Caulk and Float Across Streams of Private Capital with Two New Vignettes
Now that we've covered the four lenses for deciding when to mobilize private capital, let's uncover two new vignettes. The first vignette addresses an emerging challenge for healthcare – with donor funding for health expected to decline sharply, how can we engage private dollars which will benefit from better health outcomes?
Bangladesh Smiling Sun Franchise Program (SSFP)
The challenge: To promote greater access to quality health care in Bangladesh, particularly for the poor.
The solution: Chemonics International implemented SSFP by assisting the Smiling Sun network of health service NGOs in developing a fee-for-service social franchising approach, a model that was new to Bangladesh. This enabled the NGOs to develop partnerships, through which they could leverage financial and non-financial support, and thus attract paying customers and simultaneously extend services to the poor.
How it mobilized private capital: SSFP capitalized on the business communities’ growing interest in augmenting their staff’s health benefits as well as boosting corporate social responsibility. Of the $25 million leveraged from public and private sector partners, including the Government of Bangladesh, corporations, personal donations, and multilateral organizations, $7.16 million came from the private sector (essentially an investment in a healthier workforce) and the remaining $18.39 million from the public sector. For example, corporate contributions covered operating costs for three clinics in Sylhet as well as the construction of two Smiling Sun facilities. With more paying customers visiting Smiling Sun clinics, the NGOs were able to generate more program income to help recover their costs of operation.
How it was inclusive: Businesses also participated in SSFP’s fee-for-service model by purchasing health care coverage for employees and their families who previously had no access to health care. Over the life of the program, more than 27 percent of service contracts were with the poor.
How it was innovative: For the NGOs involved, moving away from a reliance on donor funding to a fee-for-service model that could be sustainable was a completely new approach to management and financing.
Lessons learned: A paradigm shift amongst the network NGOs was required to reduce their reliance on donor funds and incorporate “for profit” business strategies. SSFP emphasized a business approach to sustainability, which in turn resonated with private sector partners.
This vignette was submitted by Eileen Hoffman, Director of the Economic Growth and Trade Practice at Chemonics. For more information, please email EGTTeam[at]Chemonics[dot]com.
The second vignette presents a more traditional approach to mobilizing capital: build the opportunity and identify the entrepreneur, and the capital will flow to that opportunity.
Creating Employment in Cashew Processing by Mobilizing Local Investment
The challenge: Many cashews in Senegal are exported in raw form at low prices for processing in India, rather than processed and distributed locally in Senegal. Cashew processing is highly technical and requires machinery and working capital to purchase raw nut inventories – and this requires financing.
The solution: EnterpriseWorks Worldwide and USAID provided technical and business training to support local start-up cashew processing and marketing enterprises, and trained metal shops to manufacture and sell the necessary equipment.
How it mobilized private capital: EnterpriseWorks enabled entrepreneurs to make the business case needed to obtain financing by identifying and advertising the financial opportunity offered by cashew processing and marketing. It also providing the training (on a cost-sharing basis), market research, and availability of equipment needed to make it work.
How it was inclusive: EnterpriseWorks provided a scalable enterprise model that enabled micro-entrepreneurs to launch their own processing and distribution businesses. This created jobs and generated higher profits for farmers.
How it was innovative: Private capital was mobilized as an outcome of identifying a market opportunity and supporting micro-entrepreneurs to pursue that opportunity.
Lessons learned: Sometimes it’s not that complicated. Identifying a market opportunity and then preparing entrepreneurs to pursue that opportunity was sufficient. They were able to get their own financing on market terms – without need for subsidy or guarantee.
This vignette was submitted by Steev Lynn, an independent contractor based in Vermont. For more information, please email sloths[at]sover[dot]net.