Credit: Onkar Gotale
With a booming population of 1.3 billion people, India's healthcare system is extremely complex and overburdened. And as the country faces a devastating second wave of COVID-19 cases, some hospitals are struggling to keep up with the influx of patients as the healthcare system shows signs of collapsing.
Across India, inadequate infrastructure, shortages of skilled healthcare workforce, and availability of quality patient care are major challenges. Rising to meet these challenges and reinforce the overall healthcare structure in India will require innovative strategies and could come at a major cost.
As the COVID-19 crisis continues to emphasise the need to focus on the public healthcare sector, one city has recognised the opportunity to provide affordable, accessible, and high-quality healthcare to its citizens. Pimpri Chinchwad, a neighbourhood in the city of Pune and home to 2.5 million people and much of the engineering and auto industries of the region, recently signed a memorandum of understanding with the United Nations Development Program (UNDP) India to co-create India’s first Social Impact Bond (SIB).
Valuing Social Impact
Social impact bonds are partnerships that fund effective social services through performance-based contracts. Rather than the government funding services regardless of the outcomes, in a SIB construct, private investors fund the services and the government repays them based on the results achieved.
In this way, while the private investors earn a healthy return on their investment, that return is less than the government would have spent in a more traditional funding model, creating a situation in which less public money is spent and the funds that are utilised, are spent only on results. These programs have proven effective in the US, UK, and other countries across issues from prison recidivism to primary education.
By setting out clear outcome-based targets at the start of the contract, SIB’s allow for close tracking of progress and ensure transparency for investors. For Pimpri Chinchwad Municipal Cooperation (PCMC), this mechanism also ensures that funds are used effectively and efficiently towards the project and ensure high-quality healthcare services for its citizens.
As part of this innovative financing instrument, PCMC will only have to bear the costs if the project targets are met, creating a result-based financing mechanism that will utilise private capital to fund priority social programs and public welfare projects. Based on a successful track record in designing impact bonds, Palladium will work with PCMC in designing the bond, with the option to bid to lead the implementation of the SIB thereafter.
According to Ron Erasmus, Managing Partner, Palladium APAC Region, Palladium’s strong record of leading global healthcare programs acted as a key factor for this, one-of-its-kind collaboration. “We proudly pioneered the successful design of world’s first Development Impact Bond, ‘Utkrisht’ in Rajasthan, India,” he notes.
“Now we are excited to partner with UNDP and PCMC to design India’s first Social Impact Bond in the Healthcare sector. A SIB will attract more investors from private sectors to fund public welfare projects and thus help meet the investment deficit currently hindering India’s roadmap to SDGs.”
“This is the first time that a government body will act as the ‘Outcome Funder’ in a bond, whereas traditionally most government-funded public projects require large and early investments by the government with a substantial gestation period of outcomes and involve various kinds of risks”, adds Amit Patjoshi, Palladium’s National Lead in India.
“This mechanism also ensures that funds are used effectively and efficiently to improve healthcare services for its citizens while incurring minimum investment risks for the government,” Patjoshi notes. “We hope that this will lead to the development of a successful public healthcare model, which can be adopted by other urban local bodies,” he concludes.
As PCMC commits to providing quality healthcare, the hope is that the impact bond approach will allow for a broader adoption of more innovative approaches and adaptive management in India’s complex healthcare environments where interconnected approaches are required for systemic and overall change.
Learn more about India’s SIB, and contact email@example.com for more information.