tax evasion and illicit financial flows, which rob countries of revenues they can use for development.
However, in a time when many fragile countries have faced humanitarian disasters in the past few years, we know that affordable and reliable insurance is equally essential to help the world’s poor bounce back from the devastation of such extreme events and help them withstand future natural hazards.
Insurance assurances
At World Vision, we agree with a new University of Cambridge report that states that insurance deserves attention as “an essential policy instrument” in efforts to meet the sustainable development goals. The report’s primary recommendation is directed to governments, instructing policymakers to “create and maintain favorable regulatory environments that encourage the establishment and growth of low-cost insurance schemes for the poor.”
According to the 2013 Global Assessment Report there are significant economic costs to a country when you quantify the losses with low level shocks and stresses at a household level in the most vulnerable communities. Most of these expenses would be considered “uninsured losses” and fall outside the normal calculations a country would use to quantify the economic loss.
Whilst difficult to quantify, the economic effects of low level shocks on the “informal economy” of disaster prone countries, suggest that considerably more people will be pushed further into poverty unless this trend is reversed.
This is why we support the commitment to improve investment and finance into national capacity for disaster risk reduction and early warning mechanisms for natural, social and health hazards.
It is also clear that there is a need to strengthen local economies in the least developed countries so that people who are most affected by disasters can develop their own financial safety nets, engage in adaptive livelihood strategies and ultimately progress out of poverty.
Access to insurance for world’s most vulnerable
The role of the private sector and private funding in particular should be an essential component in the financing of development programmes in the developing world. It is also vital in seeking sustainable market based solutions to disaster prone countries.
Currently funds from the private sector rarely find their way to vulnerable communities which are most at risk from disasters due to the lack of financial collateral, purchasing power and poorly regulated markets.
We believe that over reliance on Overseas Development Assistance (ODA) to address the challenges of sustainable development is an unrealistic and flawed strategy. The international community involved in development and relief assistance therefore needs to seriously challenge themselves to think beyond the traditional flow of money from north to south through global institutions. Whilst this may sustain their organisations - such as Department for International Development in the UK or United States Agency for International Development in the U.S - to deliver services, it does not provide a sustainable solution for the least developed countries in the world.
Although the solutions are never simple, it is apparent that there is a close correlation between economic poverty and exposure to disaster risk. It is also clear that there is a need to strengthen local economies in the least developed countries so that people who are most affected by disasters can develop their own financial safety nets, engage in adaptive livelihood strategies and ultimately progress out of poverty.
In order for this to happen the ODA needs to provide a catalyst and or startup capital for private investment at a national level focused on strengthening local economies. Secondly, the ODA needs to encourage national governments to put in place appropriate legal infrastructure to enable investment, insurance and banking services to be made available at the local level.
Beyond Addis Ababa, World Vision seeks strong commitments from the private sector to ensure that the wellbeing of millions of children in need across the world is secured now and into the future.
