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  • The Health Finance Institute

Promising tools to close the NCD financing gap

How blended finance can convince risk-averse private capital to invest in healthcare, especially tackling NCDs, through carefully structured instruments that promise steady and sustainable returns.

The covid-19 pandemic has reinforced the need for additional investment in population health.

Increased urbanisation, lifestyle changes, and a demographic shift towards an ageing population globally have led to an increase in the incidence and mortality of non-communicable diseases (NCDs). Many low- and middle-income countries (LMICs) face a double burden of disease as they continue to also battle communicable diseases. The World Bank cautions that if current trends continue, as many as five billion people, many of whom live in LMICs , will be without healthcare coverage by 2030. Traditional donor assistance for NCDs has remained stubbornly stagnant, at under 3% of development assistance for health, for more than a decade. Furthermore, the chronic disease burden depresses global economic growth, as much as a recession every year.

The consequences of the current health funding gaps and the global NCD epidemic have become more evident since the start of the covid-19 pandemic in early 2020. Chronic conditions such as cardiovascular disease, diabetes and hypertension have placed a disproportionate burden on health systems worldwide because individuals with NCDs experience increased severity of infection and risk of death from covid-19. Moreover, the pandemic has reinforced the need for additional investment in population health and health system infrastructure. As several countries continue to grapple with control of covid-19 and its effects, many have turned their attention to building long-term health system resilience.

The United Nations estimates that the achievement of health-related Sustainable Development Goals (SDGs) would require an annual investment of US$100 billion. Investments from traditional sources, such as development aid, will not be sufficient to achieve SDG 3 for health and well-being among all age groups, and specifically SDG 3.4, which calls for a one-third reduction in premature mortality from NCDs. The Organisation for Economic Co-operation and Development (OECD) and the United Nations Capital Development Fund (UNCDF) further estimate that the covid-19 crisis will result in a US$700-billion decline in external funding for developing countries. In the light of these challenges, innovative finance solutions are needed to attract more private capital to address NCDs.

One such solution is blended finance, defined by the OECD as “the strategic use of developmental finance for the mobilisation of additional (commercial) finance towards sustainable development in developing countries”. Commercial finance includes both public and private sources invested with the intention to earn market-rate financial returns. Between 2012 and 2015, US$81 billion in private finance was directly mobilised by Official Development Assistance. This approach, however, has been slow to take hold in the health sector. Only 6% of all blended finance transactions have been health-related, but this amount is slowly increasing with the health sector accounting for 19% of transactions currently seeking funding. Given these data and the current health challenges, overlaid by covid-19, a recent report by Convergence—a global network for blended finance that generates data, intelligence and deal flow reports—suggests it is time to scale blended finance for health.

Blended finance is at the heart of innovative finance solutions, structured finance approaches, and public-private partnerships. Source: Health Finance Institute

Of the 83 blended finance transactions found in the Convergence database from 2009 to 2021, 36 were related to the health sector and valued at about US$12.3 billion (some funds were invested in the health sector alongside other sectors). Only three focused exclusively on NCDs compared to 11 that were dedicated specifically to maternal, newborn, and child health (MNCH). Most transactions either addressed both communicable and non-communicable diseases or did not specify a disease of interest.

Blended finance transactions by sector. Only 6% of blended finance transactions are in the health sector, and of these, the majority do not address NCDs. Source: Convergence

Of the 33 blended finance transactions in the health sector, the Convergence database describes 12 as funds (33%), seven as facilities (19%), seven as companies (19%), five as projects (14%), and five as impact bonds (14%).

Source: Convergence.

Funds were by far the most common type of blended finance vehicle used, although the average transaction value was US$224 million (range of US$14 million to US$1 billion) compared to US$1 billion for facilities.

The largest transactions recorded in the health sector were two facilities: the International Finance Facility for Immunisation (US$5.2 billion) and the Advance Market Commitment for Pneumococcal Vaccine (US$2 billion). All facilities were pharmaceutical or vaccine delivery solutions, with four of the seven specifically targeting vaccine delivery for communicable diseases. Each of the seven facilities had a multi-country focus.

The five transactions recorded as companies had an average value of US$202 million, with a single company in the biotechnology space, Immunocore, achieving US$1 billion in value.

Impact bonds had the lowest average transaction value at US$10 million (range of US$2-28 million). Four of the five impact bonds had a single-country focus, and the largest (US$28 million) was deployed across three countries: Nigeria, Mali, and the Democratic Republic of Congo. Three of the five impact bonds were disease intervention specific, related to cataracts, physical rehabilitation, and pre-term and low-birthweight babies, respectively.

The five transactions described as projects had an average value of US$165 million (range of US$10-475 million).

Source: Convergence data, author analysis

Geographic distribution of blended finance investments

The average value of blended finance transactions is almost nine times more for multi-country deployment compared to single-country deployment.

Source: Convergence data, author analysis.

Of the 36 blended finance investments connected to the health sector, 16 were based in Africa, three in Asia, one in South America, one in North America, and one in Europe. The remaining 16 investments were based in more than one continent. The countries with the most interventions were Kenya (8) and Nigeria (7).

Trends in the health sector

Despite the scarcity of blended finance in the health sector (compared with other sectors), the OECD’s 2018 blended finance survey reports ‘growing interest’ in the health sector following the adoption of the SDGs, particularly SDG 3. The survey indicates that while transactions targeting the health sector have been fewer, there have been several large-scale operations with an average transaction size of US$596 million.

While communicable diseases and MNCH have attracted dedicated blended finance instruments, NCDs attracted fewer and smaller transactions. Only three of the 36 health-sector transactions exclusively targeted NCDs: Clinicas Del Azucar (US$6 million) focused on diabetes; Cameroon Cataract Bond (US$2 million); and ICRC Programme for Humanitarian Impact Investment (US$28 million). This, perhaps, reflects that many donors, who are often the key sponsors of these transactions, are more mission-aligned with MNCH needs and infectious diseases than NCDs.

There are several reasons why infectious diseases and MNCH command more attention from donors, including the lack of immediate risk to others from NCDs (compared to infectious diseases), the perceived high cost, low awareness and capacity of low- and middle-income countries (LMICs) to respond to the NCD epidemic, and the thinking that the responsibility for addressing NCDs lies with personal behaviours or the public sector.

If applied to NCDs, coordinated donor investments and advocacy could create a virtuous cycle, in which small investments could lead to increased attention and financial backing for NCD initiatives.

There is a belief in some sections of the blended finance community that investment in the health sector may lead to diversion of philanthropic funding, particularly in low-income countries (LICs) that rely heavily on development assistance. They question whether blended finance, therefore, may cause more harm than good in the effort to attain SDG 3, and call for more evidence of the impact of blended finance.

In their report on blended finance for LICs, the OECD and UNCDF emphasise the importance of using blended finance in a way that strengthens local markets and their capacity to attract funding. This can be done through blended finance vehicles that mobilise local investments for self-sustainable projects and companies, which can help LICs reduce their dependence on aid in the long run. Current financing sources are not sufficient to close the development funding gap; with prioritised support for local infrastructure and capacity, blended finance can be one of the strongest tools in achieving SDG 3.4 in low-resource contexts.

However, there is a need to demonstrate and disseminate the effectiveness of blended finance mechanisms, especially because more than 40% of transactions do not publicly report their impact.

Why blended finance for healthcare

Convergence data show that the health sector accounts for only 6% of reported blended finance transactions and, among these, few focus exclusively on NCDs. This, in turn, reflects global trends in development financing, with the largest deals concentrated in infrastructure, finance, and relatively smaller inflows into the social sector. However, blended finance is well suited for the health sector as, among other reasons, it could offer a credible long-term solution to the funding gap for NCDs by attracting additional private capital by creating new markets and reaching underserved beneficiaries.

The International Finance Corporation reports that its blended finance commitments saw a ratio of concessional to commercial capital of 1:9 (that is, leverage) in deals during 2014–16. The presence of concessional capital serves as an assurance to private funders.

Here are some reasons why blended finance holds significant potential to bridge the NCD funding gap.

Sustainable source of funding: Chronic health conditions and NCDs are long-term concerns for individuals and the health systems that treat them. Therefore, they require long-term funding solutions. Blended finance could be a sustainable source of funding for NCDs because, by design, it mitigates the risk of fluctuating development assistance from year to year and, more broadly, the risk of ‘donor fatigue.’ Development assistance for health (DAH) grew annually at 1% between 2010 and 2017; and while DAH will likely remain available, a significant future expansion of the funding pool is not guaranteed. Blended finance approaches also look for investment opportunities with long-term commercial viability and the eventual ability to independently attract commercial capital, even if concessional funding is required in the immediate term.

Risk mitigation: Often private investors are deterred by the perception of high-risk investing environments in many of the countries that need NCD funding the most. However, as demonstrated in other sectors, blended finance can reduce financial risks to private capital providers, and ‘non-financial’ tools such as advisory services and technical assistance can help reduce investment risk.

Combining direct financial mitigation tools, including subsidies and first-loss capital, with advisory services and technical assistance can catalyse the successful participation of private capital and increase the chances of projects reaching commercial viability.

Broad applicability across the health sector: Compared to pure philanthropic funding, which is often limited to initiatives aligned with donors’ missions, blended finance may provide flexible and adaptable options for a variety of health interventions. Blended finance strategies can be applied across the spectrum of NCD-focused interventions, ranging from short-term large-volume supply chain transactions to infrastructure projects that are capital-intensive and require long-term commitments.

Wider economic savings: Given the macroeconomic burdens of NCDs, specifically loss of human capital, lower productivity, and the need for extensive resources to treat and manage NCDs, investing in NCD interventions can secure wider cost savings for economies and increased human capital returns. Blended finance can play this role well. The WHO released a report with “Best Buys” interventions for NCDs in 2017 which include glycaemic control for diabetes and counselling for individuals who are at moderate to high risk of heart attacks or strokes. For every dollar invested, NCD Best Buys are estimated to result in $5.6 in economic returns and $10.9 in social returns.

Role of geography

Average blended finance transaction values are approximately seven times higher for multi-country endeavours. This is not surprising because, when investing in the health sector, the private sector struggles to generate a sufficiently large deal pipeline to justify transaction costs. Many health and financial systems in LMICs lack sufficient bankable deals to attract the private sector. A regional platform approach to funds and facilities can help increase the size of NCD-focused blended finance transactions and meet institutional investors’ minimum investment thresholds.

Geographically, blended finance health transactions are heavily concentrated in sub-Saharan Africa—a region that carries a disproportionate global disease burden and has the lowest health coverage.

Blended finance instruments

A wide range of financial instruments have been used in the health sector. Bonds and guarantees may be one of the means of scaling NCD solutions. In particular, ‘advance market commitments’ and ‘volume guarantees’ can be used, for example, to help LMICs procure affordable antihypertensives, other cardiovascular drugs, and oncology drugs to lower the disease (and economic) burden. In an ‘advance market commitment’, sponsors guarantee that if a suitable product is developed then they would buy and supply it to LMICs. Under a ‘volume guarantee’, the buyer agrees to procure a certain amount of product from the seller over a period of time, often leading to lowered prices and assured supply. Donors and development finance institutions have ample experience sponsoring these facilities and would face minimal challenges in applying them to NCDs.

Impact bonds have been used for specific health interventions, focused on healthcare delivery, usually in a single country, and are typically smaller.

Looking ahead

Pharmaceuticals and commodities have the largest average transaction sizes, possibly because these are easy to deploy across multiple countries. Moreover, unlike healthcare delivery interventions, they are not that dependent on the nuances and limitations of different health systems. Funds have been used for a variety of health projects, from pharmaceutical and medical device manufacturing to health service delivery.


The opinions expressed are those of the author and do not necessarily reflect the position of Re:solve Global Health.

Andrea Feigl, PhD MPH, is founder and CEO of Health Finance Institute, as well as scientific adviser to the Lancet Commission on NCDIs and Poverty. Previously, Feigl was a health economist with the OECD and at the Harvard TH Chan School of Public Health.

Jenna Patterson, PhD MPH, is the lead Health Economist at the Health Finance Institute. Previously, Jenna has worked across public and private sectors with the aim of bringing together key stakeholders with a unique approached in valuing and financing healthcare.

Rikke Møller Nedergaard, MA, MPH, is a mixed-methods researcher and a Project Manager with the National Health Services in England. She was previously a Public Health Fellow at the Rollins School of Public Health.

Oyeyinka Kanyinsola, Co-Founder/COO of Wala Digital Health, MPH (Health Management) graduate from the Harvard T. H. Chan School of Public Health.


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