Multilateral development banks can play an instrumental role in solutions to displacement linked with disasters, through investments in mitigation, climate adaptation and infrastructure to build communities’ long-term resilience.

Across the past decade, 65% of all disaster displacements recorded in Asia and the Pacific occurred in low and lower-middle-income countries.[1] Low levels of socio-economic development increase the risk of displacement, as poorer individuals, communities and countries have limited capacity to cope with severe or repeated disasters and with the slow-onset effects of climate change. Displacement, in turn, increases the risk of poverty and reduces development opportunities, creating a vulnerability loop with long-lasting effects.

The cost of providing internally displaced persons (IDPs) with emergency assistance is estimated at USD 20.5 billion globally.[2] In addition, IDPs’ ability to work is often compromised upon displacement, at least temporarily. With 9.5 million people likely to be displaced by disasters in any given year across Asia and the Pacific, USD 275.5 million could be lost for every day that they are unable to work.[3] Of course, the impacts of displacement on development also go beyond financial costs and losses: displacement has negative consequences for the health and education of affected individuals and can hinder human development and future opportunities for growth.

The Internal Displacement Monitoring Centre (IDMC) and the Asian Development Bank have conducted joint research to identify how multilateral development banks (MDBs) can best support solutions to internal displacement linked with disasters and climate change.[4] The consequences of displacement can threaten to slow down or even reverse socio-economic development. Investing in preventing displacement and finding solutions to displacement is therefore clearly aligned with MDBs’ mandate, and development financing can be instrumental in securing enough resources to address the issue in the most sustainable and cost-efficient way.

Identifying displacement as a development priority

For MDBs to fund displacement-related initiatives, displacement must first be identified as a development priority by the affected country. In situations of significant displacement or displacement risk, a national approach could be set out in a country’s National Development Plan. In other contexts, the inclusion of displacement needs within sector plans, medium and long-term climate adaptation strategies, and national disaster risk management plans can help guide action and finance.

In some countries, displacement-specific national policies, strategies or plans have been developed; they set out a clear path for addressing displacement across sectors in a coordinated and coherent approach. In Asia and the Pacific, many countries such as Fiji, Vanuatu, India, Pakistan, Bangladesh and the Philippines already consider displacement in their national policy architecture, and this can serve as the basis for investments by MDBs. In countries where displacement-specific or displacement-inclusive policies and frameworks are not yet in place, MDBs can provide technical assistance to develop guidelines and frameworks to address specific displacement drivers, impacts and risks.

Financial support for displacement-related priorities should be based on an estimation of the current and future impacts of displacement, identifying funding needs, as well as potential return on investment in terms of development outcomes. For a project to be funded by MDBs, it must demonstrate its viability in addressing these identified needs and impacts effectively. However, there are many data gaps on the scale and impacts of internal displacement linked with disasters and climate change, particularly longer-term impacts on socio-economic development.

A 2021 IDMC assessment covering the Asia and Pacific region found that 32 out of 65 countries were not reporting any information on the number of people pre-emptively evacuated or displaced during and after disasters, the number of houses destroyed and the duration of displacement. Data gaps often hamper the ability of governments to create a compelling business case for investments in displacement prevention and finding solutions to displacement. MDBs can support governments in obtaining the necessary information through investments in national data systems, including statistical offices, technical assistance, dedicated research grants or MDB-led analyses.

Once these requirements are met, countries can use development finance from MDBs to reduce the risk of displacement, respond to the immediate needs of displaced people and host communities, and invest in longer-term planning (in areas of origin or destination) to support lasting solutions. This can take various forms, including structural support for physical infrastructure, non-structural support for service delivery and the development of policies.

How MDBs’ development-related support can address displacement

One of the most effective ways to address disaster-linked displacement is to invest in limiting its root causes, including the destructive impacts of sudden-onset disasters on housing and other infrastructure, and the deterioration of livelihoods due to the effects of climate change. MDBs can support these efforts by funding governments’ initiatives on climate change mitigation and adaptation, disaster risk reduction or planned relocation.

MDBs have extensive experience in investing in disaster risk reduction and strengthening the resilience of communities and systems to hazards and shocks; over 45% of all projects financed by the Asian Development Bank in 2023 had disaster risk management features. This provides entry points for the inclusion of measures to reduce displacement and invest in the resilience of vulnerable communities through initiatives around hazard reduction. These include flood risk and river erosion management, or improving agricultural production through irrigation and the introduction of climate-resilient crops. Other relevant measures could include enabling access to markets by improving roads and supply chains, finance and risk transfer through credit and insurance schemes, and risk governance through strengthening building codes, compliance and early warning systems.

As the governments of lower-income countries make a stronger case for these types of investments, there is an opportunity to increase their volume and quality. Forecast-based financing mechanisms can also be used to mitigate the risk of displacement and its negative consequences on people and development. These work by combining data and weather forecasts to predict extreme weather events and their impacts, and automatically releasing money for emergency response in advance.

Where displacement has been prioritised as a development issue, governments can draw on their allocations of regular market-based loans, or for lower-income countries, concessional loans. Those in need of more concessional support can use grant resources, albeit recognising that these are limited. Given these constraints, integrating displacement considerations within sector projects offers multiple benefits, in terms of addressing root causes and reaching displaced people and those at risk of displacement.

Large-scale infrastructure projects, urban development projects (including affordable housing and sustainable urban planning), and investments in the healthcare and education sectors are pivotal for the long-term resilience of communities to climate change and natural hazards. For instance, people with higher incomes and better housing conditions were found to be less often displaced by floods in Jakarta, while people with no education were found in higher proportion amongst those displaced for years after the 2015 earthquake in Nepal. Socio-economic development can contribute to delaying or preventing displacement by providing people with more coping options and contribute to the sustainable integration or return of already displaced people. In addition to regular country allocations, thematic or special funds are available from MDBs to support solutions, including relocation and facilitating voluntary and sustainable resettlement to safer areas.

Lending which is conditional on policy changes being made can provide general budget support to public sector borrowers, helping countries facing a financing gap in their annual budget. The loan (or grant) is disbursed only when the borrower completes policy reforms or actions that have been agreed upon. While the primary focus of a policy-based loan or grant is unlikely to be displacement, displacement can be addressed as part of wider resilience-strengthening reforms. However, there are inherent constraints in providing speed or flexibility to regular instruments like programme loans. These limitations can impede timely and effective responses to displacement issues, highlighting a need for more flexible and adaptable financing solutions.

MDB financing after disasters

MDBs provide immediate liquidity through the rapid disbursement of funds to support basic services following a disaster. They also play a critical role in financing the reconstruction of homes, community facilities and infrastructure, fostering long-term resilience in affected communities. The World Bank’s International Development Association (IDA) includes the Crisis Response Window (CRW), a fund to support countries with immediate funding for exceptionally severe crises. After the 2015 Gorkha earthquake in Nepal, the World Bank invested in restoring 55,000 affected houses in targeted areas with multi-hazard resistant core housing units and enhancing the government’s ability to improve long-term disaster resilience.

The EBRD (European Bank for Reconstruction and Development) also dedicated funding for the response to the 2023 earthquakes in Türkiye, including 600 million euros in credit lines to local banks for businesses and individuals directly affected by the earthquakes, as well as new lending to companies participating in recovery and reconstruction efforts in the area. By investing in the reconstruction of sustainable infrastructure and supporting the economy to preserve human capital, livelihoods and jobs in the affected cities, it is hoped that this project will limit the duration of displacement and contribute to the return and reintegration of IDPs.

Next steps

Multilateral development banks have been, and can increasingly be, instrumental in addressing the root causes of displacement, supporting affected communities and investing in longer-term solutions. MDB’s diverse funding mechanisms can provide not only immediate funding for response and recovery in the aftermath of a disaster but also play a critical role in the reconstruction of more resilient homes and infrastructure, reducing the risk of future displacement. Investments in climate change mitigation and adaptation, disaster risk reduction, urban development, healthcare, education and livelihoods are pivotal for the long-term resilience of communities to climate change and disasters.

In order to enable MDBs to take a more active part in solutions, a shift is required in the way internal displacement is framed, from a purely humanitarian perspective to a development lens. This shift must be reflected in national policies, budgets and plans. MDBs can help by raising awareness of the need to include displacement in development planning in affected countries and supporting better national data systems and displacement-inclusive policies. They can be influential in guiding governments towards the most inclusive, comprehensive and efficient approaches to address displacement as a development issue.

 

Christelle Cazabat
Head of Programmes, Internal Displacement Monitoring Centre
christelle.cazabat@idmc.ch

Steven Goldfinch
Senior Disaster Risk Management Specialist, Asian Development Bank
sgoldfinch@adb.org

Faisal Abdul
Consultant, Asian Development Bank
aabdul.consultant@adb.org

 

[1] Analysis based on data from IDMC’s Global Internal Displacement Database www.internal-displacement.org/database/displacement-data/

[2] IDMC (2021) Unveiling the cost of internal displacement bit.ly/cost-internal-displacement

[3] IDMC (2022) Disaster Displacement in Asia and the Pacific bit.ly/disaster-displacement-asia-pacific

[4] IDMC and ADB (2024) Harnessing Development Financing for Solutions to Displacement in the context of disasters and climate change in Asia and the Pacific bit.ly/development-finance-displacement

 

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