Small Grants, High Stakes: Can New Funding Model Turn Displacement into Recovery?

A new report from the Internal Displacement Solutions Fund highlights how targeted catalytic funding helped government-led programmes mobilise large-scale national and development finance for internally displaced people. The findings matter because they frame internal displacement not only as an emergency response issue, but as a long-term development, governance and public-service challenge. The progress is significant, but the report also warns that conflict, insecurity, disasters and limited resources continue to threaten durable solutions.

Internal displacement is treated as a humanitarian emergency, but a new report from the Internal Displacement Solutions Fund points to a broader shift: helping uprooted people rebuild their lives requires development finance, public systems, housing, legal identity and long-term national planning.

The Fund, established by the United Nations Global Solutions Hub, supported 10 joint programmes in 2025 with catalytic investments of up to USD 3 million each. Those comparatively small injections helped unlock approximately USD 2.5 billion in national government budget allocations for protecting internally displaced people and supporting long-term solutions. The programmes also attracted more than USD 850 million in development finance.

The report suggests that targeted funding, when tied to government-led plans and coordinated development support, can help move displacement policy beyond emergency relief. The issue is not only how to assist people after they flee, but how to rebuild the systems that allow them to live with stability, access services and participate in local economies.

The Fund is championed by the International Organization for Migration, the United Nations Development Programme and UNHCR, the UN Refugee Agency. Their shared approach reflects a growing recognition that internal displacement cannot be managed by humanitarian agencies alone. Governments, development partners, local authorities and financial institutions all have a role in turning temporary relief into durable recovery.

The Shift from Aid to Systems

Displacement solutions depend on national systems, not isolated projects. People forced from their homes need food, shelter and protection in the immediate term, but long-term recovery depends on legal documentation, access to land, housing, livelihoods, schools, healthcare, financial services and government assistance.

The programmes supported through the Fund show how those pieces can be connected. Nearly 98,000 hectares of land have been allocated for housing, livelihood opportunities and local integration initiatives. More than 200,000 internally displaced people have received legal documentation, improving their access to healthcare, education, employment, financial services and public assistance.

These are the basic conditions that determine whether displaced families can move from survival to self-reliance. Without documentation, people may struggle to enrol children in school, access clinics, find formal work or receive state support. Without land or housing options, returns and local integration can remain unstable. Without livelihoods, recovery can become dependent on continued aid.

The Fund estimates that every USD 1 invested helped mobilise around USD 168 in funding from development partners. This figure illustrates the financial leverage that coordinated planning can generate, but it also raises a critical editorial and policy question: whether these commitments translate into sustained delivery on the ground, especially in places where conflict, insecurity or weak public resources continue to drive new displacement.

Returns Are Rising, but Fragility Remains

UNHCR Assistant High Commissioner for Operations Raouf Mazou noted that more than 10 million internally displaced people returned home during 2025, the highest number recorded in several years. That is a significant signal of progress. It shows that durable solutions are possible when governments, communities and international partners work together.

However, returns are not the same as recovery. People may go back to areas where homes are damaged, services are limited, livelihoods are uncertain or security remains fragile. The report itself warns that many returns remain vulnerable without sustained support. This is where the development framing becomes essential. A return is durable only when people can rebuild lives with safety, dignity and access to basic systems.

IOM Deputy Director General for Operations Ugochi Daniels said investment in recovery systems can make displacement more manageable while strengthening communities. UNDP Crisis Bureau Director Shoko Noda placed internal displacement firmly within the development and governance agenda, arguing that it should not be treated only as a humanitarian issue.

Displacement often puts pressure on schools, clinics, water systems, land, jobs and local authorities. If programmes only target displaced people without strengthening the wider community, they can create tension or leave public services overstretched. The Fund's approach seeks to address that risk by supporting national systems that serve both displaced people and the communities that receive them.

The Next Test Is Staying Power

The report is encouraging, but it does not present displacement as a solved problem. Many countries continue to face fresh displacement driven by conflict, insecurity, disasters and limited public resources. These pressures can quickly overwhelm progress if financing is short-term, fragmented or poorly aligned with national strategies.

The next test is whether governments and partners can sustain predictable long-term financing. The report calls for closer alignment between national displacement strategies and development financing, stronger partnerships with international financial institutions and the private sector, and greater involvement of displaced people in decisions affecting their futures.

Durable solutions cannot be designed only from ministries, donor offices or international agencies. Displaced people must have a voice in decisions about whether they return, integrate locally or rebuild elsewhere. Without meaningful participation, programmes risk missing the realities of land rights, livelihoods, family safety, community acceptance and local governance.

The financing figures show momentum. The land and documentation outcomes show practical progress. The return numbers show that recovery is possible, but the deeper challenge is whether these gains can survive the pressures that cause displacement in the first place.

The report ultimately points to a more mature way of thinking about internal displacement. For millions of people uprooted within their own countries, the path to dignity depends on whether governments and partners can turn catalytic investments into lasting public systems, stable communities and real choices about the future.