Alan Main is a member of the HEAL Fund Investment Committee and Shareholder in Bamboo Capital Partners, the Asset Management arm of Palladium’s Impact Investing business.
A year since its emergence in Wuhan China, COVID-19 has shone a spotlight on the discrepancies in the quality of healthcare between rich and poor countries.
It has not created the level playing field that some commentators predicted. On the contrary, it has highlighted how large swathes of the global population struggle to access a decent standard of healthcare. Many health systems around the world have left people without access to critical healthcare during the global lockdowns.
As impact investors, we are working to devise solutions that bridge this gap of inequality and improve access to healthcare for the world’s most marginalised communities in both emerging and frontier markets. Philanthropic funding is vital for emergency relief, but it will not be enough to address the systemic cracks which were widened in the wake of COVID-19.
A decade ago, Bamboo Capital Partners started out by investing in physical infrastructure development, for example, chains of hospitals and pharmacies. While our investments in this space improved access to healthcare in challenging markets, the financial returns were difficult to earn.
We learned that investing in physical infrastructure is very challenging if you don’t include technology in the equation – for example, medical devices and tele-medicine. The promise of leveraging emerging digital and health-tech solutions has been touted for years, but never has this resonated more strongly than during the COVID-19 crisis. The pandemic highlighted the vital role that technology solutions can play in enabling more efficient and fit-for-purpose care, and we are intent on supporting innovative solutions to that end.
However, this is uncharted territory. These investments are riskier than solely investing in mature segments of the market, such as physical infrastructure. Therefore, to convince private and institutional investors to deploy capital into technology-based solutions, we are pioneering a new approach.
Private Sector Capital for Early-Stage Healthcare Innovators
Bamboo supports early-stage enterprises bringing transformative innovation to health systems in emerging markets to engage with those they serve. By supporting early-stage innovators, new private sector funding can be catalytic in encouraging the development of innovative solutions and technologies, filling gaps within traditional approaches to strengthen health systems.
Our experience has highlighted that these innovators cannot be fostered by traditional “pull” capital, but need a “push” in the form of upfront capital to support innovations early in the entrepreneurial cycle. This innovator-centred approach targets a specific gap in how global health interventions are supported and accelerates healthcare transformations in emerging markets.
The “push” is provided in the form of a “first loss” tranche of a blended finance investment vehicle. The first loss is designed to encourage and protect senior tranches of funding. Any loss in the investment vehicle is absorbed by investors in the first loss – typically organisations in the public sector, such as governments, not-for-profits and corporate social responsibility programs. For private and institutional investors in the senior tranches, returns are market-based and the risk-reward is enhanced because of the first loss protection.
The main advantage of blended finance is that it allows multiple actors in the private and public sector to invest alongside one another in the same investment vehicle. This ensures that everyone sticks to the mission of generating real and granular social impact in emerging markets, channelling investment where it is most needed and most efficient while offering risk-adjusted, market-based returns to private and institutional investors.
Blended finance is all about strategic partnerships
It respects the type of capital available, makes it highly efficient, and encourages all participants involved to do what they do best to optimise the expertise and resources available, while staying strongly tied to impact outcomes. It combines the technical expertise and in-country infrastructure of public sector actors such as governments and NGOs, with the fund management know-how and expertise of the asset management industry to ensure institutional investors yield both impact and a risk-adjusted return from their initial investment.
There has never been such an important opportunity for private sector investors to play a pivotal role in the transformation of health systems in emerging markets. They have an opportunity to support promising innovations determined to pivot current health systems to become more accessible, efficient, and resilient. The pandemic makes it ever clearer that new partnerships are necessary not only for a swift recovery from the current crisis but to improve and future-proof health systems in emerging markets for the next generation.
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