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Bridge loans close gap between money pledged and received
NEW YORK (Thomson Reuters Foundation) - Faster is better and, when it comes to delivering humanitarian aid, it can be critical.
A new public-private financial partnership aims to shrink the lag time between donor commitment and aid disbursement that often proves costly in terms of lost purchasing power for supplies and, more importantly, lives.
Pledge Guarantee for Health (PGH) is a programme designed to give aid recipients access to bridge financing so that they can start using funds committed by donors before the funds actually are disbursed. In many cases, traditional disbursement may take a year or more.
Once a donor makes a commitment, an aid recipient using PGH essentially will receive a line of credit for the amount of the commitment with the United States Agency for International Development (USAID) and the Swedish International Development Cooperation Agency (SIDA) guaranteeing credit for half the funds and commercial banks guaranteeing the other half.
After two years as a pilot programme, PGH, which was developed by the United Nations Foundation, entered a new phase last Friday with the announcement of $100 million in loan guarantees for aid recipients on the closing day of the two-day 2013 GBCHealth Conference in New York.
"Pledge Guarantee for Health works because it delivers aid faster, saving millions of lives," said UN Foundation president and CEO Kathy Calvin in a statement. "While the financial mechanisms may be complex, the goal of PGH is simple: to quickly and effectively reduce deaths from easily preventable diseases."
Members of GBCHealth, an international coalition of more than 230 companies promoting global health, are among those participating in the five-year partnership, which is geared to expedite the purchase and delivery of life-saving supplies, such as contraceptives, anti-malaria bed nets, vaccines and other medicines.
Under the PGH scheme, aid recipients can not only begin using funds more quickly but, because their suppliers should receive prompt payment, they can negotiate better prices.
GBCHealth members, such as U.S.-based Merck & Co., Inc. and Switzerland's Vestergaard Frandsen, Inc., have pledged to provide price discounts to aid recipients who use PGH to purchase their drugs, anti-malaria bed nets and other supplies.
According to the United Nations Foundation, during its two-year pilot programme the PGH programme scored a number of successes. For example, it accelerated the delivery of $4.8 million in aid to Zambia by more than six months, enabling the distribution of anti-malaria bed nets to 1.6 million people before the rainy season.
It also expedited the purchase of more than 600,000 contraceptive implant devices in Ethiopia, doubling the amount that could be purchased without the PGH programme, and raising access by 18 percent for over 3 million women.
According to PGH research, the net savings realized through the plan on a $3 million grant could be as much as $600,000 due to improved efficiency in logistics and delivery.
That $600,000 translates into 140,000 more anti-malaria bed nets, 3.8 million doses of antiretroviral drugs, 20 million condoms or 11 million doses of anti-tuberculosis drugs, according to PGH.
In a statement, Aron Betru, managing director of PGH, said: "Leveraging innovative financing, we hope to help programmes achieve more impact with each deal, helping every donor dollar reach the end-user faster and with more value."
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