DISASTER RISK FINANCING MODEL

Coronavirus a wake up call for Kenya's disaster response

I propose a four-tier financing framework to harness financial resources to prevent, prepare, respond and recover from disaster impacts.

In Summary

• Moving forward, with the high frequencies, complexity, and destruction severity of disasters, a holistic model must be at the centre of this interconnected challenge.

•  Such a model would involve a proactive and comprehensive financing framework aimed at mobilising funds to strengthen institutions 

Kiambu Governor James Nyoro with Kenya Covid-19 Emergency Response Fund officials and Kiambu county officials receive donations worth Sh20 million from Capwell Industries Ltd in Thika on Wednesday, April 29, 2020.
DONATIONS: Kiambu Governor James Nyoro with Kenya Covid-19 Emergency Response Fund officials and Kiambu county officials receive donations worth Sh20 million from Capwell Industries Ltd in Thika on Wednesday, April 29, 2020.
Image: JOHN KAMAU

 Covid-19 Emergency Response Fund chairperson Jane Karuku recently said everyone has a role to play to make the war on Covid-19 a success.

This rallying call is appropriate and timely to rope in as many people and organisations to mobilise resources needed to contain coronavirus and cushion the poor.

There has been a positive response from individuals and organisations in this regard. According to the fund management,  both cash and in-kind donations were Sh1.3 billion as of late April. This is commendable.

But what we are witnessing is just one case of a health disaster. With changing climate scenarios, burgeoning populations and advancing technologies, we are likely to get other forms of health-related disasters.

So how will we finance such disasters? In disaster risk financing, the emergency response fund falls in the category of post-disaster risk financing. It's called donor assistance financing instrument, which has been widely used across the globe.

When a phenomenon overwhelms an entity and communities, it is a common practice to seek support. However, this emergency aid business model is unsustainable, reactionary, uncertain and dependent on media coverage. The louder the media, the more the aid.

This requires us to re-examine and evaluate whether our disaster risk financing approach is fit for our purposes.

There are other better alternatives that Kenya should explore in preparing for, responding to, and recovering from disasters.

HOLISTIC RESPONSE

Moving forward, with the high frequencies, complexity, and destruction severity of disasters, a holistic model must be at the centre of this interconnected challenge.

Such a model would involve a proactive and comprehensive financing framework aimed at mobilising funds to strengthen institutions and enhance resilience. This will see integration and investment in disaster risk reduction in the counties development plans and at the national government.

After all, disaster risk financing represents value for money because the World Bank Group estimates that for every dollar invested, between four to seven dollars are saved in the long run.

PROPOSED MODEL

I propose a four-tier financing framework to harness the much needed financial resources to prevent, prepare, respond and recover from disaster impacts.

The first tier is made up of individuals and organisations or, in simpler words, the households and Nyumba Kumi initiative.

The second tier involves the ward and subcounty administrative units, while the third tier is comprised of the counties and the national government.

The last is the extra tier and it incorporates the international community such as the World Bank Group, International Monetary Fund, the African Development Bank, and the World Health Organization, among others.

At the individual level, there is need to introduce the National Disaster Insurance Fund akin to the National Hospital Insurance Fund. Other interventions at that level include the formation of Vulnerability Risk Cooperative Societies, which could now have been useful in executing the Covid-19 cash transfer programme currently being disbursed by the government.

Also, the establishment of crop/livestock/fish government-subsidized index- insurance packages are vital for the country to cushion farmers during adverse weather conditions.

At the organisational level, introduce Disaster Cooperation Tax for profit-making organisations and mandatory budgetary appropriation to disaster vote by not-for-profit institutions. Such a fund should not be accessed at the pleasure of an entity’s management.

Expenditure would be assessed by a higher authority — in the line function — and in consultation with the yet to be created Disaster Risk Management Authority of Kenya. This arrangement would minimise any abuse of the fund.

Ward and subcounty units will make disaster budgetary allocations programmes and enhance the established emergency funds provision and donor assistance.

It is vital to note that some of these proposals may require amendments to the relevant Acts of Parliament. Devolved units will also need to establish county disaster boards just as we have County Education Boards to coordinate and execute mobilisation of resources and other disaster activities in the devolved units.

The possible funding sources will include taxation, budgetary provisions and reallocations, risk transfer mechanisms, contingent loan facilities, reserves, national government support and donor assistance.

The national government has been the re-insurer of the last resort in an event of a disaster and the laws of the land do not explicitly state the responsibility of the government under such circumstances.

However, the proposed model provides an opportunity to execute a risk assessment and evaluate the responsibility of the government. The national government will institute legislative amendments to implement the proposed disaster risk financing model by establishing Disaster Risk Management Authority of Kenya (DRMAK), the National Disaster Insurance Fund, the County Governments Disaster Boards as well as modification of other laws such as NG-CDF, NGAAF and CRA, among others.

Disaster funds for the national government will come from budget contingencies, risk transfer mechanisms, contingent loans, budgetary reallocations, tax increase, donations, external and domestic debts and a national reserve fund.

The operationalisation, coordination and policy decisions will be overseen by DRMAK a complete departure from the present capital strapped and fragmented disaster institutions such as the National Disaster Operation Centre, the National Disaster Management Unit and the National Drought Management Authority.

The extra tier is made up of the international community which has been instrumental in supporting disaster missions in various parts of the world.

This tier will only be linking with the national and county governments in harnessing disaster funds. However, the DRMAK will be coordinating the relevant areas and organisations to enhance the seamless flow of information, smooth operational activities and prevent duplication.

It would also help to better target vulnerable and exposed geographical areas, individuals and organisations.

For more interaction on this, link with Dr. Oseno Ben and Prof. John Obiri via [email protected] / [email protected]

Osen teaches at Masinde Muliro University of Science and Technology, School of Business and Economics