The global refugee system is broken. Can innovative financing and cross-sector collaborations help fix it?

What are the challenges in the global refugee system?

More than 82 million people are displaced around the world, of whom 26 million have crossed borders and are therefore refugees. Long-standing conflict in fragile states, climate change, authoritarian regimes, and prolonged socioeconomic crises continue to fuel migration, and so these numbers are likely to increase.

As shown by Europe’s experience over the past few years, supporting refugees is challenging. On the one hand, the current system is outdated and insufficient to deal with modern drivers of migration. Designed in the aftermath of World War II, it responded to migration driven by contextual factors of the time and was therefore mostly restricted to short-term humanitarian relief (Betts and Collier, 2017). On the other hand, most states’ political will to offer solutions and support refugees is also declining. This makes it difficult to offer compassionate and durable solutions.

Durable solutions for refugees include repatriation, resettlement to a third country, and local integration. In reality, most refugees spend many years in uncertainty and very few end up accessing durable solutions. They lack opportunities for long-term local integration, which goes beyond immediate needs for food, safety, and shelter, and promotes self-reliance through access to education, employment, housing, and wellbeing resources. Meanwhile, existing public services are often fragmented or suffer from resource constraints.

How can innovative financing and cross-sector collaborations help?

While significant reforms are needed in the global refugee system overall, innovative financing and cross-sector collaborations can play a meaningful part in addressing service fragmentation and resource constraints at a more local level. Recent research by the Government Outcomes Lab and the Sorbonne Business School looked at two interesting examples in Europe – the Hemisphere Social Impact Fund in France and the KOTO social impact bond in Finland. The former is an innovative project combining social impact funding with infrastructure to provide accommodation for refugees. Meanwhile the latter focusses on employment, and was launched as one of the world’s largest and first impact bonds to support refugees.

While both projects are yet to report final results, some key learnings are already emerging:

1. Where outcomes are well designed and well communicated, they can drive collaboration and flexibility in projects. In KOTO SIB, the social impact bond model and outcomes contract were able to align diverse stakeholders from the private, public and voluntary sectors around common objectives. Shifting from inputs and activities to outcomes as the basis of payment led to more flexibility. For example, a place-then-train model was introduced, where training length and job matching were customised to suit service users’ preferences and needs. Service providers could hire coaches who shared linguistic and cultural backgrounds with service users and were hence best placed to help them, instead of fixating on qualifications or experience. While the Hemisphere Social Impact Fund was also able to bring stakeholders together from a range of sectors, it was unable to align them around shared outcomes. Its outcomes metrics were crudely perceived by delivery staff and came to be seen as a liability rather than a basis for collaboration.
2. Co-design and buy-in from both strategic and operational stakeholders are crucial for successful implementation. In KOTO SIB, local employment offices were expected to refer service users into the project. However, a lack of co-design and buy-in from these offices resulted in slow referrals during the project’s first year which impacted results. To avoid such challenges, stakeholders recommended communicating referral mechanisms clearly, and ideally reflecting these in formal contracts. Similarly, the Hemisphere Fund failed to build buy-in around outcomes among centre managers which impacted the project’s performance.
3. Refugees and migrants’ needs should guide the design of outcomes metrics and long-term solutions. While KOTO and Hemisphere provided important services to support refugees, they both could have benefited from greater attention to refugees and migrants’ needs. In Hemisphere, this could have meant designing accommodation in ways that suited the logistical needs of families, many of whom needed accommodation over extended periods of time. In KOTO, outcomes metrics could have been expanded to encompass local level impact as well as outcomes beyond employment. This could be addressed in future projects by incorporating user voice and lived experience, to gain an appreciation of individuals’ varying readiness for work, life stages, and personal preferences- all of which are linked to engagement, outcomes, and the eventual success of a project.

Building new initiatives to support refugees – what do stakeholders recommend?

New initiatives in this space are building on the learnings from earlier projects. These include the Refugee Transitions Outcome Fund in the UK (a £14 million outcomes fund to support refugee employment, housing and wellbeing) and the Refugee Impact Bond in Jordan (a $10 million project to support refugee employment, focussing on women, youth and vulnerable host communities).

Stakeholders in these projects found it challenging to design and price outcomes due to lack of relevant data sources. However, they found it helpful to start with data that was available and quantifiable and to further build on this through consultation with peers elsewhere. Close collaboration with project partners based on co-design and mutual gains, frequent adaptation, and openness to listening and learning proved fundamental. They also recommended caution around perverse incentives and cherry picking, especially when designing rate cards. Finally, they corroborated the need for more creative financing which leverages the private sector and goes beyond humanitarian relief to incorporate a development focus.