Private Sector Engagement SECOND INVESTORS GROUP, St Albans,

Private Sector Engagement SECOND INVESTORS GROUP, St Albans,

Private Sector Engagement SECOND INVESTORS GROUP, St Albans, United Kingdom, 17-18 February 2016 Introduction Private sector is key to realizing the GFF objectives: - Flow of international private finance dwarfs ODA: US$135 bn ODA vs. US$778 bn FDI and US$400 bn remittances - Private expenditure on health is >50% of total health expenditure in more than 60% of GFF countries - Analysis of DHS data across low and middle income countries shows over a third of deliveries with appropriate care take place in the private sector, as well as over half of all care for pediatric diarrhea and fever - Countries already have mixed health systems, although in many the private sector is not sufficiently leveraged to deliver on national health goals Given the GFF is a new mechanism, proposed approach is to develop a private sector strategy focused on 2016, rather than a lengthy planning process for a multi-year document

Source: ODA vs. FDI from World Bank review of national health accounts; Service delivery from various DHS data analyses 2 Broad range of private sector actors to be leveraged for RMNCAH In most countries, achieving GFF goals is unlikely without engaging with actors outside government system; range of possibilities: - - - Service providers (e.g., private doctors/clinics/hospitals); Pharmaceutical manufacturers;

Medical technology companies; Financial sector: National (e.g., banks, financial institutions, investors); International/regional (e.g., private investors in IBRD or IFC bonds, private equity firms investing in health); Private insurers: purchasing technical services for government sponsored health insurance schemes; Private institutions producing human resources for health Management and logistics: Supply chain/distribution companies; Management consulting firms supporting development of management capacity; Information and communications technology firms (e.g., mHealth companies, tech firms working on big data, such as in the context of CRVS); Key business actors in other sectors related to health (e.g., energy firms that can supply electricity to remote health facilities, companies working on water and sanitation) 3 Objectives of GFF engagement with the private sector

Overarching objective: GFF to use the flexibility of its trust fund and the expertise of its facility partners to draw in the financial resources and capacity of the private sector to help countries achieve RMNCAH outcomes Three pathways: 1. Developing innovative financing mechanisms to catalyze private sector capital for Investment Case financing 2. Facilitating partnerships between global private sector and countries 3. Leveraging private sector capabilities in countries to deliver on Investment Case objectives All pathways require involvement of various GFF partners (e.g., UN agencies, bilateral donors like USAID, World Bank Group institutions such as IFC, etc.), based on the comparative advantage of each institution in working with the private sector 4 1. GFF innovative financing mechanisms The GFF has a unique opportunity to draw in private capital on a large scale from investors

with a focus on socially impactful solutions key to bridging financing gap for RMNCAH Private capital faces difficulty reaching GFF target populations in RMNCAH priority areas due to high risk, transaction cost and high cost of funding The GFF can broker impactful financing structures to increase both public and private investment into RMNCAH Potential vehicles include: 1) Pay for Performance Structures: - GFF-IBRD performance based loan buy-downs: IBRD raises funds from private capital markets to provide country loans GFF grants used to buy-down loans to concessional rates based on performance metrics Enables countries to access increased resources for RMNCAH - Development Impact Bonds for RMNCAH interventions and health systems strengthening 11 1. GFF innovative financing mechanisms (contd.) 2) Catalytic Financing for Private Investment:

- GFF flexible grant funds can lower investor risk and borrower interest rates, thus crowding in private sector investment into GFF priority areas for high-need populations - GFF de-risking can be done through a range of instruments such as grants, guarantees, concessional finance, etc. - GFF will work with partners such as IFC and USAID to leverage their private sector finance expertise and experience First investment under due diligence: GFF first loss grant to Medical Credit Fund, a not-for-profit that partners with local banks to provide loans to small and medium healthcare providers across Africa 67% of patients served by MCF borrowers are low income or very low income Over 70% of health visits by women and children 11 2. Facilitating partnerships with global private sector Great interest among private sector actors at global level; keen to be involved

along continuum of RMNCAH care through sustainable business models GFF facilitates partnerships for innovation, global public goods and resource mobilization to match specific needs in country Investment Cases Partnerships may be: - Between private sector and specific countries Safaricom, Merck, Philips, GSK, Huawei and Kenya Healthcare Federation commitment in Kenya to provide resources and expertise for RMNCAH, coordinated by UNFPA and aligned with GFF - With private sector for global public goods GFF working with DITTA*, WHO, medical technology companies to address requests for support on procurement of medical technology from several countries - With global private sector to mobilize resources for countries GFF is in discussions with GBCHealth to bring in private sector companies as outcome payers for performance-based financing program results in GFF countries

*Global Diagnostic Imaging, Healthcare IT, and Radiation Therapy Trade Association 7 3. Leveraging private sector in countries for Investment Case needs GFF approach is tailored to country context: private sector presence in health varies across countries, income groups and types of care Some early examples of country-level private sector engagement: - Kenya: Mapping of private sector partnership opportunities conducted Partnering with UNFPA and private sector on Kenya 6 County Initiative Working with counties in the context of devolution to develop implementation plans including private sector solutions - Cameroon: Private sector consultations held for Investment Case development Performance-based financing of private sector service delivery Development impact bond for Kangaroo mother care

- Uganda: Conducting a joint private sector health assessment with USAID to inform Investment Case development and implementation Setting up loan facilities with local banks to provide affordable loans to small and medium health providers 8 Cross-cutting role of innovation across pathways Disruptive innovations and new business models can play significant roles in helping leapfrog constraints to improving RMNCAH outcomes The GFF has an important role to play in promoting engagement with the private sector to: - Help identify and attract these kinds of innovative solutions - To support countries to bring successful innovations to scale The GFFs innovation efforts will be linked with the nascent EWEC Innovation Marketplace (to help identify promising innovations),

and with other partners that have considerable experience in bringing innovations to scale, such as Gavi and the Global Fund 9 GFF faces some key challenges in private sector engagement Wide scope of the GFF approach leads to many possible areas of engagement with the private sector need to define priorities and criteria for GFF investment; Limited data and analytical work available globally on private sector in health need for further analysis comparing options for GFF to pursue In many countries, coordination structures are inadequate (both within private sector, and between private sector and government) support is needed to ensure that private sector is engaged in a manner that fully leverages its capabilities 10

Proposed deliverables for 2016 Pathway 1: - IBRD performance-based buy-down in at least 1 country - GFF criteria for innovative finance defined, analysis of investment landscape and possible opportunities to leverage GFF and partner funds and expertise for maximal development impact - Investment made through catalytic financing mechanism (e.g., Medical Credit Fund for access to capital for small and medium providers in Africa) Pathway 2: - Draft priorities and criteria for selection of GFF private sector partnerships at global and regional level - Process for companies to get involved in GFF process at global and country level 11

Proposed deliverables for 2016 Pathway 2 (continued): - Medical technology procurement support for countries - GBCHealth deal to bring private sector outcome payers for performance based financing in health in at least 1 country Pathway 3: - Appropriate inclusion of private sector in all GFF Investment Cases - Focused private sector engagement in at least 2 GFF countries - Draft of guidance for countries on private sector engagement for GFF approach Cross-cutting: - Mapping of other GFF private sector opportunities, including key GFF partner private sector initiatives, comparative advantage and areas of synergy 12 Recommendation

It is recommended that the Investors Group retain this item as a regular issue on their agenda and that the Secretariat provide annual updates, to be given at the last Investors Group meeting of every year, on the status of the strategic directions laid out in this paper. As the pathways for private sector engagement mature, additional consultation with the Investors Group will be sought as appropriate. 13

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