2024

ASTMH 2024: A Discussion on Financing Private Sector Innovations in the Era of Antimalarial Resistance

Last week in New Orleans, the Health Finance Coalition was invited by Maisha Meds, a digital health organization, and Jhpiego, a global health non-profit organization, for a side event on the sidelines of the American Society of Tropical Medicine and Hygiene (ASTMH) annual meeting.

In a discussion facilitated by the Gates Foundation’s Abigail Pratt, panelists – including HFC’s Alex Honjiyo – explored how innovative financing methods can effectively engage the private sector to catalyze the scale of innovations to fight antimalarial resistance.

Malaria financing has become increasingly challenging
Panelists discussed how over the past five years external financing for malaria has plateaued and, in some cases, decreased. This stagnation in donor support and ongoing gaps in malaria funding highlight the urgent need to develop new and innovative mechanisms of financing implemented at the global, regional, and country levels.

“Financing solutions are very important because they are a way for sustainable financing to provide quality malaria services to the most vulnerable,” said Dr. Samwel Lazaro, Head of Tanzania’s National Malaria Control Programme.

This was echoed by Dr. Maria Dieci, Emory Rollins School of Public Health, who highlighted that “the current ways, where funding is coming from, are going to continue to be constrained and will continue to pose challenges going forward.”

Leveraging the private sector offers a path to more sustainable financing
Panelists also discussed how countries and development partners are increasingly looking at market-based approaches and investments from the private sector to help bridge gaps in both malaria resources and expertise to sustain results and accelerate progress.

National, public sector malaria programs recognize this need. During the panel discussion, Dr. Lazaro underscored this challenge, stating that “we need to bring the private sector onboard, so they become part of the solution making. Under the current financing mechanisms, we are not able to engage the private sector appropriately,” said Dr. Lazaro. “We need to rethink how we get the funding solutions that would be sustainable to the private sector but are also complementary to working with governments. We have to make our policies friendly to the private sector.”

“We will need to be more creative in how we think funding and financing for the malaria fight as we continue to seek elimination” said Alex Honjiyo, Deputy Director of the Health Finance Coalition. “At the Health Finance Coalition, when we think about engaging the private sector, we are constantly looking to engage a wider range of investors and implementors to achieve the world’s global health goals,” said Honjiyo. “Often as we look to de-risk investment, we are thinking about what kinds of financing and funding mixes could make the global health sector or malaria interventions more attractive for private sector investors. At HFC we call this a capital stack approach. Similarly, public-private partnerships can extend the impact of public sector anti-malaria programs while creating space for return-seeking investment.”

Outcome-based financing models offer solutions for financing malaria programs
Outcome-based financing models, or performance-based, can be used to improve malaria programs by aligning financial incentives with public health goals, panelists agreed. “It’s basically procurement reform at a very basic level,” said Honjiyo, “governments engaging in a public-private partnership, contracting a service from a non-profit or company.”

While often complex, panelists agreed that outcome-based financing models are an effective tool for yielding both effective health outcomes as well as potentially new funders for the malaria fight. “These outcomes funding methods open the door for impact investors to get involved, expanding the pie for potential investors in this space” Honjiyo said.

A benefit of outcomes funding models is that they are inherently driven by the achievement of impact metrics. “Financing should be driven by the outcomes that we want to do,” said Dr. Maria Dieci, Emory Rollins School of Public Health. “Ultimately, we need to be nimble to adapt to changes and outcomes funding can be the guide… An important pillar of any financing proposition that we think about has to include targeted interventions that are driven by an incentive to change the behavior of last mile providers patient and or improving diagnostics. Outcomes funding models are a great way to achieve this.”

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Uncategorized - 11/20/2024

Investing In Our Future: A Conversation with Noorin Mawani, Co-lead of the Transform Health Fund

In an interview with the Health Finance Coalition, Noorin Mawani, co-lead of the pan-African recently- closed Transform Health Fund (THF), discusses the fund’s innovative blended-finance structure, which aims to bolster healthcare systems in Africa by scaling proven and innovative healthcare models. Earlier this month, AfricInvest and The Health Finance Coalition (HFC) announced the Transform Health Fund exceeded its initial target in its final close, raising $111 million, through commercial, public, and private donor investments.

What makes the Transform Health Fund unique?

MAWANI: What makes the THF unique is its investment strategy that focuses on reaching low to middle income patient populations in Africa which today lack accessible and affordable healthcare

Too often, healthcare investments target companies serving middle- to high-income patients. That’s been for a few reasons: First, investors with high target returns tend to focus on patient populations with a dependable ability to pay. Unfortunately, in many African countries, less than 10% of the population has private health insurance. And while public healthcare systems dominate, many people rely on out-of-pocket payments for medical expenses, and yet to not have the means to cover them. The second reason healthcare investors target companies with higher income patients is geographical. These companies are typically located in large cities and so they are better known.

THF’s focus on low-income patient populations is made possible by a blended capital structure at the Fund level, that allows us to focus on companies expecting moderate returns.

Can you describe how blended financing is used?

MAWANI: With blended financing, different types of capital (with different return requirements) are combined into one fund structure. In more traditional funds, there is just one type of share class for all investors who all receive the same terms.

By combining investors with different risk and return expectations, it is possible to “grow the pie,” or catalyze investors who may not have otherwise had the risk appetite to invest, and providing the opportunity for Africa to see a greater share of international capital flows.

Where does the Transform Health Fund fit into the health financing ecosystem?

MAWANI: The health financing ecosystem is extremely wide, spanning donors who give philanthropic grants to larger institutional players like UNICEF, the US government, PMI Healthcare and many others.

I think about the providers of finance on a continuum of returns. On one extreme, there are those who do not expect even the return of their principal, providing grants and donations. Many are motivated by the belief that the provision of adequate healthcare is a basic human right, and grant financing is sometimes required to help ensure this

In the middle, there are those interested in supporting health in emerging markets given their development impact agenda, who still require a rate of return, but perhaps not a fully market adjusted rate of return. Think of a development finance institution – e.g., BII or IFC. They use limited taxpayer money to drive development in the least developed nations across the world but require a return to sustain their ability to invest.

Moving across the spectrum, the financing available becomes increasingly commercial in nature. Market returns are expected and while impact is an important outcome, it is not necessarily the primary intention of the investment.

This continuum is a necessary feature of the healthcare finance ecosystem. There are some parts of the market, some subsectors, some geographies, where pure commercial investments are unavailable, and philanthropic capital has a critical role to play.

In my view, there is a place for all types of capital – across geographies and across different subsectors. However, it is critical that the right capital is being used for the right kinds of projects. Commercial money should not be used for something that should have been funded by grants, potentially leaving commercial investors disappointed. At the same time, using grant or donor money for a commercial investment is not an efficient use of precious grant dollars.

That’s the challenge for us all making sure we’re matching our capital and the requirements of our capital to the type of risk and expected return of the projects.

What does it mean to be impact focused? And where do you see the most healthcare impact?

MAWANI: For me, being impact focused is basically identifying the kind of impact you’re trying to achieve, and then aligning your internal processes, your fund governance, and your incentives to achieve that objective.

For example, we consider ourselves impactful, because we’ve stated what our impact policy is, and we have a way to govern that. We have an investment committee process that considers impact votes on whether a project is sufficiently impactful.

We also have incentives tied to impact. For our investors and for ourselves, it is not enough to just deliver financial returns and so it is only fair that our incentives are ties to impact.

What challenges exist for scaling healthcare innovations in Africa and deploying capital?

MAWANI: One of the challenges we face, like other sectors in Africa, is the ability to pay. To increase access to healthcare services, either the services must become more affordable or the patient’s ability to pay must improve.

The challenge in Africa is that both of those are difficult. It’s hard to bring down the cost of healthcare, especially since he primary input into the cost of healthcare is labor. There are just not enough trained medical staff on the continent. And even those trained in the medical profession on the continent are tempted to leave for other markets where there’s more financial opportunity.

The other big challenge is the cost of drugs and pharma. Africa doesn’t manufacture adequate supplies of pharmaceutical products for its population and while there are efforts to encourage local production, many barriers still exist: The cost of energy is high, financing isn’t always available, and prices of products from other emerging markets are extremely competitive.

On the other hand, helping to improve a patient’s ability to pay is typically driven by two things: First, increasing income, a variable that it not in the control of healthcare investors. Secondly, increasing the availability of health insurance. While improvements in this regard are underway in some markets, it is a long road, and often requires government intervention and regulatory support.

Despite these important challenges, they are part of what makes African healthcare investing so exciting and such a big opportunity.

That’s where the innovation comes from, particularly companies targeting decreases in the customer cost of care.

With this final close, would it be fair to say you’re optimistic?

MAWANI: Definitely. I think we’re very optimistic because of achieving this final close of THF for an amount surpassing our target. As you can see, the is a great deal of interest and drive from investors to finance companies providing innovative solutions to some of Africa’s most pressing healthcare challenges.

And from the investments we’ve made so far, we’ve found incredible opportunities to solve for affordability. Still, this is by no means an easy sector. But we’ve found really strong entrepreneurs who are finding ways to drive innovation.

Finally, we are inspired by our investors, because at the end of the day, we’re a conduit for their money. It’s still their money and they’re still taking the risk.

So, our optimism is driven by both investors, as well as the hard work being done by the entrepreneurs themselves. While we are pleased with the success of the Transform Health Fund, investors and entrepreneurs are really the ones that are going to solve Africa’s healthcare problem.

Financing is just one piece of the puzzle that we try to unlock for them.

Q: Can you talk about Health Finance Coalition’s Transaction construction role in the fund? How does HFC’s support enhance THF’s investment process?

MAWANI: The Health Finance Coalition (HFC) plays a crucial role in structuring transactions that drive the development and execution of investment opportunities, strengthening THF’s pipeline, value proposition to companies, impact, and overall fund performance. HFC provides healthcare companies with strategic, financial, impact, and transaction structuring support, offering customized solutions that enhance their readiness to attract investment from partners like THF.

A recent example of this work is HFC’s collaboration with THF’s investee – Lapaire, an optical retailer operating across Africa. HFC assisted Lapaire in assessing strategic, high-impact opportunities designed to generate sustainable financial and social outcomes. By aligning management on the optimal strategic growth path, HFC helped Lapaire maximize impact while safeguarding THF’s investment value.

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News / Stories / Uncategorized - 10/21/2024

Transform Health Fund Surpasses $100 Million Target Final Close to Improve Access to Quality Healthcare in Africa

NAIROBI, October 3, 2024 – AfricInvest and The Health Finance Coalition (HFC) today announced the final close of the pan-African Transform Health Fund (THF), an innovative blended-finance fund that aims to bolster healthcare systems in Africa by scaling proven and innovative healthcare models across the continent.

Under the management of AfricInvest, a leading pan-African investment platform active across private equity, venture capital and private debt, in collaboration with the Health Finance Coalition, a group of leading global health funders, the Transform Health Fund exceeded its initial target, raising $111 million, through commercial, public, and private donor investments.

Notable fund investors include Royal Philips, the International Finance Corporation (IFC), Swedfund, the U.S. International Development Finance Corporation (DFC), Proparco, Merck & Co., Inc., known as MSD outside of the United States and Canada, FSD Africa Investments, Grand Challenges Canada (with funding from Global Affairs Canada), ImpactAssets Inc., the Global Health Investment Corporation (GHIC), Ceniarth (the family office of Diane Isenberg), UBS Optimus Foundation, Skoll Foundation, Chemonics International, Anesvad Foundation, Netri Foundation, U.S. Agency for International Development (USAID).

The successful closing allows THF to expand its investment into locally led health supply chains, care delivery, and digital solutions in Africa, providing debt and mezzanine financing to scale proven high-impact health enterprises serving vulnerable communities while offering risk-adjusted returns to investors.

The Transform Health Fund has already committed $20m in financing to:

Africa Healthcare Network (AHN), the largest dialysis chain across Sub-Saharan Africa, delivering high-quality, life-saving dialysis and preventative care treatment at affordable cost.
Lapaire Glasses, a network of more than 60 optical shops, providing affordable and accessible eye care products and services across six countries in West and East Africa.
Insta Products, a producer of ready-to-use therapeutic food for millions of malnourished children and mothers across sub-Saharan Africa, supplying its accredited products through international NGOs.

The Transform Health Fund, publicly highlighted in December 2022 at the U.S.-Africa Leaders’ Summit in Washington, D.C., was established to address Africa’s massive health financing and capacity gaps. While Sub-Saharan Africa is home to 14 percent of the global population and 20 percent of the global disease burden, just 1.6 percent of annual impact investments target the healthcare sector in Africa.

“Financing companies in Africa’s health sector through innovative financing models such as the Transform Health Fund is critical to address Africa’s health financing and capacity gaps,” said Ziad Oueslati, Founding Partner, AfricInvest. “By teaming up with private sector leaders, the Transform Health Fund has become a proven model for scaling locally led healthcare solutions across the continent.”

“The Transform Health Fund demonstrates that health enterprises serving the most vulnerable communities are in fact investible,” said Martin Edlund, CEO, Malaria No More and Executive Director of the Health Finance Coalition. “The context of static donor funding for health and unsustainable debt for African countries makes private investment in high-impact healthcare more important than ever.”

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For more information on the THF, please contact Noorin Mawani at noorin.mawani@africinvest.com. For interview requests, please contact Mindy Mizell at mindy.mizell@malarianomore.org.

About AfricInvest:

AfricInvest is a leading pan-African investment platform active in multiple alternative asset classes including private equity, venture capital, private credit, and listed equities. Over the past quarter century, the firm has raised more than $2bn to finance more than 200 companies at various development stages, delivering value and impact for its investors, portfolio companies, and the communities they serve. The 100-person-strong team of investment experts in more than ten offices across three continents has a proven track record of providing attractive risk-adjusted returns while spurring productivity growth, creating jobs, and ultimately improving African lives through inclusive and sustainable development. Learn more at: www.africinvest.com

About the Health Finance Coalition:

The Health Finance Coalition (HFC) was launched by a group of leading philanthropies, investors, donors, technical partners convened by WHO Ambassador for Global Strategy and Health Financing Ray Chambers and hosted by Malaria No More. The HFC seeks to attract an unprecedented level of private-sector investment to impact millions of lives and accelerate progress to ensure healthy lives and promote well-being for all, a UN Sustainable Development Goal 3. The coalition uses public and philanthropic funding to encourage private-sector capital investment in transformative healthcare impact. Learn more at: healthfinancecoalition.org

News - 10/03/2024

HFC & CHAI Announce Partnership to Scale-up Wolbachia Interventions to Prevent Dengue

The Health Finance Coalition (HFC), a subsidiary of Malaria No More, and the Clinton Health Access Initiative Inc. (CHAI), today announced a new partnership and initiative to scale up Wolbachia bacteria interventions to prevent dengue and aedes-borne diseases, with a generous award of £6.1M from Wellcome.

News - 10/01/2024

Ready for Investment, Ready for Scale: HFC’s approach to supporting African manufacturers

To scale manufacturing locally, African manufacturers must receive support to better understand the realities of the markets in which they operate, strengthen business planning, and understand the connection between market structures, competition, and regulatory requirements with their revenues. Without such “investment-readiness” support, manufacturers will be unprepared and unsuccessful in accessing catalytic growth financing from DFIs and other impact investors.

News - 09/18/2024

Investing In Our Future: A Conversation with Rowena Luk, Founder of Africa Health Ventures

In an interview with the Health Finance Coalition, Rowena Luk, founder of Africa Heath Ventures and host of “The Africa Health Ventures Podcast”, discusses investing in early-stage health ventures in Africa.

News / Stories / Uncategorized - 08/27/2024

Associate, Health Finance Coalition

The rapidly expanding Health Finance Coalition is seeking to hire an Associate to join our team. The Associate will support transaction construction, global financing platforms, and strategic exploration of new opportunities.

Jobs - 08/05/2024

How Investors Evaluate Healthcare Opportunities

Emerging markets, or economies transitioning into developed economies, shoulder a disproportionate share of the global disease burden, but their health systems are often underfunded and overwhelmed. For example, according to the World Health Organization (WHO), African countries, are exposed to 25% of the global disease burden yet receive less than 1% of the global health expenditure.

News / Stories - 07/29/2024

Achieving Financial Sustainability: 4 Fundamental Questions for African Healthcare Companies

For many scaling companies, achieving ‘financial sustainability’ stands as a crucial milestone on the path to long-term success. But what exactly does financial sustainability entail, and how can companies achieve it?

At its core, financial sustainability refers to a company’s ability to operate without relying on external sources of capital such as grants, debt, or equity. Instead, sustainable businesses generate sufficient revenue from their operations to cover expenses and weather economic uncertainties without jeopardizing their long-term viability.

For many early-stage companies, achieving financial sustainability can be a daunting challenge. With limited resources and a myriad of competing priorities, understanding the key indicators of sustainability is essential for charting a course toward lasting success. Revenue, profitability, cash flows and working capital are some of the key indicators informing the financial sustainability of a company. Revenue indicates the demand for a company’s product/service, while profitability is the most basic indicator of a business’ performance. A financially sustainable company should either be able to maintain their revenue (where the company is already profitable) or demonstrate growth (creating a pathway to profitability). In either case, the company should be able to meet its operational costs using internally generated cash flows.

Cash flow is the amount of money that flows in and out of your business over a period of time, such as a month, a quarter, or a year. Cash flow is an indicator of your business’s liquidity and solvency, which are the ability to meet your short-term and long-term financial obligations, respectively. Working capital refers to the ability to repay short-term liabilities using short-term assets. A company’s working capital impacts the cash flow. A financially sustainable company will be able to cover all short-term liabilities using short-term assets, and positive cash flows, at least at the operational level.

Companies should consider several key questions to achieve financial sustainability.

#1 – Customer Base: Does the company have an addressable, growing market base or can the company create an addressable customer base?

A fundamental determinant of financial sustainability is a strong value offering to customers.

Prior to launching a product or service, companies should conduct comprehensive market research to identify customer requirements, pain points and gaps, and the steps needed to realize sales. It is essential to gauge the potential for growing demand among customers. Understanding the trajectory of customer demand allows companies to anticipate market shifts and position themselves for sustainable growth.

In cases where a readily addressable market is not available, companies need to explore the possibility of creating addressable market, which involves assessing the process, time, financial constraints, and risks associated with expanding market reach and generating demand. While this may pose challenges, it can also present lucrative opportunities for companies willing to innovate and carve out their niche.

When analyzing the market base, it is crucial to consider not only the presence of a gap but also other customer-associated risks. Factors such as affordability and awareness can significantly impact market penetration, particularly in industries like healthcare. By addressing these risks head-on, companies can enhance their market position and foster sustainable growth.

#2 – Strategic Growth: Is the company able to maintain its market share or grow its share?

A company that is able to grow its market share is more likely to be successful in achieving revenue growth, thereby more effectively move towards financial viability.

To develop a robust growth strategy, management teams should look at strategic growth options available to them, including pros, cons, risks, and financial considerations of each option. Growth initiatives should also be assessed in light of operational bottlenecks e.g., limited workforce, and technology constraints.

Companies must also recognize that not all growth initiatives support financial viability. Often, strategic growth opportunities have a long pathway to profitability, implying that existing activities need to absorb the burden until profitability is achieved. Therefore, it is important that the profitability of new initiatives along with the financing structure for the new initiative be analyzed in detail.

#3 – Capital Structures: What is the right capital structure for the company?

Companies have access to a myriad of capital forms – from grants to equity. Without the appropriate capital structure in place, companies may find themselves grappling with a host of financial strains. These strains can manifest in various forms, such as liquidity shortages, high interest expenses, or inadequate funding for expansion projects. The wrong capital structure can function as a significant impediment to growth and financial sustainability.

Fortunately, companies have access to a diverse array of capital forms, each with its own benefits and drawbacks. For instance, grants provide non-dilutive funding but may come with stringent eligibility criteria. In addition, equity financing offers flexibility but dilutes ownership stakes.

Achieving financial sustainability hinges on finding the optimal blend of capital that aligns with a company’s growth trajectory and risk appetite. This entails assessing factors such as cost of capital, leverage ratios, and funding requirements.

#4 – Operational Processes: Has the company implemented strong processes that minimize leakages and support growth?

Operational processes dictate how tasks are executed, resources are allocated, and risks are managed, all of which directly impact the bottom line. Streamlined processes and optimized workflows minimize waste and inefficiencies, resulting in cost savings and improved profitability. Furthermore, well-defined operational structures enable companies to scale their operations effectively, accommodating growth.

By regularly monitoring key financial metrics, companies can identify potential risks to their sustainability and take proactive steps to mitigate them. Whether it is implementing cost-saving measures, diversifying revenue streams, or optimizing pricing strategies, addressing these challenges head-on can help pave the way for long-term financial health and resilience.

The bottom-line.

While internal factors have a significant impact on financial sustainability, it is also important for companies to remain aware, and look to mitigate/balance out external risks faced by the company. Such risks include the economic conditions a company operates in and the regulatory landscape.

The health of a country’s economy is a critical factor influencing the financial viability of individual companies. A buoyant economy can propel a company to new heights, while a stagnant or declining economy can spell trouble for even the most robust businesses.

A robust economy characterized by steady growth and stability is likely to attract greater investor confidence, fostering a favorable investment climate for companies seeking capital to fuel their growth ambitions. Conversely, in an economic downturn characterized by sluggish GDP growth or recessionary conditions, companies may face significant headwinds.

By understanding and monitoring key economic indicators, companies can better assess their operating environment, anticipate potential challenges, and position themselves for success in an ever-evolving global marketplace. For example, companies operating in unstable economic conditions can look to diversify its presence through country expansion and partnerships in more stable countries.

In the complex landscape of business operations, compliance with laws and regulations stands as a fundamental pillar. When it comes to regulatory compliance, it is crucial to understand that different companies are subject to various sets of rules. These regulations are often enforced by different regulatory bodies, each with its own mandates and enforcement mechanisms. Consequently, navigating the regulatory landscape can be challenging, with requirements varying in complexity and stringency.

For companies, particularly early-stage ones, grappling with regulatory compliance can be daunting. Limited resources and workforce may pose significant obstacles, making it difficult to meet all the necessary obligations. Therefore, it is imperative for companies to assess their financial capabilities and allocate resources strategically to ensure compliance without unduly straining their operations.

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News - 06/26/2024

Top Health Finance Takeaways from the 77th World Health Assembly

Late last month, government delegations, implementing partners, innovators, investors, and other stakeholders from around the world convened for the 77th World Health Assembly in Geneva, Switzerland, to address this year’s theme: All for Health, Health for All.

News - 06/11/2024

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