There are over 90 million people worldwide suffering from physical disabilities. This in mind, wheelchairs, crutches and prostheses as well as people to train those in need how use them can help a lot. But this care can be hard to come by- especially for those living in war zones. But there may now be a solution.
The Humanitarian Impact Bond
Currently, the Red Cross operates in 34 countries helping 330,000 people suffering from physical disabilities. A huge task burdened by limited resources, meeting targets can be difficult. And so, in September 2017, the organisation created the “humanitarian impact bond” (HIB) to raise money for its humanitarian work.
How Does it Work?
The HIB received an initial investment of $27 million from private investors including Swiss company NewRe to build and run three new Red Cross rehabilitation centres in the Democratic Republic of Congo, Mali and Nigeria.
Rather than making fixed recurring payments to investors like in an ordinary bond, returns are calculated after five years and are based on how well the Red Cross centres perform.
Paid by the Belgian, Swiss, Italian and UK governments alongside la Caixa Foundation, if the centres perform better than other existing centres, investors will be paid a premium. However, if they do worse than expected, investors will lose money.
Will it Work?
Maybe. In the best case scenario, investors can expect an annual return of 7%. The worst case scenario however is a 40% loss on the original investment.
Despite this possible loss, investors and governmental officials seem optimistic. Firstly, the Red Cross has a reputation for creating successful rehabilitation centres. Complimenting this, as returns to investors are based on the success of the centres, the Red Cross is encouraged to be as efficient as possible and deliver good results.
If successful, the Red Cross’s impact investment experiment could help hundreds of disabled people living in war zones. On top of this, it could also pave the way to a new fundraising model for humanitarian work that could help even more of those who need it most.