Andrej Verity, who works at UN-OCHA, wrote a thought provoking and enjoyable post earlier this week about alternative crowdfunding and Kickstarter-type mechanisms for distributing aid funding to beneficiaries during disaster response.  I posted a few short thoughts in the comments section of the post, but thought it’d be good to expand on them a bit.  Hopefully these observations can add to the discussion Andrej started, since it’s an important one.

During the last cyclone that hit Samoa in December 2012, I saw estimates that the damage totaled between $100-200 million U.S. dollars.  That’s about a third of Samoa’s GDP, and I was told it knocked out ten years’ worth of investment and development in one serious storm.  So finding mechanisms and processes for distributing funding efficiently, and in the right modality (loans, grants, equity investments, etc.), in places like Samoa, whose economy can be drastically impacted by natural disasters, is important.

The two things that come to mind when thinking about what this would look like in practice is capacity on the recipient side to manage and audit something like what Andrej describes, and some thoughts on economic questions that a Central Bank might have about this.

The capacity side of things was underscored when I mentioned open source software to an IT analyst in another government agency in Samoa earlier this week and he gave me a withering look before (sarcastically) asking if I planned to stay around to maintain it.  In many cases the human resources to keep software and equipment running on a day-to-day basis are stretched, so having a strategy for backstopping software management and databasing during the emergency (such as activating the Digital Humanitarian Network), then having a process developed cooperatively with the ministry responsible for disaster response management for making use of the data after the response phase ends, is important.  In Samoa this is the Ministry for Natural Resources and Environment.

Along with software maintenance is the auditing of funds – I could imagine the Ministry of Finance would be weary of having to audit crowdfunds, peer-to-peer transfers and micro loans unless the donors providing the funds were willing to develop auditing processes that are appropriate for decentralized fund distribution.  Having an auditing process in place that is purpose-built for crowdfunding and peer to peer transfers before a disaster hits can save a lot of headaches later for both the recipient government and the donors.

The other issue, how these kinds of programs would affect the macroeconomics of the country, is something the Central Bank would likely want to be looped in on.  Are these funds above and beyond the funding that will pass through the disaster response ministry?  If so, since they’re going directly to beneficiaries and into the commercial economy, and not being spent on things like rebuilding, are they structured so that they replace estimated losses on things like personal loans, or are they meant to be spent on goods and services?  These questions are important since sudden, large influxes of cash can have negative effects on a currency (e.g. Dutch Disease) and create inflationary pressure.  Working with central banks to develop a strategy for managing crowdfunding, micro-investment and peer-to-peer money transfer can help prevent negative longer term macroeconomic effects of aid after disasters.  The key is making sure the central bank is aware of what’s coming so that funds are distributed cooperatively, with the central bank and donor agency working together.

Setting aside the technicalities, the importance of active cooperation between donors and beneficiary governments is key.  I recognize this is easier said than done, but as folks across the spectrums of UN, host government, and civil society keep looking for innovative ways to respond to emergencies, figuring out which questions to be asking each other can help keep us out of our silos so that all the stakeholders are engaged in the process of innovation, maximizing the benefits for populations effected by disasters and emergencies.

Update: This post from the World Bank is apropos and worth having a look at.

Update II: This guidance note from the FAO on cash transfers in emergencies is good too.