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Financing for Protracted Displacement in the Syrian Refugee Context in Jordan - January 2022

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Action Against Hunger
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For over a decade now, Jordan has been host to large numbers of Syrian refugees fleeing conflict and persecution in neighbouring Syria. According to United Nations High Commissioner for Refugees (UNHCR), 663,000 Syrian refugees are registered in Jordan, making it one of the countries with the highest ratios of refugees per capita in the world.

With durable solutions not in reach for the vast majority of Syrian refugees, attention has increasingly focused on how the response can shift to a more sustainable model strengthening future prospects for durable solutions and supporting refugees’ socio-economic inclusion or self-reliance.

This case study critically examines the existing displacement financing architecture in Jordan to explore how it can better respond to medium- and longer-term priorities and needs of the Syrian refugee displacement context and support pathways to durable solutions. The case study analyses the key trends and challenges in displacement financing, using the thematic area of economic opportunities as an analytical lens to identify key gaps and opportunities. It draws on the perspectives of diverse actors, including bilateral and multilateral donors, International Financing Institutions (IFIs), United Nations (UN) agencies, international non-governmental organizations (INGOs) and local non-governmental organizations (NGOs), private sector actors and sectoral experts. Finally, the case study offers recommendations and areas for consideration for stakeholders supporting pathways to durable solutions in the Syrian crisis response.

This study finds that despite some attempts to promote more coherent, joined up and longer term solutions – for instance the establishment of the Jordan nexus task team - and some specific financing instruments designed to support pathways to medium to longer term solutions, such as European Union (EU) Regional Trust Fund in Response to the Syrian Crisis (EUTF Madad), France’s Minka Fund and the Global Concessional Financing Facility (GCFF) – the short-term nature of the funding reaching displacement affected communities inhibits the development of medium to long term programming and approaches. A number of recommendations are made on how financing modalities could better support pathways to durable solutions.

While Jordan offers a relatively favourable protection environment, the outlook for durable solutions is becoming more constrained, particularly after COVID-19. Jordan initially adopted a welcoming policy toward displaced Syrians, however this has become more restrictive over time and the question of local integration is complex and sensitive.

The country has been at the forefront of the debate on global burden-sharing in refugee responses and pioneered new approaches, most notably the 2016 Jordan Compact. Improving access to livelihoods and economic opportunities for Syrian refugees has been a major focus of the response since the signing of the Jordan Compact.
Despite this, major structural, legal and regulatory barriers remain that hamper Syrian refugees’ ability to access livelihoods, particularly for women, and exacerbate their vulnerability. The medium to longer term outlook in terms of economic opportunities for Syrian refugees in Jordan is uncertain.

The legal and policy environment for displacement financing for Syrian refugees has been significantly shaped by the Jordan Compact. With the expiration of the Compact, there is a pressing need for dialogue with the government on what comes next. There are pressures militating against the development of a new Compact. Nevertheless, such a dialogue offers an opportunity to build on lessons learned and invest further in creating an enabling legal and policy environment.

Of all the main sources of domestic and international resources available to potentially support pathways to durable solutions in Jordan, including domestic resources, remittances, Official Development Assistance (ODA), and private financing, ODA is the most significant. Despite Jordan’s relatively developed economy, ODA is a significant source of funding and donors appear to be motivated as much by geopolitical concerns as developmental objectives. Jordan’s economic and fiscal outlook has taken a severe hit from the impacts of Covid-19, which has put additional pressure on public services and infrastructure already under considerable strain since the Syrian crisis.

While levels of ODA to Jordan are relatively high compared to GDP and other protracted forced displacement contexts, overall, volumes of ODA supporting Syrian refugees specifically have declined year on year since 2016. Support to displacement affected communities remains heavily reliant on short-term humanitarian funding sources, which are declining. Short-term and annual funding cycles, and rigid distinctions between humanitarian and development funding sources prohibit finding pragmatic solutions to problems.

Concerns around aid dependency and a desire to mobilise new and additional sources of finance to support displacement affected communities have led to growing interest in the use of blended finance in Jordan. For several years, blended finance has been used to ‘de-risk’ lending to Syrian refugee entrepreneurs through micro-finance institutions. Increasingly, the use of blended finance is expanding to support Small and Medium Sized Enterprises (SMEs) that create positive impacts in refugee and host communities. Barriers to blended finance initiatives include the restrictive regulatory and right-to-work environment for refugees, and challenging economic climate.

Another form of blended finance is the Refugee Livelihoods Development Impact Bond (DIB) – the first of its kind to specifically target refugees – and is about to be launched in Jordan. Bringing together new funding partners with a rigorous results-based program mechanism, the Refugee Livelihoods Impact Bond is essentially a payment for results model that offers a premium to impact investors. The design of the DIB offers some advantages for the implementing partner and outcome funder. Despite the long lead-in, stakeholders are optimistic about the potential of the DIB. Beyond the programmatic results which will take some years to be known, testing a new model is important in itself to generate learning about its potential as an additional tool in the displacement financing toolbox.

With a growing focus on attracting private investment into refugee-owned, -led or -supported businesses in Jordan, social impact investors have been identified as those most likely to be the early movers to intentionally invest in support of vulnerable communities. Several notable earlystage initiatives are looking to mobilise private investment for social impact to the benefit of Syrian refugees in Jordan but are taking time to get off the ground. To further support impact investment initiatives, partnerships between humanitarian actors and the investment community will need to be developed and expanded. Challenges remain around matching expectations of investors with opportunities in the market, but several initiatives are working to overcome these.

A number of challenges stand out in adapting financing to better meet medium to longer term needs and support economic self-reliance. Firstly, the numerous legal, regulatory and policy barriers faced by Syrian refugees limit what financing can achieve. Secondly, limited resources and shrinking aid budgets mean hard trade-offs must be made and donors are under pressure to prioritise acute needs over medium-term approaches. A third challenge relates to the set-up of the aid system itself, in which rigid distinctions between humanitarian and development funding sources inhibit pursuing comprehensive appropriate longer-term approaches.

Nevertheless, in Jordan financing is addressing these challenges in a number of ways. Firstly, packages of financing have helped to incentivise and influence policy reform to create a more enabling environment for economic opportunities for Syrian refugees. While there is a limit to the influence financing can exert, there are opportunities for international financing to be used to improve economic prospects for Syrians in the short to medium term. Debt financing may limit the leverage financing can exert but enables the mobilisation of far greater volumes of resources than grant funding could provide. Financing to promote economic development in refugee-hosting areas is essential but must be coupled with refugee-specific investment.

In a context of limited resources, common agreement is needed on priorities and sequencing of investments informed by evidence. But when it comes to supporting economic self-reliance for Syrian refugees and host communities, there is a lack of strategic direction and clarity about which programmatic approaches to invest in and the sequencing and prioritisation of investments. Shortterm assistance should run in parallel with longer-term approaches, requiring different funding sources to be used in a complementary way. Effective support to economic opportunities for Syrian refugees requires both top-down and bottom-up approaches, working on both supply and demand sides of the economy. Funding decisions appear to be only partially based on evidence of which interventions have the most impact in achieving economic self-reliance for Syrian refugees and vulnerable Jordanians.

Specific financing instruments designed to address forced displacement and bridge the silos in the aid system are having some success in supporting positive medium-term outcomes. Yet, there is a need to be realistic about the duration required for financing to support economic self-reliance. ‘Nexus-oriented’ funding provided through the EU Madad Trust Fund and the Minka Fund helps to reinforce coherence between short-term and longer term approaches. Supporting the inclusion of refugees in national systems appears to be a more sustainable and cost-effective approach in the longer term, but hard evidence is lacking.