Pledge Guarantee for Health: An Innovative Financing Partnership for 21st Century DevelopmentThe United States Agency for International Development (USAID) and the Swedish International Agency for Development Cooperation (SIDA) recently committed a $50 million guarantee to Pledge Guarantee for Health (PGH) and, with the help of risk sharing by commercial banks, the new guarantee will enable PGH to secure a 5-year, $100 million credit line to scale up its operations of facilitating bridge financing for developing country governments and civil society partners and help speed up delivery of essential health commodities.

Increasing Impact through Strategic Partnerships

By Kathy Calvin
President & CEO, United Nations Foundation

In a resource-constrained world, partnerships and innovation are essential to scaling up creative solutions in the global fight against deadly diseases. In the past decade, we have seen the value that strong global health partnerships can create. Under the Measles & Rubella Initiative, more than 1 billion children have received a measles vaccination. Globally, routine immunization has increased from 72 percent to 85 percent, and measles deaths decreased by 74 percent between 2000 and 2010. Since 2010, Every Woman Every Child has secured commitments from more than 250 organizations to support the UN Secretary-General’s Global Strategy for Women’s and Children’s Health, and more than US$10 billion has been disbursed in the effort to save the lives of 16 million women and children by 2015. Succinctly put: effective partnerships work.

In 2011, the UN Foundation unveiled Pledge Guarantee for Health to serve as a financial tool to help expedite the disbursement of foreign assistance while making global health supplies more affordable for developing countries. PGH is working to deliver aid faster, saving millions of lives. While the financial mechanisms are complex, the goal of PGH is simple: to quickly and effectively reduce deaths from easily preventable diseases.

PGH provides a loan guarantee for donor funding at the time a commitment is made and works with commercial banks to provide a letter of credit backed by the loan guarantee. That financial backing enables the Ministry of Health or civil society organization to work with suppliers immediately, rather than waiting for commitments to be processed, resulting in faster distribution of goods and sometimes more favorable pricing.

PGH loan guarantees have been used to accelerate procurement of health commodities, speeding the time for distribution of lifesaving goods. Working with the Government of Zambia, the World Bank, UNICEF and Stanbic Bank Zambia, with support from UN Secretary-General’s Special Envoy for Malaria, the PGH loan guarantee enabled 1.6 million malaria-preventing bed nets to be distributed before the rainy season, rather than after. Providing bed nets before the high-risk rainy season likely averted tens of thousands of malaria cases, savings the lives of thousands of Zambian children.

PGH’s successes also include improving maternal health by leveraging innovative finance to accelerate delivery of reproductive health supplies in Ethiopia and the Philippines. With the help of PGH, the countries were able to access higher quality and more effective methods of contraception faster and at no additional cost. Determined to procure contraceptives for its poorest communities, the Philippines Department of Health, with the guidance of UNFPA, was able to apply PGH’s approach of using commercial banks to bridge finance procurement of essential commodities that helped women avoid over 700,000 unwanted pregnancies and save nearly 1,000 mothers’ lives.

Pledge Guarantee for Health’s unique alliance of businesses, non-profits, governments and donors exemplifies the innovative partnerships that are crucial to meeting 21st century development goals. With the ever-pressing need to strengthen and streamline global health investments, crosssector collaboration can help boost the value of donor aid and accelerate progress toward the MDGs. Having proven the concept and delivered impressive results over two years, PGH now moves into its next phase as an independent entity, spearheading new partnerships that will take the concept to scale.

Commitment to Maximizing Value

By Dr. Ariel Pablos-Méndez
Assistant Administrator for Health, U.S. Agency for International Development (USAID)

In order to meet our commitments to the Millennium Development Goals and bring an end to preventable child and maternal deaths in a generation, we cannot continue to do business as usual. We must instead work better, faster, and smarter.

The Brookings Institution estimates that the value for donor aid can be increased by as much as 28 cents per dollar by stabilizing aid flows and increasing predictability in the system—exactly what this partnership with Pledge Guarantee for Health (PGH) is designed to do. This added value could help us to avoid stock-outs, allow bulk buying, lower prices, and remove unnecessary emergency costs.

In a resource-constrained environment, smarter and more creative financing can maximize the impact of our investments. New, groundbreaking tools can improve the predictability of financing. With a more stable investment environment for suppliers, we can optimize the value of the supply chain, making each donor dollar go farther as we tackle the core issues of our time.

At USAID, our support of this initiative reflects the Agency’s new effort to deploy more innovative financing solutions in partnership with the private sector. We are pleased to help scale the impact of PGH by providing a $50 million credit guarantee using USAID’s Development Credit Authority (DCA). This credit enhancement, provided in partnership with SIDA, will guarantee 50 percent of any loan that commercial banks issue to PGH over the next five years.

The PGH guarantee will allow commercial lenders to get comfortable with this unique structure and eventually continue lending to PGH after the guarantee expires. Similar risk sharing models have been deployed by DCA in 72 countries around the world and have unlocked $2.7 billion in credit to developmentally important businesses and projects. For every dollar we spend on DCA, we leverage $28 in private capital for development. The Bureau for Global Health’s Center for Accelerating Innovation and Impact also played an important role in bringing this partnership to life.

The center is promoting and reinforcing innovative, business-minded approaches to address key bottlenecks in the development, introduction and scale-up of global health technologies and interventions – applying business and marketplace principles to accelerate impact against some of the world’s most important health challenges.

USAID is committed to working with partners throughout the international development, finance, and supplier communities to maximize the value of every dollar spent, ensuring that we can transform lives around the world for the better. I am extraordinarily proud to stand with our partners to spearhead the next generation of the Pledge Guarantee for Health and help bring people around the world the life-saving assistance that they need.

$50 million for Health: The New PGH Guarantee

By Dr. Anders Nordström
Ambassador for Global Health, Swedish Ministry of Foreign Affairs

Increasing aid effectiveness at a global level is achieved by testing good ideas, improving on them, and then taking them to scale. In that spirit, Swedish SIDA is happy to be partnering with USAID to help scale up PGH with a 5-year, $50 million guarantee to increase the reach and scale of this unique funding mechanism. By combining that guarantee with projected risk-sharing by commercial banks, PGH turns a $50 million guarantee into faster, more cost-effective procurement of essential health commodities by government and civil society partners.

Currently, due to extensive lag time between the donors and recipients, aid disbursements can take up to 14 months, which means millions of people won’t receive bed nets before the deadly rainy season or health workers may face a stock-out of supplies essential to helping women with healthy deliveries. By leveraging a flexible and reliable long-term credit line that can mobilize up to $1 billion in lending capacity, the new PGH will help streamline this process to shave months off of the commitment-to-disbursement timeline.

Leading private sector supply companies such as Merck and Vestergaard Frandsen are joining this co-investment, helping to lower the cost of health commodities and working to eliminate the danger of stock-outs that recipients face while waiting for donor funding. Merck & Co. and Vestergaard Frandsen are paving the way and setting a strong example that private sector companies can partner with the development community to help their products reach more families in need.

The health gains we make through PGH’s new approach can foster a new era in processing donor aid. By combining our resources, technology and innovative ideas, we can help convey a strong message to the world that increased value for donor dollars is central to meeting global development goals.

Timing is Everything With 1,000 Days to Go

By Ray Chambers
United Nations Secretary-General’s Special Envoy for Financing the Health Millennium Development Goals and for Malaria

We have fewer than 1,000 days to achieve the Health Millennium Development Goals. To complete this bold humanitarian mission, we must avert the preventable deaths of 4.4 million children. With the stakes so incredibly high, we cannot permit insufficient resources or inefficiency to impede us.

As the United Nations Secretary-General’s Special Envoy for Financing the Health Millennium Developments Goals and for Malaria, I am committed to finding the keys to unlock the assets that will drive our shared efforts. Pledge Guarantee for Health (PGH) is one such key. While funding is obviously essential to hitting our targets, the timing of that funding — the cash flow — sometimes can be even more important than the absolute amount of money available. It can often mean the difference between life and death.

Two years ago, the Ministry of Health of Zambia was facing a rainy season without mosquito nets. Donors like the World Bank stepped in quickly to address the emergency, but with only weeks to go, further acceleration was needed. PGH came to the rescue. With its guarantee, working with UNICEF and the World Bank, the nets were delivered on time and thousands of lives were saved.

With the generous support of the United States and Swedish Governments, PGH can now bring critical health services to millions more who need access to them on time.