Consultancy on Producing Financing (Re)integration: Area-Based Financing Pathways in the East, Horn and Great Lakes Regions of Africa Report

WHO IS THE DANISH REFUGEE COUNCIL?Founded in 1956, the Danish Refugee Council (DRC) is a leading international NGO and one of the few with specific expertise in forced displacement. Active in 40 countries with 9,000 employees and supported by 7,500 volunteers, DRC protects, advocates, and builds sustainable futures for refugees and other displacement-affected people and communities. DRC works during displacement at all stages: In the acute crisis, in displacement, when settling and integrating into a new place, or upon return. DRC provides protection and life-saving humanitarian assistance; supports displaced persons in becoming self-reliant and included in hosting societies; and works with civil society and responsible authorities to promote the protection of rights and peaceful coexistence.About ReDSSReDSS is a secretariat working on behalf of 14 international and national NGOs working on forced displacement in the Horn of Africa. We were established in 2015 in response to a desire by the NGO community to be more proactive in shaping durable solutions policy and programming in the region. Our team works at both a regional and a country level and focuses on the translation of evidence and research into policies and programmes that can better deliver for displacement-affected communities. We do this through a range of activities, including convening key stakeholders at multiple levels to produce consensus around collective actions that can be taken; supporting new evidence generation through commissioning and undertaking research and analysis; and building the capacity of key actors through delivering training and developing tools and guidance. We do not implement programmes directly, and by maintaining this distance are better able to play a neutral role across the system. Since ReDSS was established in 2015, we have played a critical role in shaping durable solutions narratives in the region, building on our initial work in Somalia and expanding to Ethiopia and Kenya which has allowed us to work on a wide range of policy and programming processes.PURPOSE OF THE CONSULTANCYThe purpose of this study is to generate practical, evidence-based insights on how to finance sustainable (re)integration outcomes for forcibly displaced populations and host communities at the local level in the East, Horn, and Great Lakes (EHAGL) region. While national policies and frameworks for durable solutions have advanced, there remains a critical gap in understanding how these commitments can be effectively financed and implemented within specific municipalities and communes where displacement is experienced and solutions are delivered.The study will adopt an area-based approach, focusing on selected sites in Ethiopia, Somalia, and Burundi, namely Jigjiga City, Baidoa City, and Rumonge, to examine how different financing sources interact within local systems. These locations reflect diverse displacement contexts, including urban, protracted, and returnee settings, and provide a basis for comparative analysis across varying institutional, economic, and financing environments.Specifically, the study aims to:* Assess how financial resources including domestic public financing, humanitarian and development assistance, diaspora remittances, and private sector investmentsare mobilized, allocated, and utilized within displacement-affected localities; * Identify gaps, misalignments, and bottlenecks in the flow and coordination of financing at the municipal and commune level; * Analyze the extent to which financing is aligned with local priorities, systems, and capacities, including planning, budgeting, and service delivery mechanisms; and * Develop practical, area-based financing pathways that demonstrate how different sources of financing can be better aligned, sequenced, and leveraged to support sustainable (re)integration outcomes over time.By grounding the analysis in specific local contexts, the study seeks to move beyond high-level policy commitments and provide actionable recommendations for governments, donors, and partners on how to finance durable solutions in practice. The findings are intended to inform more coordinated, predictable, and system-aligned financing approaches that can be scaled and adapted across the region, ultimately contributing to more sustainable and resilient outcomes for displaced populations and host communities.BACKGROUNDDurable solutions for forcibly displaced populations in the East, Horn, and Great Lakes (EHAGL) region face a growing risk of becoming fragile, partial, or reversible. While national policies and frameworks have advanced, the realization of sustainable (re)integration outcomes ultimately depends on how these commitments are financed and implemented within specific municipalities and communes where displaced populations live. The scale and duration of displacement are expanding faster than the capacity of existing financing systems to support place-based, long-term outcomes. Without more resilient, aligned, and diversified financing approaches that reach the local level, progress toward self-reliance, inclusion, and stability is unlikely to be sustained.First, needs continue to outpace response capacity, particularly in displacement-affected localities. The number of forcibly displaced people in the EHAGL region has grown steadily due to ongoing conflict, climate shocks, and chronic insecurity. By the end of 2024, the region hosted approximately 26.3 million forcibly displaced people, many living in specific urban, peri-urban, and rural areas where services, infrastructure, and economic systems are already under strain. In these locations, displacement is experienced as a localized pressure on housing, labour markets, and basic services, contributing to protracted conditions of economic precarity and limited opportunities. This places increasing pressure on financing approaches to support area-based service delivery and economic inclusion, rather than repeated short-term responses.Second, displacement is concentrated in highly fragile and unevenly resourced environments. Within countries such as Somalia and Ethiopia, and in returnee-affected areas of Burundi, fragility is not uniform but spatially concentrated, with certain municipalities and communes facing overlapping crises, including insecurity, environmental degradation, and weak service systems. These localized conditions increase both the complexity and cost of delivering services and investing in recovery, while also heightening risks for public and private investment. As a result, the feasibility of durable solutions is shaped as much by local conditions as by national policy frameworks.Third, domestic public financing for solutions remains limited, particularly at the subnational level. Governments hosting large displaced populations operate under severe fiscal constraints, and local authorities often have limited fiscal autonomy, unpredictable intergovernmental transfers, and weak budget execution capacity. While national policies increasingly promote inclusion and self-reliance, these commitments are not consistently translated into adequate, predictable financing at the municipal or commune level, where services are delivered and integration occurs. This disconnect constrains investments in infrastructure, service expansion, and local economic development in displacement-affected areas.Fourth, international financing remains constrained and insufficiently grounded in local systems. Declining and uncertain Official Development Assistance (ODA), coupled with a continued emphasis on short-term, project-based humanitarian funding, limits the availability of predictable, multi-year resources. Moreover, external financing is often not aligned with subnational planning and budgeting systems, and is frequently delivered through parallel mechanisms that bypass local institutions. This reduces the effectiveness and sustainability of investments in displacement-affected areas and weakens the link between financing and long-term outcomes.Fifth, alternative sources of financing remain underutilized at the local level. Diaspora remittances, private sector activity, and informal financial systems play a significant role in many displacement-affected areas, yet these flows are rarely aligned with local development priorities or integrated into structured financing approaches. The absence of mechanisms to connect these resources to place-based investments in livelihoods, services, and infrastructure limits their potential to contribute to sustainable solutions.In response, several countries in the region have developed national policy frameworks and action plans to advance durable solutions. These frameworks provide an important strategic foundation. However, implementation has been uneven because financing is not effectively translated into coordinated, place-based investments at the municipal and commune level. In countries such as Ethiopia and Somalia, national solutions frameworks offer a strong entry point, but their operationalization depends on how financing reaches and is managed within specific localities. In Burundi, the ongoing returnee reintegration process presents an opportunity to embed area-based financing approaches from the outset, linking national planning with local implementation.1. OBJECTIVE OF THE CONSULTANCYObjectiveResearch QuestionsProposed Data SourcesObjective 1: Estimate financing gaps for priority actions at municipal / commune level1. What priority actions in municipal (Somalia & Ethiopia)andcommune (Burundi) solutions or development plans most contribute to financial autonomy, livelihood stabilization, and prevention of re-displacement? 2. What is the estimated cost of implementing these priority actions over 3–5 years at the subnational level? 3. What portion of these costs is covered by local government budgets, devolved transfers, and externally funded projects implemented locally? 4. Where are the largest funding shortfalls across municipalities/communes, sectors, or displacement-affected populations?* Municipal development plans, urban resilience strategies, and commune-level plans * Subnational budgets, fiscal transfer data, and local treasury/expenditure reports * Project-level financial data from NGOs/UN operating in specific municipalities/communes * Donor disbursement data with geographic tagging (where available) * KIIs with municipal/commune officials, local implementers, and community representativesObjective 2: Assess alignment of financing with subnational priorities and systems1. To what extent do domestic transfers, humanitarian, and development financing support municipal/commune-level priorities? 2. How are funds channeled at the subnational level (through local government systems vs parallel project structures)? 3. What coordination mechanisms exist (or are absent) at the municipal/commune level for integrating financing streams? 4. Are financing flows predictable, multi-year, and aligned with local planning and budgeting cycles?* Municipal/commune budgets and planning document * Intergovernmental fiscal transfer frameworks * Local coordination platforms (area-based coordination, cluster systems, municipal forums) * Donor and UN project portfolios mapped to specific locations * KIIs with local authorities, NGOs, UN field offices, and donors with field presenceObjective 3: Identify fiscal, institutional, and political constraints at the subnational level1. What fiscal constraints limit municipal/commune-level resource allocation to solutions (e.g., limited own-source revenue, unpredictable transfers)? 2. What institutional barriers exist at the subnational level (planning capacity, budget execution, coordination with the central government)? 3. How do local political dynamics shape financing decisions and prioritization? 4. What bottlenecks prevent multi-year and system-integrated financing at the municipal/commune level?* Subnational PFM assessments, decentralization policy documents * Municipal/commune budget execution reports * KIIs with local officials, regional authorities, donors, UN/NGO field staff * Secondary literature on decentralization and local governanceObjective 4: Analyze opportunities to mobilize diaspora, private sector, and DFI financing at the local level1. What is the scale and spatial distribution of diaspora remittances and local financial flows at municipal/commune level (including informal systems and mechanisms such as Zakat where relevant)? 2. Which local private sector actors and markets could support economic inclusion and solutions? 3. What instruments/incentives could mobilize financing into specific municipalities/communes (e.g., matching grants, blended finance, municipal bonds where applicable)? 4. How can these resources be aligned with local development priorities and delivery systems?* Local financial ecosystem mapping (banks, MFIs, SACCOs, mobile money data where available) * Diaspora association networks linked to specific localities * KIIs with local businesses, chambers of commerce, financial institutions * DFI and donor programs with subnational targeting * Case studies of place-based financing modelsObjective 5: Develop and validate practical subnational financing pathways1. What municipality-/commune-specific financing strategies can realistically support implementation of priority actions? 2. How can financing streams (local, national transfers, humanitarian, development, and alternative sources) be sequenced and layered at the subnational level? 3. What delivery mechanisms (e.g., municipal budget lines, area-based programs, pooled funds, delegated financing) are most viable? 4. How do local stakeholders validate feasibility, ownership, and sustainability of proposed pathways?* Synthesized findings from Objectives 1–4 * Validation workshops at municipal/commune level (not only national) * Engagement with local authorities, community representatives, and implementers * Comparative analysis of subnational financing models2. SCOPE OF WORK AND METHODOLOGYGeographic Scope: Three countries in the East, Horn, and Great Lakes (EHAGL) region: Burundi, Ethiopia, and Somalia.Within each country, the study adopts an area-based focus, centered on selected municipalities and communes as primary units of analysis:* Rumonge Commune (returnee and reintegration context) * Jigjiga City (urban, regional capital context) * Baidoa City (protracted displacement and humanitarian hub)Temporal Scope: Within 8 months with a timeline of 1st June 2026 to 31st December 2026.MethodologyOverall Approach:* Mixed-methods, qualitative-heavy, with selective quantitative elements for cost and financing gap estimation. * Comparative, area-based case study design, focusing on municipalities and communes in Burundi, Somalia, and Ethiopia. * Analysis anchored in place-based systems, examining how financing flows, governance structures, and markets interact within specific locations, and how…