Forecast-based Financing: Developing triggers for drought

Abstract: Forecast-based Financing (FbF) is a rather new concept within the humanitarian world, which enables actors to act before a likely disaster, based on forecasts. In this study, two scoping studies and five interviews with FbF experts were conducted to find out how to develop useful triggers for drought. The study finds that the triggers must be contextualized, as drought differ a lot across the globe. To accommodate the complexity of drought both meteorological data, as well as societal data, such as market analysis should be used as triggers. Impact and vulnerability analyses should also be conducted and integrated when developing the triggers since they are key for the understanding of where the hazard potentially can evolve into a disaster. FbF requires extended cooperation between the stakeholders and therefore, how best to include the stakeholders in the project and enhancing their ownership of it must be considered. Despite the promising future of FbF, there are still some challenges that must be overcome when developing an FbF drought project. First, the lack of a universal drought definition causes confusion and potential problems for the collaboration in a project. Secondly, there is a lack of data in many of the settings where FbF is being implemented, which makes it difficult to develop useful and accurate triggers.