Moving the cursor from aid dependency to sustainable investment

Since becoming President of the ICRC in 2012, I've visited several countries affected by different socioeconomic challenges. One observation stands out as particularly important and counter-intuitive: in contexts described as “fragile”, unstable and "un-investable" by international operators, considerable economic life is unfolding, even under the most difficult circumstances.

Local entrepreneurs are deploying high-impact economic activities, micro-credits are serviced with solid repayment discipline (in particular by women’s initiatives), and local banks and other financial institutions are delivering services to communities.

While challenges are obvious, resilience is strong, with entrepreneurship deeply rooted in their communities and their knowledge of markets and economic realities widespread.

What individuals and communities are missing though are market-based solutions to scale and speed their efforts, alongside patient capital for entrepreneurial development. Businesses and investors operating in these markets need legal and political frameworks, encouraging social and environmental investments, the removal of political and bureaucratic obstacles to market access and determined support for technological innovation so that they get a chance to leapfrog development gaps.

I have always recognized the urgent need, but also the limitations and even harmful consequences of international aid in local markets. My conviction has deepened that sustainable change needs to build on collective action towards measurable impact for individuals, families and communities. This should be based on strong private and public cooperation, all while working for a shared agenda.

Sustainable development needs the promotion and support of entrepreneurship, combined with broad capacity-building efforts, technological innovation, market access and investments in infrastructure and income-generating activities.

Creating “value chains for impact” through aligned private and public actors (including development, economic and humanitarian, national and international, multi- and bilateral) is a key challenge for the international community.

The World Economic Forum’s Humanitarian and Resilience Investing Initiative and its Call to Action brings together stakeholders to mobilize $10 billion in commercial and catalytic capital to enable 1,000 local and international businesses in frontier markets to scale their operations by 2030. This initiative is an important reference point and an operating framework for an enlarged response to increasingly complex realities.

It is encouraging to see that change is happening, albeit at an insufficient scale. Multiple initiatives, based on capital investments in water, health, energy, food, shelter, digital or education are already underway. Financial instruments like funds and bonds are used to address some of the challenges of vulnerable communities, while dedicated organizations are strengthening entrepreneurship. Some foundations are enabling others to take more risk and local enterprises are being created in big numbers and expanding markets.

Like-minded investors, funders and intermediaries are pushing the boundaries of impact investment. States are enhancing legal frameworks to facilitate investments. Some countries are reviewing their refugee policies, offering opportunities to mobilize the private sector in favour of displaced communities instead of using funds for refugee camps or ethically unacceptable policies.

While impact investment in fragile economies is still a small effort compared to existing needs, a lot of successful examples demonstrate that there is a broad and growing community emerging. Increasingly, the private sector, civil society, venture entrepreneurs and capitalists are cooperating to push sustainable development beyond aid.

The multiple efforts over the past years have demonstrated how to trigger concrete action:

While realities are changing and concepts for impact investment in emerging markets become more broadly supported, adequate scale will need political, economic and financial leadership. It also needs the deliberate removal of organizational limitations, exemptions from mandate-specific restrictions and scrapping bureaucratic obstacles.

While this may look like a new complexity of its own, not acting along these lines may leave us with more difficulties, more crises, and more expensive responses in the future. The time is ripe to take decisive steps beyond proofs of concept and offer adapted, market-based solutions to those who are most marginalized. The leadership moment is now.