Alternative Financing for Pharmacy Leads to Improved Access to Sanitation and Hygiene Products
Amakelech Lulu is no stranger to winning. Founder of Gishen Pharmacy in Addis Ababa, Ethiopia, she won the 2019 Invest2Impact East Africa competition, which included 100 women-led businesses selected based on their potential to achieve growth and contribute to women’s economic empowerment. In July 2022, she also was awarded a certificate of merit in recognition of her exemplary professional service for best Community Pharmacy Practices by the Ethiopian Pharmaceutical Association. Despite her success, even her business was not immune to the economic impact of COVID-19.
For Gishen Pharmacy, the support Lulu received from USAID CATALYZE has been crucial in its recovery from the drop in annual sales caused by COVID-19. To minimize the impact of economic shocks, including COVID-19 and political instability, USAID CATALYZE MS4G in Ethiopia uses a market systems approach to address the challenges of small- and medium-sized enterprises (SMEs) in food security and water and water security, sanitation, and hygiene (WASH) sectors. MS4G works with nine Business Advisory Service Providers (BASPs) under Pay-for-Result (P4R) awards to support 100 growth-oriented companies, to increase their sales and revenue by at least 10% within a year of receiving assistance.
Amakelech Lulu is excited about the support she is receiving from Target Business Consultant PLC, a BASP contracted by CATALYZE MS4G. In August 2021, MS4G signed a market-based P4R contract with Target to accelerate the capacity and growth of SMEs. Gishen Pharmacy is one of the six enterprises Target selected to increase their sales and revenue, leading to sustainable employment for youth and women, and increased access and use of quality WASH products in Ethiopia.
Lulu said, “COVID-19 had a devastating effect on our business. Our sales and revenue dramatically dropped, from close to $1 million in 2019 to $600,000 in 2022. We had to let go half of our staff members because of the drop in sales. Since COVID-19, our sales of WASH-related products have dropped by 15–20% of our total revenue. Our suppliers increased the prices of their products due to a shortage of imported raw materials leading to price hikes, which made the final products unaffordable to the public. So, the support from MS4G was timely and very much appreciated from the beginning.”
Gishen Pharmacy, established in 1994, has eight branches in Addis Ababa and 70 employees, 42% of whom are women. Although the pharmacy focuses on selling pharmaceutical products, 40–50% of its revenue comes from a wide range of sanitary and hygiene products, such as sanitizers, diapers, sanitary pads, cosmetic soaps, hydrogen peroxide, alcohol, and household cleaning materials. Ensuring access to these products is critical to health and well-being, particularly for women who rely on the products for menstruation hygiene and for the hygienic care of their children.
To enhance Gishen’s performance and product/service delivery and inclusion, Target first conducted a diagnostic assessment that identified the major strengths and weaknesses of the company. The exercise was relevant to clearly define the business offer, its target segment, the root causes of its challenges, and viable solutions moving forward.
Following an agreement with Gishen, Target provided training on competitiveness and marketing, inventory management, customer care, and finance to improve the efficiency of the business. In addition, Target provided advisory support on alternative financing to meet the pharmacy’s financial obligation with suppliers and improve the company’s access to credit.
One key challenge of Gishen was its inability to access conventional credit due to the banks' liquidity problems and the company's weak collateral base. To address these issues, Target and Gishen agreed to implement two approaches: using a special supplier credit arrangement and seeking additional equity investors.
Getnet Haile, the Managing Partner of Target Business Consultants PLC, said, “The special supplier credit arrangement involved engaging with interested suppliers in a profit-sharing scheme, where suppliers enjoy a better price for their products by providing extended credit limits. Our team provided support in designing agreements for this special engagement and gave advice on how to manage the transaction in compliance with the country’s tax laws.”
Lulu added, “The support is already changing the way we operate. Now we have an annual work plan, a restructured, more efficient accounting system, well-functioning credit arrangements with our suppliers, and improved customer service. We expect a new partner to join the enterprise to raise our capital by 49% or more before the end of 2022.”