In one year, the whole system of humanitarian relief has changed

One of the best stories in the world today has been the steep drop in extreme poverty – more than 1 billion people lifted themselves out of poverty in the past 15 years alone. For the first time ever, the World Bank Group projected that the percentage of those living in poverty fell under 10% last year.

But the goal of ending extreme poverty in the next 15 years, while still achievable, faces major threats. Among them are the sluggish global economy, and the increasing number and severity of extreme weather events and other major disruptions in weather patterns due to climate change. And, most critically now, the goal of ending extreme poverty is threatened by the growing number of people who are forcibly displaced from their homes: 20 million refugees and millions of internally displaced people.

Governments, multi-lateral development organizations, civil society and faith-based groups all have critical roles to play in finding solutions to this humanitarian crisis. But what about the private sector? If we are going to be successful in ending extreme poverty, in providing more opportunities, especially for young people and women, and helping prevent conflicts from happening in part by creating jobs, then the private sector will have to play a central role.

Changing the way humanitarian assistance works

At the World Bank Group, we are now engaging much earlier in humanitarian emergencies, analysing the greatest areas of risk around the world to prevent crises, and funneling more financing into fragile states and countries that could fall into fragility.

This is a sea change in one year. A year ago, for instance, humanitarian groups, which save countless lives in emergencies, were mostly focused on one great need: securing more funding from donors to properly address the crises.

Today, those groups, affected countries and donors, the World Bank, other multilateral development banks, and the entire UN system are rewriting the codes of action and cooperation. Instead of the old way of relying mostly on donor grants to solve such global risks, the focus now is expanding financing, which will include several sources: donors’ assistance, increasing domestic resource mobilization from developing countries, stopping illicit financing flows, and leveraging private sector investment.

The multilateral development banks are fully committed to a collective response to the forced displacement crisis, including joint action on data and evidence, country-level engagements, and innovative financing mechanisms.

These commitments require us to update existing financing tools and adopt new approaches to raising resources. Even struggling countries can, with help, improve domestic resource mobilization.

The strategy to is to leverage the billions of dollars now invested in developing countries into trillions of dollars that will allow us to have an impact at a much larger scale. On that point, the private sector will be vital.

In order to leverage private investment, we’re committed to expanding risk financing, debt guarantees, and public resources.

IFC, a member of the World Bank Group that focuses on private sector development, has done much to promote private investment in fragile and conflict-affected countries – and will do much more in the years ahead. Over the past three years, IFC has invested more than $2 billion in fragile and conflict affected states, supporting private-sector led projects that are generating power, restoring telecommunications, increasing food supply, and creating jobs for women and young people.

Investing in challenging environments

But we should not underestimate the difficulty of the task to encourage private investment in challenging environments. We must not only provide knowledge from our experience in working in these countries, we must also provide financing arrangements that lower the risks for private investors and give them the necessary measure of comfort.

It can be done. Earlier this month, for example, the IFC and Lebanon’s Bank Audi jointly invested $375 million in one of Iraq’s leading power companies – Iraq’s Mass Global Energy Sulimaniya – to expand a power plant in the Kurdistan Region and build a new one near Baghdad. Kurdistan has experienced an influx of more than 1 million Iraqis fleeing violence from the Islamic State, as well as 250,000 Syrian refugees. The project is expected to provide electricity to about 3 million people in Kurdistan and deliver about half of the electricity in Baghdad.

Most fragile states need a wide array of support from humanitarian groups, development organizations, and donors. But they also need a strong private sector to create jobs – and therefore hope for a better future.

Fragile states are not prisoners of their history. With the right reforms, sustained support, and strong private sector investments, these countries have every chance to lay the foundation for growth, stability and lasting prosperity.

This is part of a series of articles linked to the 2016 World Humanitarian Summit, including:

Six smart ways to educate refugee children
Rethinking emergency aid and development funding