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RH Commodity Supplies Financing Study Workstream A: « Mobilizing Additional Dollars « Workstream B: Financing Mechanism Analysis: « Better Money « RH Commodity.

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Presentation on theme: "RH Commodity Supplies Financing Study Workstream A: « Mobilizing Additional Dollars « Workstream B: Financing Mechanism Analysis: « Better Money « RH Commodity."— Presentation transcript:

1 RH Commodity Supplies Financing Study Workstream A: « Mobilizing Additional Dollars « Workstream B: Financing Mechanism Analysis: « Better Money « RH Commodity Supplies Financing Study Workstream A: « Mobilizing Additional Dollars « Workstream B: Financing Mechanism Analysis: « Better Money « RHSC Meeting NY, April 27-28, 2006

2 Developed by DSW based on data from: Ross, John, John Stover and Demi Adelaja, Profiles for Family Planning and Reproductive Health Programmes 116 Countries (2005); UNFPA Achieving the ICPD Goals: Reproductive Health Commodity Requirements (2006); and UNFPA, Global Estimates of Contraceptive Commodities and Condoms for STI/HIV Prevention (2000). Estimated Costs and Donor Support for Contraceptives and Condoms for STI/HIV Prevention

3 CRITERIA for « Additional $ » Approach Produce more $ volumes + More stable and predictable $ Produce more $ volumes + More stable and predictable $ Additional vis-à-vis ODA & existing mechanisms / If possible build upon existing schemes Additional vis-à-vis ODA & existing mechanisms / If possible build upon existing schemes Feasibility / Launch speed Feasibility / Launch speed Visibility and attractiveness / Compelling brief needed Visibility and attractiveness / Compelling brief needed Foster local ownership and country responsibility / Reward performance Foster local ownership and country responsibility / Reward performance Efficiency Efficiency Sustainability Sustainability

4 Possible Sources of « Additional $ » Each with Specific Requirements & +/- Donors & related Organisations Donors & related Organisations Private sector Private sector Philanthropy Philanthropy IFIs IFIs Public, as solidarity contributor Public, as solidarity contributor To be Mobilised Whenever Possible Local Governments Local Governments End-users End-users

5 Range of Approaches investigated Larger $ Volumes 1.International Solidarity Taxes / Lotteries 2.Vertical instruments Ex: Gavi, Global Fund 3.Revolving Funds Ex: PAHO Fund, UNFPA thematic Trust Fund 4.Guarantees / Risk cushions 5.Front-loading Ex: IFFIm 6. Debt-based Tools Ex: IDA Buy-down, Debt Securitization, Swaps More focused $ Volumes 7.Capital Market / Fin. Engineering If & Where feasible 8.Voluntary Contributions Ex: Red, Credit card %, UK bonds lottery 9. PPPs EX: IAVI, FIND $ Generated from the Field 10. MFIs, Social marketing, Performance-Output Roads

6 Possible Routes: Three Examples 1. Revolving Fund Fund is created with initial endowment (Donors and/or others) Fund is created with initial endowment (Donors and/or others) Fund procures and pre-finances RH commodities on optimal terms & conditions Fund procures and pre-finances RH commodities on optimal terms & conditions Participating countries commit to reimburse Fund for supplies + pay fee (PAHO model) Participating countries commit to reimburse Fund for supplies + pay fee (PAHO model) Participating countries who cannot pay for supplies delivered can, under certain conditions, have access to ancillary bridging fund (or to direct ODA support) Participating countries who cannot pay for supplies delivered can, under certain conditions, have access to ancillary bridging fund (or to direct ODA support) +Sustainability / Visibility / Countries made responsible and made to contribute $ - Country appetite for joining? - Country appetite for joining? Link with Workstream B solutions ? Link with Workstream B solutions ?

7 Possible Routes: Three Examples 2. Use Microfinance to expand Social Marketing Provide dedicated loans through MFIs in order to strengthen local RH sales network, including social marketers Provide dedicated loans through MFIs in order to strengthen local RH sales network, including social marketers + Generates more $ from end-users who can afford to pay for RH supplies + Strengthens awareness, advocacy and use of RH -The small end of the $ generation scale -The small end of the $ generation scale Approach which could be combined with larger-scale $ generation effort Approach which could be combined with larger-scale $ generation effort

8 Possible Routes: Three Examples 3. International Air Ticket Tax Tax on air tickets (Can be tailored) Tax on air tickets (Can be tailored) France committed to start July 1 France committed to start July 1 Other countries considering to join Other countries considering to join If enough join and agree on application of funding, potential for sizable and predictable $ If enough join and agree on application of funding, potential for sizable and predictable $ International Working Group working on International Working Group working on i) Implementation details i) Implementation details ii) Use of funding (Including idea of an International Drug Purchase Facility / Not exclusive) ii) Use of funding (Including idea of an International Drug Purchase Facility / Not exclusive) Why not a RH Commodity Compartment ? Why not a RH Commodity Compartment ?

9 MOVING FORWARD Suggestions Preliminary report end of May Preliminary report end of May Workstream B Advisory Group to start providing advice, feedback under Workstream A Workstream B Advisory Group to start providing advice, feedback under Workstream A Aim: To single-out and further develop up to 3 options Aim: To single-out and further develop up to 3 options Final report by end of July Final report by end of July

10 Financing Mechanism Analysis: Better Money Improving efficiencies in the reproductive health commodity financing/procurement system Improving efficiencies in the reproductive health commodity financing/procurement system Focus areas: Focus areas: –Low/middle income recipient countries –Global level donor lens (bilateral & multilateral) Objectives: Objectives: –Smooth external funding volatility (enable long-term planning, minimize chaos in supply chain management system) –Reduce system cost (via price negotiations, advance notice, reduced costly emergency shipments)

11 Research Process Literature review Literature review Advisory Group Advisory Group –Georgia Taylor (Dfid) –Jagdish Upadhyay (UNFPA) –Jacqui Darroch (Gates Foundation) –Kees Kostermans (World Bank) –Wolfgang Bichmann (KfW) Interviews/consultations (13 country representatives, 6 manufacturers, private NGOs, procurement agencies, bilats, & multilats) Interviews/consultations (13 country representatives, 6 manufacturers, private NGOs, procurement agencies, bilats, & multilats) Reviewed and narrowed financing mechanism options Reviewed and narrowed financing mechanism options Analyses: impact, costs, feasibility assessment/system alignment, implementation pathway Analyses: impact, costs, feasibility assessment/system alignment, implementation pathway

12 Pledge Mechanism (1 of 2) Problem: Donor funding volatility/ delays Problem: Donor funding volatility/ delays –Appraisal process delays –Budget cycles Solution: Financing mechanism confirms donor pledge, negotiates MOU with donor, and releases funding for recipient country use. Donor funding replenishes financing mechanism. Solution: Financing mechanism confirms donor pledge, negotiates MOU with donor, and releases funding for recipient country use. Donor funding replenishes financing mechanism. Rationale: Rationale: –Financing mechanism assumes risk – no debt on books –Donors typically follow-through with RH commodities even if not timely –RH commodities relatively small price tag –Phase out once donors provide long-term commitments

13 Pledge Mechanism (2 of 2) Addressable: $35m (max: $69) Addressable: $35m (max: $69) Direct Impact: ~$5m Direct Impact: ~$5m Indirect Impact: Indirect Impact: –Smooth funding & secure product availability Costs: Costs: –Capital costs ~ market size –Default costs ~ risk appetite –Administrative costs ~ structure

14 Minimum Volume Guarantee (1 of 3) Pills Condoms ~60% ~20% ~40% Percent of total 100 % ~ 40 % Total order amount Vendors not providing per- order volume based discounts Vendors per order volume based discounts Orders already at maximum discount volume level Subscale volume orders Target vendors for min volume guarantee Maximum potential impact from minimum volume guarantee Subscale: 6- 11% savings potential if aggregated Suboptimal: 5% savings potential with long- term/volume commitment Illustrative

15 Minimum Volume Guarantee (2 of 3) Solution: Financing mechanism aggregates demand forecasts and establishes preferred price with suppliers using minimum offtake. Users can enjoy preferred price based upon performance (demand ~ offtake). Financing mechanism procures unused products. Solution: Financing mechanism aggregates demand forecasts and establishes preferred price with suppliers using minimum offtake. Users can enjoy preferred price based upon performance (demand ~ offtake). Financing mechanism procures unused products. Rationale: Rationale: –Financing mechanism shares risk of demand forecasts, while providing incentive to improve demand forecasting data –Unused product not necessarily lost if shifted

16 Minimum Volume Guarantee (3 of 3) Addressable: $62 m ($83 max) Addressable: $62 m ($83 max) Direct Impact: Direct Impact: –Cost savings: $ m Indirect Impact: Indirect Impact: –Reduce supply lead time –Guaranteed volume may attract new suppliers and reduce price –Incentive for suppliers to submit products for prequalification increase product quality Costs: Costs: –Administrative costs ~ structure –Unused product procurement ~ risk appetite

17 Next Steps Review findings in Systems Strengthening Working Group Review findings in Systems Strengthening Working Group Assess value in testing assumptions Assess value in testing assumptions Explore pilot option Explore pilot option


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