Financial Resilience Around the World: Global Risk Financing Facility
Shocks--no matter their cause--are inevitable. We all know that. Through the Global Risk Financing Facility (GRiF), we strive to help vulnerable countries prepare financially for those shocks. So, they can resist, rebound, and recover from their financial impacts.
We've learned a lot in the two years since GRiF went from design to implementation. Today, virtually everything we do is designed to help lessen the impact of climate shocks, disasters, and crises.
Our first public annual report shows the importance and the value of our work. We see five key takeaways from our early experience:
- GRiF's work is relevant across borders
- We can apply what we know across sectors
- We can adapt risk financing principles to address different risks in different contexts
- Developing flexible shock-agnostic financing and systems helps quick recovery
- Financial instruments work better when they're embedded and linked to delivery systems
Dialogue in all six World Bank regions--in just two years. Countries like Sierra Leone and Malawi are developing shock-responsive safety nets. Nations like Morocco and Indonesia are establishing sovereign funds. Jamaica's government is requesting a sovereign risk transfer instrument. And countries like Bangladesh, Burundi, and Myanmar are developing risk finance solutions for their infrastructure sectors. We're also seeing technical and analytical work informing water-sector specific analysis for pre-arranging finance in advance of disasters and pandemics in Europe and Central Asia and other parts of the world.
Demand for customizing risk financing instruments across sectors. GRiF was designed to test the demand for financial solutions in development sectors beyond traditional disaster risk management and urban projects, where these have previously seen traction. Over the last two years, the GRiF Secretariat has had conversations with eight sectors, including water, transport, and energy. These discussions are just beginning but there is already a commitment to test innovative ideas that can lead to new solutions.
Applying financial solutions to new risks and contexts. GRiF has begun piloting how risk financing solutions respond to new risks. Engagements in food-insecure and FCV environments like Somalia and Afghanistan show financial solutions can help in fragile contexts. For countries, the most attractive components of GRiF financing support systems building and the preparation of financial solutions. They also strengthen the overall institutional and policy environment. Together we're enabling better disaster and crisis preparedness in low-capacity environments.
School Children in Sierra Leone. Photo Credit: Annie Spratt
Responding to different shocks and crises with flexibility. The coronavirus pandemic highlighted the importance of designing instruments and systems that are responsive to emerging shocks and crises. In Sierra Leone and Malawi, the governments were quick to reorient GRiF funds to design systems that could facilitate shock response. In Sierra Leone, contingent IDA funds held in reserve were mobilized through this. These emergency cash transfers reached vulnerable populations much faster than the regular safety net program. This demonstrates the value not only of pre-arranged finance but of pre-arranged flexible finance and systems.
Financing solutions embedded in long-term development projects. Integrating GRiF grants into larger World Bank projects is a first step in integrating financial planning in a country's core development planning processes. Often World Bank funds form direct budget lines in countries. Since GRiF requires some counterpart matching for its grants, which often comes from IDA, GRiF projects are often the first step countries take toward allocating precious IDA or national budget resources toward financial planning. Since World Bank projects typically run between three and five years, we are able to offer technical support for designing these instruments well and potentially seeing their proof of concept.
To share early experience more broadly from GRiF projects, we are launching a “Technical Talks” series this May. These will share perspectives from our early engagements through conversations with key stakeholders - donors as well as implementing project teams.
We recognize that shocks will never go away. But we want to continue to share knowledge and lessons that show how with better planning, we can respond more quickly and more effectively, to reach more people in need, when there is a need.
Photo credit: A bridge was damaged by flooding in May Pen, Jamaica. Photo Credit: United Nations Photo
Financial Resilience Around the World | Blog Series