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A nurse reviews
a patient’s chart at a hospital in Preah Vihear, Cambodia.
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With the Addis Ababa Action Agenda on
financing for development now set in stone, one question has come to the fore
among the ranks of the global development community: What will be the impact on
human development and rights issues of the so-called new financing mechanisms —
blended, nongrant and private sector financing — promoted in the Addis agenda?
With the
recent launch of the Global Financing Facility in support
of the United Nations’ Every Woman Every Child initiative as the flagship
instrument for the implementation of the #FFD3 action agenda, it is not
surprising that stakeholders such as Countdown 2015 Europe — a consortium of 15
nongovernmental organizations working on sexual and reproductive health and
rights issues, led by the International
Planned Parenthood Federation’s European Network — are taking a
closer look, by conducting in-depth research to assess the impact of these
mechanisms on women’s health and rights.
On the
sidelines of the recent third International Conference on Financing for
Development in Addis Ababa, Ethiopia, Devex spoke to a number of luminaries to
identify ways in which the development community can make private sector and
nongrant financing work for health.
1. Only take up a loan for what you plan
to own.
“Why would
you take up a loan for a house you do not live in?” asked Munyaradzi T. Nkomo,
information and communications officer at the African Forum and Network on Debt
and Development — known asAfrodad — in an interview with Devex.
Nkomo
referred here to the danger of pushing for the use of loans and public-private
partnerships without taking into account countries’ — often insufficient —
financial management capacities.
But let’s
take this thought one step further: If you are given credit for renting a house
you will only live in for four or five years, who is going to pay back the loan
when it is due in 10 or 20 years’ time?
“Governments
often think in terms of election cycles — without looking at the long-term debt
sustainability and financial consequences of taking up loans,” explained Bodo
Ellmers, senior policy and advocacy officer at the European Network on Debt and
Development, or Eurodad.
This is
perhaps especially true for sectors such as health and SRHR.
“When
deciding on the type of financing to use, it is important to differentiate both
by country capacity and sector,” affirmed Degol Mendes, secretary of state at
Guinea-Bissau’s Ministry of Finance, who spoke exclusively to Devex. “Social
sectors cannot be financed through loans they do not produce sufficient
economic returns.”
This argument
was nuanced by one representative from the banking and financial services
sector, who asserted that while the health sector was perhaps seen as being
weak when it came to short-term results and was therefore “de-prioritized for
investments by governments and the private sector,” investing in health and
education was, in the long run, the “best thing you can do to harness the
highest yields for sustained economic growth.”
That is, of
course, provided that reimbursement for related loans is appropriately
sequenced to allow for gradual payback.
How
can the Global Financing Facility Trust Fund bring down the cost of engaging
the private sector in global health? Mark Suzman, president of global policy,
advocacy and country programs at the Bill & Melinda Gates Foundation,
explains in this exclusive interview.
As argued by
Mark Suzman, president of global policy, advocacy and country programs at the Bill & Melinda Gates Foundation, loans
could potentially even increase ownership as they “allow for long-term
investments and looking at outcomes instead of two-to-three year outputs.”
However,
according to Richard Willis, press officer at the European Investment Bank, this has to be
done “in a gradual and appropriate way and in close collaboration with relevant
development institutions.”
In
conclusion, the aid effectiveness principle of “country ownership,” which has
guided the development rhetoric for a number of years, ultimately also needs to
be applied to the “new” financing mechanisms: “Own your house and manage your
debts” could be an appropriate apothegm — something that can, however, be done
by engaging in helpful partnerships.
2. Join forces to minimize risks.
According to
the Nigerian proverb, “It takes a whole village to raise a child.” Indeed,
joining forces is essential for investing in women’s and children’s
development.
“Take our
experience in the agriculture sector,” EIB’s Willis explained. “Agriculture is
a challenging sector for long-term investments, but we can work with partners
to overcome these challenges — and through adequate partnerships, certain
sectors may become bankable that have not been bankable before.”
Speaking
exclusively to Devex, Tim Evans, senior director for health, nutrition and
population at the World Bank, explained how GFF aims at
doing just that by challenging what he sees as a misperception of health being
a “nonproductive” or “noninvestable” sector.
“GFF will attract
new external support by developing a robust investment case that provides
confidence to investors — it will highlight evidence-based, high-impact and
cost-effective interventions,” he said.
What is
crucial here, Evans said, is the instrument’s openness and flexibility to a
wide range of innovative partnerships to seek the most suitable combination for
each partner country. The World Bank’s AAA credit rating, for example, could be
used to issue a bond that would attract private investors toward contributing
to large-scale health investments. Supporting mHealth PPPs would be another
option, especially those applications targeting women’s and children’s health.
Although GFF
has only just launched, some organizations are already thinking of how to best
complement it through other innovative instruments.
The Health
Credit Exchange, an innovative financing tool launched during #FFD3 by GBCHealth, Total Impact Advisers and the
MDG Health Alliance, aims at doing exactly that. Established as a
performance-based pooled funding mechanism, HCX aims to attract private capital
toward financing high-impact health projects, such as those targeted by GFF.
As explained
by Gary Cohen, acting CEO at GBCHealth, HCX could potentially help buy down the
repayment obligations of governments that take up a GFF loan. In this way the
fund could contribute to mitigating the risks associated with taking up loans
for social sectors.
In essence,
according to Eurodad’s Ellmers, it is about smart and appropriate risk-sharing
between the private and public sectors.
“It can’t be
that the public sector starts bearing all the risks of private operations when
working with corporations that are perfectly able to bear these risks
themselves,” he said.
3. Prioritize win-win PPPs.
Many in the
global development community are talking about using official development
assistance to leverage private sector finance — but how do we avoid “wasting”
scarce ODA resources to invest in the for-profit sector?
A number of
#FFD3 participants told Devex that the most cost-effective scenario is to
prioritize those initiatives that have a natural “win-win” outcome for both
sides, where no major additional ODA injections are needed.
GBCHealth
studies show that for companies with a large female customer base, which employ
a largely female workforce or operate in areas where the status of women is the
underlying cause of poor health and maternal deaths, investments in women’s
empowerment and reproductive and maternal health can have a significant impact.
This was
confirmed by an Ethiopian woman entrepreneur visited by Devex on the fringes of
the #FFD3 conference in Addis: With a high number of female employees, Genet
Kebede, founder of small textile company Paradise Fashion, quickly recognized
that caring for her employees’ sexual and reproductive health and education
needs was key to avoiding multiple long-term absences due to maternity leave
and child care. She made family planning education part of the work-related
training given to her staff and is now looking into the possibility of
providing family planning supplies for free within the premises of her company.
And what is
the role of ODA here? It could simply be about helping these women-run SMEs
connect with the right partners to ease their access to both domestic as well
as international finance and markets.
This is what
the International Trade Center has been
doing in close collaboration with the Ethiopian government for local
businesswomen, explained Arancha González, ITC’s executive director. Amelza
Yazew, founder of baby garments company Little Gabies and an ITC beneficiary
told Devex that ITC had enabled her to connect with Mongolian entrepreneurs, a
collaboration which resulted in a high-quality, blended cotton-Kashmir product
that is proving to be very popular on the U.S. market.
And as
highlighted by a number of other Devex interviewees, it is also possible to
find win-win scenarios in other types of industries too — although it may
require thinking outside the box.
The
innovative aspect of the Health Credit Exchange, for example, is the
cost-effective way it plans to work with the private sector. Selected
high-impact health interventions will be assigned a certain number of “exchange
credits” based on the specific characteristics of the health interventions.
Companies invest by purchasing credits and directing them towards interventions
that align with their areas of interest.
“The intent
is to establish these credits as a private sector social financing instrument
that will be well recognized by governments and international agencies
overseeing the implementation of health goals, as reflected in the SDGs,” said
GBCHealth’s Cohen, adding that organizations involved in the initiative are
exploring potential methods to incentivize the credits purchased by companies —
in areas such as regulatory or tax benefits — to provide further motivation for
companies to invest in HCX.
4. Set clear rules for healthy
investments.
“What is
often forgotten when it comes to PPPs, is the word ‘public,’” Afrodad’s Nkomo
told Devex.
Indeed, the
primary role a government must take in the context of PPPs is that of a
regulator. Even the private sector itself is asking for that in the name of
investment security.
“In any
sector there needs to be clarity about the rules for investing,” said one
private sector representative during an #FFD3 side event on impact investments.
“Otherwise, the project may be deemed too risky.”
As
highlighted by nonprofit organizations, such as Eurodad and Afrodad, a number
of international frameworks and principles have already been established to
help regulate the so-called new financing methods for development. Among
others, these include the U.N. principles on responsible sovereign lending and
borrowing, the U.N. principles on responsible investments, and the Organization for Economic Cooperation and Development principles
for public governance of public-private partnerships.
The next step
is to make these frameworks binding, translating them into national laws and
policies. Establishing an open, transparent and participatory U.N.‐led process for oversight, monitoring
and review of international PPPs is another recommendation coming from CSO
platforms such as the FFD women’s group.
5. Involve communities and civil society
for local buy-in.
Not only
governments, but also communities need to be won over to make a project work.
According to
Afrodad’s Nkomo, there are numerous examples of private sector initiatives in
Africa, especially in the extractives industry, which have failed due to a
rejection and blockage from local communities. In other cases, communities
successfully pushed for certain conditions to be attached to companies’
activities, for example the building of local technical capacities.
One key ask
of the CSO community represented in Addis was that community-level impact
assessments should be carried out prior to engaging in any major PPPs. Prior
and informed consent by affected communities should be sought, they said,
especially for those PPPs aimed at delivering or affecting what is considered
to be a public good, such as health, for example.
6. Identify high-impact innovations.
What products
and services benefiting women’s health are worth investing in? And which are
likely to reach the markets, are scalable and will have the highest impact?
Showing value
for money is particularly important when it comes to investing in social
sectors.
“The problem
is not so much on the supply side, but on the demand side,” said one private
sector participant at a #FFD3 side event on impact financing. “How can we find
investable social projects?”
One possible
answer to this question was provided by the recent Reimagining Global Health report, launched
by the newly created Innovation Countdown 2030 initiative. It highlights 30
lifesaving health innovations selected by external health experts for their potential
to transform global health by 2030. Accessibility, affordability and
scalability were key criteria for selecting the best innovations from more than
500 entries submitted.
Striking
examples included a low-cost uterine balloon tamponade kit, suitable for use in
remote areas that could reduce deaths due to postpartum hemorrhage by 11
percent and thus potentially save 169,000 maternal lives by 2030; and in the
area of reproductive health, a number of long-lasting, low-cost and easy-to-use
contraceptives were presented that may be self-administered by women, outside
health care settings.
Now that the
dust has settled in Addis and the global development community knows who should
set the rules of the game, who are its key players, as well as how much and and
what to bet on going forward, there is one logical next step: to put the pieces
of the puzzle together to make markets work for health and health work for
markets.
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