November 2024 - Health Finance Coalition

In an interview with the Health Finance Coalition, Cees Rustenhoven, Chief Financial Officer with Healthy Entrepreneurs, discusses the critical role of innovative financing for scaling healthcare solutions.

How and why did Healthy Entrepreneurs start?

RUSTENHOVEN: The founder of Healthy Entrepreneurs, Joost Van Engen, first worked for a wholesale company that distributes medicines and health products in Africa and other developing countries throughout the world. In that time, he realized that if Coca-Cola can get its products just about anywhere Africa, why couldn’t you deliver medications or healthcare products more effectively. So, Engen started thinking about a kind of network or franchise, or even small kiosks, that could sell medicines and various products in more rural or desolate areas of Africa.

He pitched the idea as a business case for the company he was with, but they weren’t interested. So, he thought …what if I quit and start my own company? It was a bold idea but that’s how it started over a decade ago. First, we did a few assignments for a small NGO in the Netherlands. Then we got grants from the Ministry of Foreign Affairs to serve a company in Africa.

And it was in that early start that I joined Healthy Entrepreneurs, because they were wanting to bring onboard someone who could manage the financials. So, we continued that journey, scaling up the company, particularly these last couple of years. Now, we are active in seven different countries.

As a business model, what has been Healthy Entrepreneurs’ evolution? What have you learned through the process?

RUSTENHOVEN: We have improved quite a lot. But the changes we’ve made weren’t something that just happened in a day. But over the years, we have evolved and now do things completely differently from when we first started. For one, we came to appreciate that it’s really community health workers who are the heart of any community and are trained and already registered by local governments. They’ve become the basis for our business. We recruit, train and make them community health entrepreneurs. We do that in close collaboration with local health authorities. We essentially sell our products to community health entrepreneurs, and they, in turn, sell the products to the end customer.

For us, it’s not about sales, as much as it’s about engagement, because we know that these entrepreneurs need to be engaged with the community for this to work. It’s not just about asking someone if they are ready to place an order. It’s more. You need to sit next to them, listen to them, coach them, and support them in doing their own business. If we do that, then the sales increase automatically. So that model now determines the people we are recruiting for this type of engagement.

Healthy Entrepreneurs has also used an outcome-style convertible note model? Can you explain more?

RUSTENHOVEN: That’s been an important step in the process. In 2020, we had our first financing round, and our initial investors were willing to invest more than half a million dollars into Healthy Entrepreneurs. Then, we negotiated the interest percentage and how much it would increase year over year. But it’s a loan that’s not part of your equity. Therefore, we also agreed to a certain profit sharing. So, at the end, if we are reaching a certain EBITDA level, meaning “earnings before interest, taxes, depreciation, amortization”, they would get a certain, part of the profit.

On the other hand, if we reached specific impact targets, then that resulted in a lower profit sharing.

So, that model served as a stimulus for us to reach social impact because there’s also a financial benefit for the company.

At the same time, we only want to have investors on board who are interested in the social impact and not only there for financial benefit.

Not many companies are making these types of agreements but it’s truly a win-win model. The loan, profit sharing and the social impact all come in together to achieve more healthcare solutions.

What would you say about the role of innovative or blended financing structures on scaling healthcare solutions?

RUSTENHOVEN: If you look at our business case, we are dealing with community health entrepreneurs who are living in desolate and rural areas of Africa. People there often earn just $1 or $2 a day. So, most orders being made by our community health entrepreneurs are often relatively low.

So, our business case is not the strongest commercial business case. We’re focused on the social business case. But still, there is a business case. Between the combination of public funding and commercial funding, it becomes a more sustainable business case than all the NGOs actively dealing with community health workers.

A couple of months ago, I was in Uganda, and I spoke to someone from an NGO that focuses on community healthcare. And they said, our Healthy Entrepreneurs model has essentially never-ending projects since our model is based on community health workers or entrepreneurs who remain in communities and can making a living from their business. Of course, not all our entrepreneurs reach that level of success, because some are higher performers than others. But still, there are quite a number of entrepreneurs who can make a living from their business and have a sustainable business model opening doors in the most rural areas of sub-Saharan Africa.

So, for us, that combination really makes this model extremely powerful, and opens up opportunities to scale healthcare using this network of community health entrepreneurs.

We can also finance innovations and new approaches, which is something we’ve done for communicable diseases, NCDs. We set up a closed supply chain to pick up orders from chronic patients through our call centers. We now have doctors on the payroll who can write prescriptions, and we can distribute medicines with a simple barcode scanned by a smartphone. We make sure each community health entrepreneur has a smartphone, where he or she can place online orders, and ensures the correct order is distributed to the appropriate patient.

That happens through public funding. But when we scale up, we need working capital. We then add in some commercial funding into our company so that we can continue to scale our business model.

What other innovative healthcare solutions are in the pipeline?

RUSTENHOVEN: We know the smartphone is increasingly being used also to register housing data of people living in the most desolate places. For example, the Electronic Community Health Information System (eCHIS) is digitizing community health information registered on household level. It’s expected that these information systems will play a critical role in measuring the performance of healthcare delivery and generating the necessary data for program monitoring, planning and evaluation. And it’s that kind of system that community health workers will then use to register every single household in each desolated village in Africa.

We are also seeing an increase in health apps with counselling services, videos and different tools for measuring vitals. Ultimately, what we would like to see, is a central database for all this information. Because, when we know the demands or the health needs of customers, then we can, in turn, provide the necessary products and services.

For those who haven’t considered innovative financing structures, what would you say?

RUSTENHOVEN: We thought that we were only making the margin, on the sale of products. But through the sale of our products, we are also making an impact.

Now, when an NGO comes to us and wants to try out a health intervention, we already have a network for scaling up. So, this network has a certain value. It’s not just about selling products and earning margin. It’s more about this network of community health entrepreneurs which can be used for health interventions.

For example, we distributed a product that is an injectable contraception. In Africa, if a woman gives birth four or five times, many times the sixth can be fatal. In order to prevent that, they get this injection and are protected for several months. So, we have partnered with an NGO that now pays us to distribute this injection and train our community health entrepreneurs to give this kind of an injection to women. That’s a good example of how we can use this network to scale a healthcare solution and achieve more social impact.

It is still quite cheap to distribute, but now we’re seeing more governments getting involved and wanting to use this type of network.

But this all stems from a combination of public and private funding – combining commercial funding for the working capital and public funding for startup and innovations. This way, you get a combination, which makes it more powerful and sustainable. The result is a larger network that is maintained and supported by community health entrepreneurs in the most remote areas of Africa.

After more than a decade of doing this work, I think we’ve developed a very stable business model with community entrepreneurs who will be with us for decades to come.

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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.”

Investing In Our Future: A Conversation with Cees Rustenhoven, Healthy Entrepreneurs’ Chief Financial Officer

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

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