The potential of market-based models for reaching the base of the economic pyramid
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he private sector have the potential to be an effective provider of health care products and services for populations at the base of the economic pyramid. This webinar presents two investment models: a market-based initiative and a challenge fund. The presenters will address the impact of these models with examples from programmes run by the Strengthening Health Outcomes through the Private Sector (SHOPS) project in India and sub-Saharan Africa. Arunesh Singh will discuss market-based partnerships and Colm Fay will present on a challenge fund recently launched in East Africa. Arunesh Singh, formerly of Market-based Partnerships in Health India, has over 14 years of development experience in corporate and social enterprises. He oversees market-based partnerships with private sector companies that address family planning, reproductive health, and child health. Colm Fay, a private sector specialist, focuses on business strategies for the base of the pyramid and impact investing. He manages the HANSHEP Health Enterprise Challenge Fund. This webinar is sponsored by Strengthening Health Outcomes through the Private Sector (SHOPS) http://www.shopsproject.org/ You can find out more about HANSHEP on their website http://www.hanshep.org/
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The potential of market-based models for reaching the base of the economic pyramid
- 1. @psinhealth www.pshealth.org #healthmkt The Potential of Market-based Models for Reaching the Base of the Economic Pyramid An initiative of the Private Sector in Health Symposium
- 2. Symposium: Sydney – 6 July 2013 • Since 2009 a group of researchers and policy analysts working on health markets in low and middle-income countries have organised a pre-congress symposium at the biennial conferences of the International Health Economics Association • The aim has been to encourage and disseminate high quality research on the performance of these markets and on practical strategies for improving access to safe and effective services by the poor • The Future Health Systems Consortium is responsible for organising the 2013 symposium with financial support from the Gates and Rockefeller Foundations and USAID through the SHOPS project www.pshealth.org
- 3. This webinar series provides opportunities to set the scene before the Sydney meeting and to ensure that those who may not be attending the Symposium have the opportunity to participate in debates about strategies for improving the performance of health markets in meeting the needs of the poor.
- 4. Webinar series • Facilitated by the Future Health Systems Consortium • Organised by a number of institutes • Publicised widely to involve a wide audience • The next SHOPS project webinar will be held June 6
- 5. Organisation of webinar • Introduction to the webinar (Caroline Quijada) • Presentations from: - Arunesh Singh, Abt Associates - Colm Fay, Abt Associates • Question and answer session
- 6. Questions? How to submit • Via the „Questions‟ box in the GoToWebinar Control Panel • Via Twitter using the hashtag #healthmkt Be sure to include your name, organisation and location with your question!
- 7. What Is a Market-based Model? A market-based model is scalable, commercially viable and socially beneficial to the BoP BoP refers to the population segment at the base of the economic pyramid in a country Monitor Group
- 8. SHOPS Approach to Market-based Models • Understand the landscape – what is range of promising market-based business models • Carry out research to identify barriers to scale and long-term viability • Provide technical assistance to support promising models, document and share lessons learned
- 9. Promise and Progress: Market- based Solutions to Poverty in Africa • Monitor-led study financed by Gates, Rockefeller Foundation, USAID, IFC, Actis and others – 9 SSA countries: Ghana, Kenya, Senegal, South Africa, Tanzania, Uganda, Nigeria, Mali and Zambia – 439 initiatives identified across all sectors with a focus on BOP – Field visits included interviews with over 500 customers, distributors, executives as well as impact investors • 13 Model types; 4 with most potential impact for health – Distribution and sales through informal shops – Low frills, high volume service delivery – Distribution through dedicated sales agents – m-Enabled businesses
- 10. Sharing Knowledge on these Models
- 11. Reaching Base of the Pyramid Health Markets in India Arunesh Singh Abt Associates
- 12. Health Care Innovation at the Base of the Pyramid: A Challenge Fund Model for Addressing the “Missing Middle” Colm Fay Abt Associates
- 13. Market-based Partnerships for Health Reaching Base of the Pyramid Health Markets in India Arunesh Singh Abt Associates April 11, 2013
- 14. Market-based What are Market-based Partnerships for Health? Partnerships for Health Click to edit Master title style • Click to edit Master text styleshealth are defined as Market-based partnerships for – Second level commercially viable partnerships between the • Third level commercial sector and other public or private sector – Fourth level actors in order Fifth tap into and expand distribution, service » to level delivery and information networks to improve public health outcomes in selected areas.
- 15. Market-based Partnerships for Health: Context Market-based Barriers to Entry in BoP Health Markets in India - Partnerships for Health Consumers • Lack of access to quality products and information is a Click to edit Master title style barrier to use, especially in BoP markets • Click to edit Master text styles – Second level • Third level – Fourth level » Fifth level
- 16. Market-based Partnerships for Health: Context Market-based Barriers to Entry in BoP Health Markets in India - Partnerships for Health Consumers • Lack of access to quality products and information is a Click to edit Master title style barrier to use, especially in BoP markets • Click to edit Master text styles – Secondrural women are aware of OCPs but use is only 14% – 85% of level • Third level – In rural India, lack of proper knowledge and correct information – Fourth level on ORS leads to low use » Fifth level
- 17. Market-based Partnerships for Health: Context Market-based Barriers to Entry in BoP Health Markets in India - Partnerships for Health Consumers • Lack of access to quality products and information is a Click to edit Master title style barrier to use, especially in BoP markets • Click to edit Master text styles – Secondrural women are aware of OCPs but use is only 14% – 85% of level • Third level – In rural India, lack of proper knowledge and correct information – Fourth level on ORS leads to low use » Fifth level • Affordability barriers are result of limited resources and irregular cash flows
- 18. Market-based Partnerships for Health: Context Market-based Barriers to entry in BoP Health markets in India - Partnerships for Health Consumers • Lack of access to quality products and information is a Click to edit Master title style barrier to use, especially in BoP markets • Click to edit Master text styles – Secondrural women are aware of OCPs but use is only 14% – 85% of level • Third level – In rural India, lack of proper knowledge and correct information – Fourth level on ORS leads to low use » Fifth level • Affordability barriers are result of limited resources and irregular cash flows – Especially true for durable goods and services – Some MNCs (Unilever) have successfully introduced smaller packaging
- 19. – Barriers to entry in BoP Health markets in IndiaMarket-based Partnerships for Health Manufacturers/Marketers Reaching the unreached: Key Click to edit Master title style challenges • Lower demand for health products and services so often markets need to be created • Click to edit Master text styles – Second level • Highly fragmented demand among BoP markets • Third level – Fourth level – Over 600,000 villages » Fifth level across India of which 50% have less than 2000 inhabitants • High discovery cost – BoP markets are not conventional and require a deep understanding
- 20. Market-based Size and Profile of the BoP Market in India Partnerships for Health Profile BoP Master the style Click to editincludes title following sub-groups • The of the unreached in India – Over 700 m people in rural India encompassing a range of • Click to edit Master text styles over 80 m urban poor income and economic profiles and – Second level • Third level – Fourth level » Fifth level
- 21. Market-based Size and Profile of the BoP Markets in India Partnerships for Health Profile BoP Master the style Click to editincludes title following sub-groups • The of the unreached in India – Over 700 m people in rural India encompassing a range of • Click to edit Master text styles over 80 m urban poor income and economic profiles and – Second level • Public health indicators are lower among the BoP: • Third level Indicator Urban non-poor The BoP – Fourth level » Fifth level Urban poor Rural (all) Total unmet need for FP (%)* 10.0 14.1 14.6 Current use of any modern 58.0 48.7 45.3 method (%)* Children with diarrhea in the last 2 36.3 24.9 23.8 weeks who received ORS (%) Home deliveries (%) 21.5 56.0 71.1 * Currently married women, age 15–49 Reference: National Family Health Survey -3 (2005–2006), Census of India 2001
- 22. Market-based USAID-funded Market-based Partnerships in India Partnerships for Health Click to edit Master title style • Market-based Partnerships for Health (MBPH) project (October 2008 - May 2012) • Click to edit Master text styles partnerships with the private • To forge commercially sustainable – Second level sector on a range of public health issues • Third level • Strengthening Health Outcomes through the Private – Fourth level Sector (SHOPS) project (June 2012- September 2014) » Fifth level • To refine and scale-up 5 successful partnership models tested in MBPH • BoP models implemented under SHOPS: • Dimpa (FP), ITC eChoupal (FP, CS), ORS Rural Health Initiative (CS), and Advanced Cook Stoves Initiative (CS)
- 23. Market-based Snapshot: MBPH/SHOPS BoP models Partnerships for Health Click to editPrograms title style Intervention Snapshot SHOPS BoP models Master Description Type Distribution- ITC Commercially viable rural •Demand to edit Master Click eChoupal & text styles demand distribution and – SecondORS Health Focused level generation models to increase Intervention Initiative access to health products • Third level Distribution- – Advanced Fourth level A model to increase Demand and Cook Stoves » Fifth level awareness, access, and Financing (ACS) affordability of ACS in rural Led Initiative areas through commercial Intervention partnerships Private Dimpa Expanding access & demand Provider for injectable contraceptives Focused through the private sector & Intervention advocating for expanded contraceptive choices For further information kindly refer to www.mbph.in and www.shopsproject.org
- 24. Market-based Advanced Cook Stoves Initiative: Model Partnerships for Health (ACS manufacturer) Advanced Cook Stoves style Title transfer Click to edit Envirofit title Initiative: Model Master Consumer Loan Payment for title Loan repayment • Competitive margins • Product training • • • Click to edit Master text styles Brand-specific marketing Last-mile minus one supply Loan Product for ACS – Second level • Third level (Distributor) Access fee (MFI) – Fourth level S-mart SONATA • Block level retailer Fifth level » Installments • VLE recruitment • Access to groups • VLE monitoring • VLE compensation • Access to finance • Inventory management Village-level MFI entrepreneur members • Final sale • Order placement n-MFI • Demonstration/promotion members
- 25. Market-based Advanced Cook Stoves Initiative: Model Partnerships for Health Click to (ACS Envirofit title Initiative: Model editmanufacturer) Advanced Cook Stoves style Title transfer Master Consumer Loan Payment for title Loan repayment • Competitive margins • Product training • • • Click to edit Master text styles Brand-specific marketing Last-mile minus one supply Loan Product for ACS – Second level • Third level (Distributor) Access fee (MFI) – Fourth level S-mart SONATA • Block level retailer Fifth level » Installments • VLE recruitment • Access to groups • VLE monitoring • VLE compensation • Access to finance • Inventory management Village-level MFI entrepreneur members • Final sale • Order placement n-MFI • Demonstration/promotion members
- 26. Market-based Advanced Cook Stoves Initiative: Model Partnerships for Health (ACS manufacturer) Advanced Cook Stoves style Title transfer Click to edit Envirofit title Initiative: Model Master Consumer Loan Payment for title Loan repayment • Competitive margins • Product training • • • Click to edit Master text styles Brand-specific marketing Last-mile minus one supply Loan Product for ACS – Second level • Third level (Distributor) Access fee (MFI) – Fourth level S-mart SONATA • Block level retailer Fifth level » Installments • VLE recruitment • Access to groups • VLE monitoring • VLE compensation • Access to finance • Inventory management Village-level MFI entrepreneur members • Final sale • Order placement n-MFI • Demonstration/promotion members
- 27. Market-based Advanced Cook Stoves Initiative: Model Partnerships for Health (ACS manufacturer) Advanced Cook Stoves style Title transfer Click to edit Envirofit title Initiative: Model Master Consumer Loan Payment for title Loan repayment • Competitive margins • Product training • • • Click to edit Master text styles Brand-specific marketing Last-mile minus one supply Loan Product for ACS – Second level • Third level (Distributor) Access fee (MFI) – Fourth level S-mart SONATA • Block level retailer Fifth level » Installments • VLE recruitment • Access to groups • VLE monitoring • VLE compensation • Access to finance • Inventory management Village-level MFI entrepreneur members • Final sale • Order placement n-MFI • Demonstration/promotion members
- 28. Market-based Advanced Cook Stoves Initiative: Model Partnerships for Health (ACS manufacturer) Advanced Cook Stoves style Title transfer Click to edit Envirofit title Initiative: Model Master Consumer Loan Payment for title Loan repayment • Competitive margins • Product training • • • Click to edit Master text styles Brand-specific marketing Last-mile minus one supply Loan Product for ACS – Second level • Third level (Distributor) Access fee (MFI) – Fourth level S-mart SONATA • Block level retailer Fifth level » Installments • VLE recruitment • Access to groups • VLE monitoring • VLE compensation • Access to finance • Inventory management Village-level MFI entrepreneur members • Final sale • Order placement n-MFI • Demonstration/promotion members
- 29. Market-based Advanced Cook Stoves Initiative: Model Partnerships for Health (ACS manufacturer) Advanced Cook Stoves style Title transfer Click to edit Envirofit title Initiative: Model Master Consumer Loan Payment for title Loan repayment • Competitive margins • Product training • • • Click to edit Master text styles Brand-specific marketing Last-mile minus one supply Loan Product for ACS – Second level • Third level (Distributor) Access fee (MFI) – Fourth level S-mart SONATA • Block level retailer Fifth level » Installments • VLE recruitment • Access to groups • VLE monitoring • VLE compensation • Access to finance • Inventory management Village-level MFI entrepreneur members • Final sale • Order placement n-MFI • Demonstration/promotion members
- 30. Market-based Key Lessons Partnerships for Health Key Lessons Click to edit Master title style • Click to edit Master text styles – Second level • Third level – Fourth level » Fifth level
- 31. Market-based 1. Build Cross Sectoral Partnerships Partnerships for Health Click to edit Master title style • Build cross sectoral partnerships that leverage core competencies of each partner • Click to edit Master text styles • The Advanced Cook Stoves partnership is a tripartite commercial – Second level partnership focusing in consumer financing, distribution, and • Third level marketing – Fourth level • Partnerships enable risk-share and allow the » Fifth level commercial sector to explore new and difficult markets • The Advanced Cook Stoves partnership has allowed the manufacturer to enter a new market in Northern India
- 32. Market-based 2. Leverage Distribution Platforms to Aggregate Demand Partnerships for Health Click to edit Master title style • Investing in the creation of a dedicated rural distribution network is challenging for health • Click to edit Master text styles product/service companies – Second level • Many Third level • non-health companies have created robust – Fourth level distribution» platforms for the rural market Fifth level • A distribution platform provides a cost effective option for aggregating fragmented demand
- 33. Market-based 3. Create a New Class of Retailers Partnerships for Health Click to edit Master title style • Operate as dual service points and are incentivized for both demand and supply functions • Click to edit Master text styles • Traditional distribution or communication channels do not reach – Second level the last mile, necessitating integrating demand and supply • Third level • Last-mileFourth level require selection, training and – retailers support » Fifth level • The VLEs in the Advanced Cook Stoves partnership provide last mile delivery of the product, and create demand
- 34. Market-based 4. Optimize Basket of Products Partnerships for Health Click to edit Master title style • Due to low margins and low demand it is difficult to make a viable business model through public health • Click to edit Master text styles products alone – Second level • Important level • Third to have a secondary basket of easy-to-sell, high-margin products that can contribute to – Fourth level » Fifth level entrepreneur profitability • Incentives need to be designed to ensure focus on primary public health products
- 35. 5. Products Targeted at BoP Consumers Need High Market-based Engagement Approaches Partnerships for Health Click to edit Master title style • Long term, personalized engagement with consumers • Click to edit Master text styles • High engagement marketing processes that allows the – Second level user• to “experience” the product Third level – Fourth level » Fifth level • Customize the retailer profile to account for cultural and/or product related sensitivities
- 36. Market-based Summary Partnerships for Health Click to edit Master title style • Partnerships that leverage each other‟s networks and retain focus on core competencies are more • Click to edit Master text styles sustainable – Second level • BOP markets need a specialized class of retailers who • Third level – basket deal is a Fourth levelof products and play the dual role of » Fifth level creating awareness and last mile delivery • Sales formats need customization for BOP consumers that permit „experiencing‟ the product
- 37. Market-based Partnerships for Health Questions arunesh@abtindia.net www.shopsproject.org
- 38. Health Care Innovation at the Base of the Pyramid: A Challenge Fund Model for Addressing the “Missing Middle” Colm Fay Abt Associates April 11, 2013 SHOPS is funded by the U.S. Agency for International Development. Abt Associates leads the project in collaboration with Banyan Global Jhpiego Marie Stopes International Monitor Group O‟Hanlon Health Consulting
- 39. Market Based Models in Africa New and Existing Financing Business Gaps Models Diffuse Need for TA Demand Challenge Fund
- 40. What is a Challenge Fund? Donor Enterprises Competitive Capital challenge apply selection Awards
- 41. What is a Challenge Fund? Donor Enterprises Competitive Capital challenge apply selection Awards
- 42. What is a Challenge Fund? Donor Enterprises Competitive Capital challenge apply selection Awards
- 43. What is a Challenge Fund? Donor Enterprises Competitive Capital challenge apply selection Awards
- 44. What is the Missing Middle? Micro- finance Founder‟s Capital Donor Programs ? Commercial Capital Awards Early Stage Small and Growing Scaling
- 45. What is the Missing Middle? Micro- finance Founder‟s Capital Donor Programs ? Commercial Capital Awards Early Stage Small and Growing Scaling
- 46. What is the Missing Middle? Micro- finance Founder‟s Capital Donor Programs ? Commercial Capital Awards Early Stage Small and Growing Scaling
- 47. What is the Missing Middle? Micro- finance Founder‟s Capital Donor Programs ? Commercial Capital Awards Early Stage Small and Growing Scaling
- 48. What is the Missing Middle? Micro- finance Founder‟s Capital Donor Programs ? Commercial Capital Awards Early Stage Small and Growing Scaling
- 49. HANSHEP Health Enterprise Fund • Ethiopia and Kenya • Grants up to $200,000 • Seeking innovations in: • Service delivery • Technologies • Partnerships • Business models • Funded by USAID and DFID through the HANSHEP Group • Focus on SHOPS project priority health areas: family planning, reproductive health, maternal and child health, HIV/AIDS
- 50. What makes the HANSHEP Health Enterprise Fund unique? Technical Assistance Capital “Missing Investor Middle” Engagement
- 51. How are Winners Selected? Eligibility • Revenue model Innovation • Enterprise stage • Scalability • Health area Awards • Sustainability targeting • Replicability • Geographic and socioeconomic targeting
- 52. What Types of Organizations Have Applied? • Multinational organizations piloting low-cost health care devices • Partnerships between multinational organizations and local manufacturers • Social enterprises providing high quality health care services in peri- urban areas • Faith based organizations delivering revenue generating health services to the poor • Technology companies partnering with health care delivery organizations to pilot and scale low- cost IT systems and platforms
- 53. Awardee Support Technical Assistance Shared Learning Monitoring and Evaluation Investor Readiness
- 54. Further information • http://www.healthenterprisefund.org • Facebook.com/HealthEnterpriseFund • Twitter: @Health_Ent_Fund
- 55. Summary • Market based approaches in Africa can be challenging to scale • Challenge Fund model mitigates some of this risk • Incentivizes greater private sector involvement in BoP markets • Important to provide technical assistance as well as capital • Investor engagement from the start creates a pathway to scale
- 56. Questions colm_fay@abtassoc.com www.shopsproject.org SHOPS is funded by the U.S. Agency for International Development. Abt Associates leads the project in collaboration with Banyan Global Jhpiego Marie Stopes International Monitor Group O‟Hanlon Health Consulting
Hinweis der Redaktion
- Hello and welcome to today’s webinar on The potential of Market-based Models for Reaching the base of the economic pyramid. My name is Caroline Quijada and I am a Principal Associate at Abt Associates. I am also the Deputy Director of the Strengthening Health Outcomes through the Private Sector Project, USAID’s flagship vehicle for private sector programming globally. I am pleased to be with you today as moderator.We now have XX participants who have joined us today.
- This webinar is linked to the upcoming pre-congress symposium at the biennial International Health Economics Association symposium to be held in Sydney in July.Since 2009……
- The objectives of this webinar series is three fold:To encourage wider interest in issues related to private health markets and meeting the needs of the poorTo deepen discussion on key topics that will be presented at the pre-congressAnd finally, to provide opportunities for those that will not be present in Sydney to engage in discussions
- The webinar series is being facilitated by the Future Health Systems ConsortiumThey are being individually organized by a number of organizations including Abt Associates.Today’s webinar is the 3rd in the series. The next
- Much of this work was implemented by SHOPS partner Monitor Group.
- Monitor did similar study in India. Unlike India, none were at scale in Africa (serving100-125k customers per year)Informal – BlueStar franchises in Ghana, CFW shopsLow frills- LiveWellSales agent – health keepers, living goodsM-enabled business- pesinet
- Direct sales agent model contxtualizes the current excitement about agent networks, provides data driven perspective on the conductions and hightlight how the model is applied in health and outlines actionsUpcoming SHOPS primersDirect Sales Agent Models in HealthData driven perspective on conditions under which success is more likelyOutlines recommendations for donors and social enterprisesm-Enabled Business Models and applications for HealthProvides perspective on business model principles in the mhealth spaceIncludes key practices that will assist m-enabled models in reaching commercial viabilityAddition of India’s Market-based Partnerships for Health project to the SHOPS family
- Market-based partnerships for health are defined as commercially viable partnerships between the commercial sector and other public or private sector actors in order to tap into and expand distribution, service delivery and information networks to improve public health outcomes in selected areas.
- As a first step, lets understand the three primary barriers to entry into BoP markets in India:The first being lack of Access to and of information about products and services is a barrier to use especially in rural markets
- Two good example to showcase this is to talk about Oral Contraceptive Pills (OCPs) - while 85% of rural women are aware of OCPs but its use is only 14%. While various interventions have done well in achieving excellent awareness for OCPs, a sheer lack of access has resulted in low use.Various studies on Oral Rehydration Salts have shown that awareness on use of ORS for diarrhea management in rural India is above 80%, however lack of correct information has resulted in just 24% usage in rural India.
- Another significant barrier is affordability. While affordability in low income areas sounds like a no-brainer, this barrier needs to be qualified further. First, highly subsidized or free products or services are often not valued by rural consumers. In addition for high cost or high initial outlay items (like water purifiers or cook stoves), the BOP consumer may be out of reach.
- Adjusting for the special needs of BOP due to irregular cash flows or lack of resources will need to be addressed. Large MNCs like unilever have understood this problem and have introduced small size and thus low priced products for rural markets. For example, smaller sachets.
- I would now like to focus on Key Barriers that manufacturers and marketers face while addressing BoP markets in India.The first such barrier is lower and fragmented demand – Due to barriers explained earlier (access, awareness and affordability) the demand for product and services in BoP markets, in general, is lower. Additionally there is Fragmented demand due to low population density in villages. The rural BoP population is around 700 million people, who live in 600,000 villages across India. What makes these markets more fragmented than is apparent, is the fact that more than 50% of these villages have a population of less than 2000 people. Only an abysmal 6% of these villages have a population of more than 10,000 people. Solution: A) This barrier can be overcome by introducing demand aggregators in the model i.e. entities who are able to aggregate the demand at one point. B) It must also be noted that rural sales is not just about sales alone but also about creating awareness, the solution developed should be able to combine these functions with one entity.A final challenge is the high discovery cost of entering BOP markets. BOP markets behave differently and hence require a deep understanding of the same before an attempt is made to invest in them. A simple solution for this is to work with entities that have acquired knowledge for effectiveness and efficiency
- Having understood the barriers to BoP markets in India, lets now understand the profile of BoP consumers or the UNREACHED.The Unreached can be classified into two broad categories namely – 700 million people who live in rural India and 80 million urban poor who live in towns. While this is simple math, put together these two categories add to up 780 million potential consumers in India alone!
- It is also interesting to note that Public Health Indicators are significantly lower amongst the BOP. Total unmet need for Family Planning for the Urban non poor is 10%, while the same is 14% with Urban Poor and Rural consumers. The same is true for any modern method for contraception and use of ORS for diarrhea management. The difference is substantial for home deliveries, while it is 21% with Urban non-poor it is a whopping 71% in rural areas. In conclusion, if you want make a significant health impact it is important to reach the BoP markets.I hope these examples provide a good insight into the differences in Public Health Indicators between the urban non-poor and the Unreached.
- To promote Market based Partnerships in India, USAID funded two projects. The first being a three and half years project called Market-based Partnerships for Health (which I will refer to as MBPH going forward). MBPH was followed by the Strengthening Health Outcomes through the Private Sector Project or SHOPS, this is a 18 months project focused on scaling up 5 successful partnership models. These programs/models are:Dimpa (which has a focus on Family Planning especially injectable contraceptives)ITC eChoupal Health Initiative (Focuses on over-the-counter family planning and child health products)ORS Rural Health Initiative (An ORS model focusing on child health)And the Advanced Cook Stoves Initiative
- We have done a wide range of work with different interventions but due to the paucity of time I will focus on one model only, to showcase how we have been able to overcome the barriers that I was speaking about earlier. For further information kindly refer to our websites mentioned at the bottom of the screen.
- The ACS Initiative is a commercial partnership between a syndicated distributor with last mile entrepreneurs, a product manufacturer and a Microfinance Institution. Manufacturer – provides high quality products and ensures un-interrupted supply (access)Distributor – aggregates demand and through the Village level Entrepreneur creates awareness (Access and lack of awareness)MFI - addresses the ‘lower ability to pay’ challenge by providing easy-to-pay loans to the MFI clients besides providing the distributor access to its client base. (affordability)
- Firstly, the model that I would like to focus on is the Advanced Cook Stoves Initiative. The ACS Initiative overcomes the barriers of awareness, supply and affordability by establishing commercial partnerships between a syndicated distributor with last mile entrepreneurs, a product manufacturer and a Microfinance Institution. While this model has addressed all three barriers to entry in BoP markets, I will focus on its unique ability to address the ‘affordability’ barrier. As you can see on the slide, three main entities are involved….the manufacturer, the distributor and the Micro Finance Institution. The MFI provides the distributor access to its client base (thus reducing the discovery cost) and provides loans with easy installment to those existing MFI clients who are interested in purchasing the Advanced Cook Stoves. The MFI itself is compensated both by the interest rate from the product loan and product margins offered by the manufacturer.
- Firstly, the model that I would like to focus on is the Advanced Cook Stoves Initiative. The ACS Initiative overcomes the barriers of awareness, supply and affordability by establishing commercial partnerships between a syndicated distributor with last mile entrepreneurs, a product manufacturer and a Microfinance Institution. While this model has addressed all three barriers to entry in BoP markets, I will focus on its unique ability to address the ‘affordability’ barrier. As you can see on the slide, three main entities are involved….the manufacturer, the distributor and the Micro Finance Institution. The MFI provides the distributor access to its client base (thus reducing the discovery cost) and provides loans with easy installment to those existing MFI clients who are interested in purchasing the Advanced Cook Stoves. The MFI itself is compensated both by the interest rate from the product loan and product margins offered by the manufacturer.
- Firstly, the model that I would like to focus on is the Advanced Cook Stoves Initiative. The ACS Initiative overcomes the barriers of awareness, supply and affordability by establishing commercial partnerships between a syndicated distributor with last mile entrepreneurs, a product manufacturer and a Microfinance Institution. While this model has addressed all three barriers to entry in BoP markets, I will focus on its unique ability to address the ‘affordability’ barrier. As you can see on the slide, three main entities are involved….the manufacturer, the distributor and the Micro Finance Institution. The MFI provides the distributor access to its client base (thus reducing the discovery cost) and provides loans with easy installment to those existing MFI clients who are interested in purchasing the Advanced Cook Stoves. The MFI itself is compensated both by the interest rate from the product loan and product margins offered by the manufacturer.
- Firstly, the model that I would like to focus on is the Advanced Cook Stoves Initiative. The ACS Initiative overcomes the barriers of awareness, supply and affordability by establishing commercial partnerships between a syndicated distributor with last mile entrepreneurs, a product manufacturer and a Microfinance Institution. While this model has addressed all three barriers to entry in BoP markets, I will focus on its unique ability to address the ‘affordability’ barrier. As you can see on the slide, three main entities are involved….the manufacturer, the distributor and the Micro Finance Institution. The MFI provides the distributor access to its client base (thus reducing the discovery cost) and provides loans with easy installment to those existing MFI clients who are interested in purchasing the Advanced Cook Stoves. The MFI itself is compensated both by the interest rate from the product loan and product margins offered by the manufacturer.
- Firstly, the model that I would like to focus on is the Advanced Cook Stoves Initiative. The ACS Initiative overcomes the barriers of awareness, suppy and affordability by establishing commercial partnerships between a syndicated distributor with last mile entrepreneurs, a product manufacturer and a Microfinance Institution. While this model has addressed all three barriers to entry in BoP markets, I will focus on its unique ability to address the ‘affordability’ barrier. As you can see on the slide, three main entities are involved….the manufacturer, the distributor and the Micro Finance Institution. The MFI provides the distributor access to its client base (thus reducing the discovery cost) and provides loans with easy installment to those existing MFI clients who are interested in purchasing the Advanced Cook Stoves. The MFI itself is compensated both by the interest rate from the product loan and product margins offered by the manufacturer.
- One of the Key Lessons from both MBPH and SHOPS has been the critical role partnership play in addressing BoP markets. To elaborate on this further, partnerships that are cross sectoral and leverage core competencies of each partner achieve better efficiency both from the point of view of operations as well as commercial viability. The ACS Initiative (as explained earlier) ensures that each partner focuses on its core competency i.e. the manufacturer provides products at a reasonable price, the distributor provides last mile distribution besides creating awareness and the MFI provides financing options. Secondly such partnerships also enable risk-share (the risk being high since BoP markets are new and unaddressed) and allow the commercial sector to explore new and difficult markets.
- Secondly both MBPH and SHOPS leverage distribution platforms to aggregate demand. Due to their focus on urban markets and specialized products large pharma companies will have to move down several layers to address rural markets and therefor such an investment is considered challenging. However, several non-health companies have created robust distribution platforms especially catering to rural markets. Partnering with such platforms provides a cost effective option for aggregating fragmented demand.
- While retailers play a critical role in any market, for BoP market’s retailers’ need to play multiple roles and hence a whole new class of retailers must be created. Retailers need to operate as dual service points (The last-mile retailers bring health products to the unreached and they also drive below-the-line interpersonal campaigns for products like contraceptives that require behavior change). They also need to be incentivized for both demand and supply functions as against traditional retailers.
- Commercial viability in Market based models needs to be understood from the point of view of both the partner as well as the last mile village based entrepreneur. It is pertinent for the entrepreneur to earn sufficient income to stay in the business. To achieve this, it must be noted, that public health products alone cannot provide a sustainable income for the entrepreneur.It is, therefore, important to have a secondary basket of easy-to-sell, high-margin products that can contribute to the entrepreneur’s profitability. In the ACS initiative, the product mix includes lower value, fast moving products such as solar lamps. However incentives need to be designed to ensure focus on primary public health products.
- BoP consumers need customized engagement approaches. A long term and personalized engagement with consumers helps in addressing their concerns and build consumer confidence with both the product as well the brand. High engagement marketing processes that allows the user to “experience” the product are important. It is also important to Customize the retailer profile to account for cultural and/or product related sensitivities. In the ACS Initiative a well structured demonstration process allows for long term personalized (since the VLE is either a local or from a near by village engagement, the potential consumer is able to ‘experience’ and ‘touch and feel’ via an actual live demonstration of the product. The demonstration is customized separately for men (the decision maker) and women (the actual user) thus addressing cultural issues.
- Partnerships that leverage each other’s networks and retain focus on core competencies are more sustainable BOP markets need a specialized class of retailers who deal is a basket of products and play the dual role of creating awareness and last mile deliverySales formats need customization for BOP consumers that permit ‘experiencing’ the product
- Arunesh has described some scenarios where multinational corporations have successfully implemented business models that repackage their products or introduce new delivery mechanisms and distribution strategies, for BOP population segments in India. And as we’ve seen, there are multiple challenges and risks to be overcome.While the BOP market in Africa is substantial with approximately half a billion people living on less than $2 a day, Africa has much lower population density than India, and consequently the economic potential is more thinly distributed, and more difficult to access. As a result, it is much more challenging for MNCs in these markets to develop sustainable models that have the ability to reach scale. However, what is working in Africa is the development of business models designed from the ground up to serve BOP populations. These are new and growing enterprises that are operating in a very challenging economic environment, and usually on very small margins. Not only do they need sources of capital that will help them reach scale, but they also need technical assistance and expert advice that will help them succeed.The SHOPS project has recently launched a challenge fund that is designed to uncover and support innovative health enterprises, as one way to incentivize greater private sector involvement in improving health outcomes in sub-Saharan Africa.
- Challenge funds work on the idea that a donor issues a development challenge in terms of the impact or outcome that they wish to achieve. This is contrasted with traditional development approaches where donors issue a Request for Proposal that can be very specific regarding the mechanism or methodology through which these health challenges are addressed. The objective of the challenge fund concept is to promote innovation and to uncover previously unknown or untested approaches.Enterprises apply to the challenge fund with a proposal of how they would achieve the desired health outcomes or impact. Applicants are free to be creative with the technologies, approaches or methodologies used and can propose activities that are aligned with the applicant’s existing organizational objectives and strategy.Applicants then enter a competitive process where applications are compared to each other to select the best/most innovative approaches based on predetermined eligibility and selection criteria. Winners are awarded with capital grants.
- Challenge funds work on the idea that a donor issues a development challenge in terms of the impact or outcome that they wish to achieve. This is contrasted with traditional development approaches where donors issue Requests for Proposal that can be very specific regarding the mechanism or methodology through which these health challenges are addressed. The objective of the challenge fund concept is to promote innovation and to uncover previously unknown or untested approaches.Enterprises apply to the challenge fund with a proposal of how they would achieve the desired health outcomes or impact. Applicants are free to be creative with the technologies, approaches or methodologies used and can propose activities that are aligned with the applicant’s existing organizational objectives and strategy.Applicants then enter a competitive process where applications are compared to each other to select the best/most innovative approaches based on predetermined eligibility and selection criteria. Winners are awarded with capital grants.
- Challenge funds work on the idea that a donor issues a development challenge in terms of the impact or outcome that they wish to achieve. This is contrasted with traditional development approaches where donors issue Requests for Proposal that can be very specific regarding the mechanism or methodology through which these health challenges are addressed. The objective of the challenge fund concept is to promote innovation and to uncover previously unknown or untested approaches.Enterprises apply to the challenge fund with a proposal of how they would achieve the desired health outcomes or impact. Applicants are free to be creative with the technologies, approaches or methodologies used and can propose activities that are aligned with the applicant’s existing organizational objectives and strategy.Applicants then enter a competitive process where applications are compared to each other to select the best/most innovative approaches based on predetermined eligibility and selection criteria. Winners are awarded with capital grants.
- Challenge funds work on the idea that a donor issues a development challenge in terms of the impact or outcome that they wish to achieve. This is contrasted with traditional development approaches where donors issue Requests for Proposal that can be very specific regarding the mechanism or methodology through which these health challenges are addressed. The objective of the challenge fund concept is to promote innovation and to uncover previously unknown or untested approaches.Enterprises apply to the challenge fund with a proposal of how they would achieve the desired health outcomes or impact. Applicants are free to be creative with the technologies, approaches or methodologies used and can propose activities that are aligned with the applicant’s existing organizational objectives and strategy.Applicants then enter a competitive process where applications are compared to each other to select the best/most innovative approaches based on predetermined eligibility and selection criteria. Winners are awarded with capital grants.
- Base of the Pyramid enterprises at startup stage are often funded from a wide variety of sources. Generally these are small amounts and allow the enterprise reach pilot or proof of concept stage.When an enterprise gets beyond the startup stage, it may be able to access some donor programs, but these are often difficult for small enterprises to engage with given the programmatic and reporting requirements.Where many of these enterprises want to get to, is the next phase, where they have access to commercial capital that allows them to scale their impact. However, without having invested in the systems and capacity to absorb investment from a commercial lender or an impact investor, these enterprises often don’t look like attractive investments. This creates somewhat of a paradox; while there is a large amount of capital out there, and there are many enterprises looking for investment, there is a disproportionately low volume of deals being done. This is because many of these enterprises have not been able to reach the point where they are considered to be investable opportunities. The question mark on this diagram is what has been referred to as the missing middle. The idea is that there is a need for sources of financing that allow enterprises to bridge the gap between startup financing and larger scale investments or commercial lending. These are the questions we are hoping to shed some light on through the HANSHEP Health Enterprise Fund, which is a challenge fund for innovative health enterprises serving Base of the Pyramid populations in sub-Saharan Africa.
- Base of the Pyramid enterprises at startup stage are often funded from a wide variety of sources including business plan competitions, micro-finance providers, capital provided by the founder of the company and maybe some small loans. Generally these are small amounts and allow the enterprise to develop a prototype, or if enough of this funding can be gathered together, a pilot or proof of concept.When an enterprise gets beyond the startup stage, maybe they can access some donor programs, but this capital often comes with specific programmatic objectives rather than strategically building the capacity within the enterprise to scale. Without the ability to make investments in systems, understanding markets and developing partnerships many enterprises never move beyond this project oriented phase. This funding also generally comes with significant reporting requirements that can be burdensome for a small enterprise. Not only do these enterprises need access to some unrestricted (non-project based) sources of capital, they also need technical assistance, such as deep expertise in specific health areas, business management or strategy development.Where many of these enterprises want to get to, is the next phase, where they have access to commercial capital that allows them to scale their impact. However, without having invested in the systems and capacity to absorb investment from a commercial lender or an impact investor, these enterprises often don’t look like attractive investments. This can be even more challenging in the health sector where repayment timelines may be longer in some instances than other sectors, or where there is greater competition from non-profit organizations and the public sector. In impact investment circles this creates a paradox; while there is a large amount of capital out there, and there are many enterprises looking for investment, there is a disproportionately low volume of deals being done. This is because many of these enterprises have not been able to reach the point where they are considered to be investable opportunities. Investors simply don’t have confidence in them yet. The question mark on this diagram is what has been referred to as the missing middle…is there another source of financing that recognizes the challenges that these enterprises face in developing the capacity to scale? Is there a way to provide a combination of capital and technical assistance, with the express intention of building this capacity, and preparing enterprises to move to the next stage. Is it possible to provide funding that supports enterprises in the health areas that we care about, but allows them to do it in a way that makes sense for their business rather than focusing on program objectives dictated by the funder?These are the questions we are hoping to shed some light on through the HANSHEP Health Enterprise Fund, which is a challenge fund for innovative health enterprises serving Base of the Pyramid populations in sub-Saharan Africa.
- Base of the Pyramid enterprises at startup stage are often funded from a wide variety of sources including business plan competitions, micro-finance providers, capital provided by the founder of the company and maybe some small loans. Generally these are small amounts and allow the enterprise to develop a prototype, or if enough of this funding can be gathered together, a pilot or proof of concept.When an enterprise gets beyond the startup stage, maybe they can access some donor programs, but this capital often comes with specific programmatic objectives rather than strategically building the capacity within the enterprise to scale. Without the ability to make investments in systems, understanding markets and developing partnerships many enterprises never move beyond this project oriented phase. This funding also generally comes with significant reporting requirements that can be burdensome for a small enterprise. Not only do these enterprises need access to some unrestricted (non-project based) sources of capital, they also need technical assistance, such as deep expertise in specific health areas, business management or strategy development.Where many of these enterprises want to get to, is the next phase, where they have access to commercial capital that allows them to scale their impact. However, without having invested in the systems and capacity to absorb investment from a commercial lender or an impact investor, these enterprises often don’t look like attractive investments. This can be even more challenging in the health sector where repayment timelines may be longer in some instances than other sectors, or where there is greater competition from non-profit organizations and the public sector. In impact investment circles this creates a paradox; while there is a large amount of capital out there, and there are many enterprises looking for investment, there is a disproportionately low volume of deals being done. This is because many of these enterprises have not been able to reach the point where they are considered to be investable opportunities. Investors simply don’t have confidence in them yet. The question mark on this diagram is what has been referred to as the missing middle…is there another source of financing that recognizes the challenges that these enterprises face in developing the capacity to scale? Is there a way to provide a combination of capital and technical assistance, with the express intention of building this capacity, and preparing enterprises to move to the next stage. Is it possible to provide funding that supports enterprises in the health areas that we care about, but allows them to do it in a way that makes sense for their business rather than focusing on program objectives dictated by the funder?These are the questions we are hoping to shed some light on through the HANSHEP Health Enterprise Fund, which is a challenge fund for innovative health enterprises serving Base of the Pyramid populations in sub-Saharan Africa.
- Base of the Pyramid enterprises at startup stage are often funded from a wide variety of sources including business plan competitions, micro-finance providers, capital provided by the founder of the company and maybe some small loans. Generally these are small amounts and allow the enterprise to develop a prototype, or if enough of this funding can be gathered together, a pilot or proof of concept.When an enterprise gets beyond the startup stage, maybe they can access some donor programs, but this capital often comes with specific programmatic objectives rather than strategically building the capacity within the enterprise to scale. Without the ability to make investments in systems, understanding markets and developing partnerships many enterprises never move beyond this project oriented phase. This funding also generally comes with significant reporting requirements that can be burdensome for a small enterprise. Not only do these enterprises need access to some unrestricted (non-project based) sources of capital, they also need technical assistance, such as deep expertise in specific health areas, business management or strategy development.Where many of these enterprises want to get to, is the next phase, where they have access to commercial capital that allows them to scale their impact. However, without having invested in the systems and capacity to absorb investment from a commercial lender or an impact investor, these enterprises often don’t look like attractive investments. This can be even more challenging in the health sector where repayment timelines may be longer in some instances than other sectors, or where there is greater competition from non-profit organizations and the public sector. In impact investment circles this creates a paradox; while there is a large amount of capital out there, and there are many enterprises looking for investment, there is a disproportionately low volume of deals being done. This is because many of these enterprises have not been able to reach the point where they are considered to be investable opportunities. Investors simply don’t have confidence in them yet. The question mark on this diagram is what has been referred to as the missing middle…is there another source of financing that recognizes the challenges that these enterprises face in developing the capacity to scale? Is there a way to provide a combination of capital and technical assistance, with the express intention of building this capacity, and preparing enterprises to move to the next stage. Is it possible to provide funding that supports enterprises in the health areas that we care about, but allows them to do it in a way that makes sense for their business rather than focusing on program objectives dictated by the funder?These are the questions we are hoping to shed some light on through the HANSHEP Health Enterprise Fund, which is a challenge fund for innovative health enterprises serving Base of the Pyramid populations in sub-Saharan Africa.
- Base of the Pyramid enterprises at startup stage are often funded from a wide variety of sources including business plan competitions, micro-finance providers, capital provided by the founder of the company and maybe some small loans. Generally these are small amounts and allow the enterprise to develop a prototype, or if enough of this funding can be gathered together, a pilot or proof of concept.When an enterprise gets beyond the startup stage, maybe they can access some donor programs, but this capital often comes with specific programmatic objectives rather than strategically building the capacity within the enterprise to scale. Without the ability to make investments in systems, understanding markets and developing partnerships many enterprises never move beyond this project oriented phase. This funding also generally comes with significant reporting requirements that can be burdensome for a small enterprise. Not only do these enterprises need access to some unrestricted (non-project based) sources of capital, they also need technical assistance, such as deep expertise in specific health areas, business management or strategy development.Where many of these enterprises want to get to, is the next phase, where they have access to commercial capital that allows them to scale their impact. However, without having invested in the systems and capacity to absorb investment from a commercial lender or an impact investor, these enterprises often don’t look like attractive investments. This can be even more challenging in the health sector where repayment timelines may be longer in some instances than other sectors, or where there is greater competition from non-profit organizations and the public sector. In impact investment circles this creates a paradox; while there is a large amount of capital out there, and there are many enterprises looking for investment, there is a disproportionately low volume of deals being done. This is because many of these enterprises have not been able to reach the point where they are considered to be investable opportunities. Investors simply don’t have confidence in them yet. The question mark on this diagram is what has been referred to as the missing middle. With the HANSHEP Health Enterprise Fund, we aim to These are the questions we are hoping to shed some light on through the HANSHEP Health Enterprise Fund, which is a challenge fund for innovative health enterprises serving Base of the Pyramid populations in sub-Saharan Africa.
- The HANSHEP Health Enterprise fund was launched in January 2013 in Ethiopia and Kenya. Enterprises have applied for up to $200,000 in grant funding for innovations in service delivery, technology, partnerships and business models.The fund is supported by USAID through the SHOPS project, and by the UK Department for International Development through the HANSHEP Group, a multi-donor consortium focused on harnessing non-state actors for better health for the poor.The fund seeks to support enterprises that directly or indirectly contribute to improved health outcomes in family planning, reproductive health, maternal and child health and HIV/AIDS.
- The HANSHEP Health Enterprise Fund differs from other challenge funds in three major areas:The fund provides not only capital to awardees, but substantial technical assistance in order to address capacity gaps within the organizations being supported by the fund.The fund creates a platform for awardees to engage with investors early on in the process, and technical assistance is focused on increasing investor readiness among the awardeesFinally, the fund specifically focuses on those enterprises that have limited options to access growth capital, that are in the “missing middle”
- The first selection stage is screening out those applications that are ineligible. For the HANSHEP Health Enterprise Fund we require applicants to meet certain minimum criteria:They must be revenue generating. This doesn’t mean that they are necessarily for-profit because we are interested in the activities here rather than the legal form, and we want to make sure that the business model has the potential to be sustainable in the long-term.The next thing that we need to be conscious of when we are awarding grants is that we are not undermining other available sources of financing. So we need to make sure that the applicants are enterprises that are in that growth stage where they need more than microfinance but can’t yet access commercial capital or impact investors and don’t have very many options open to them.Finally, we have to obviously make sure that the enterprises are contributing to improved health outcomes in the priority areas that the donor has identified, are operating in the geographic areas that we are targeting and targeting the poor.In the second selection process, the selection committee will look at a more qualitative assessment of the applicants and compare them against each other. Ultimately, the selection committee is looking for enterprises that have the greatest potential to achieve impact that is scalable, sustainable and replicable.
- So, what is the range of enterprises that have applied to the Health Enterprise Fund?...So, there really is a wide range of organization and partnership types, business models and technologies.
- And this support really is aimed at increasing their investor readiness. It will include direct technical assistance provided by local partners, regional experts and SHOPS project staff globally that is focused on building capacity and implementing best practices in business management and service delivery from around the world.As well as agreeing technical assistance plans with each of the awardees, we will agree monitoring and evaluation plans that will track progress toward operational milestones and focus on the programmatic activities proposed as well as progress towards investor readiness.Many of the awardees will experience similar challenges, and there may be many opportunities to learn from each other, so the fund will provide a learning platform that allows the awardees to share experiences, resources and challenges. This community based platform will also facilitate greater interaction between the SHOPS project and the awardees, and provide opportunities for other interested stakeholders such as investors to participate.
- Over the next year we will be sharing some of these insights and best practices with the global health community through the Health Enterprise Fund website and social media, and we hope you’ll stay connected with the process as we learn more about how these models work to improve health outcomes for the poor.