|Getting food to the most people with the fewest resources is a constant challenge for food-assistance agencies, but one that financial tools can help address.
The finance tools examined in the report have been used effectively in other sectors -- for example, to provide vaccines to developing countries -- but they have not been used in food assistance delivery. The report recommends using such instruments as call options, guaranteed bonds and tax credits to help improve assistance groups' ability to deliver desperately needed food on time and at lower cost.
The report is the result of a Financial Innovations Lab, hosted by the Milken Institute with support from the Bill & Melinda Gates Foundation, which took place in Washington, D.C., in July 2009. The participants included humanitarian and government agencies and experts from international development finance institutions, commodity exchanges, banks, foundations and research organizations.
At the Lab, participants noted that the main challenges facing global food assistance organizations fall into three categories: funding, price and supply.
Funding, which primarily comes from donations, is unpredictable. This unpredictability, combined with some donors' restrictions on the type of aid they can provide (i.e., in-kind or cash) and where their donations may be used, severely constrains organizations' planning and budgeting. The uncertainty also prevents them from taking advantage of economies of scale or stocking up on supplies when prices are low.
Volatile prices and long and difficult transportation routes, trade barriers and security concerns also make it difficult for food assistance to reach those in need.
To help break through these barriers, the report recommends a number of finance tools, including: