Opinion: Innovative finance doesn’t mean reinventing the wheel

 

A more prosperous, secure, sustainable, and fair future for 2.4 billion people. That is the shared vision of leaders from 52 nations in London for the Commonwealth Heads of Government Meeting, as they come together to discuss how to build on strengths in the face of global challenges, toward a common future.

But while there is broad agreement on where to go, what is less clear, is how to pay for it.

We know that we need to go from the billions of dollars we currently have available to the trillions of dollars we need to achieve our sustainability goals, for both development and climate.

We know that government aid budgets alone cannot get us there and we know that more funding will need to come from institutional capital and the private sector. Innovative financing models appear to hold the key as to how we do that. But in the hunt for solutions, we don’t have to reinvent the wheel.

The fact is, innovative financing as a concept is not new; we have been looking to novel and creative models for more than a decade, and in some cases, with great success. So, while there is a need to look to other solutions, such as blended financing — which involves the strategic use of public investment and philanthropy to mobilize additional commercial finance to help the world’s poorest people — we also need to look to existing success stories and see how we can replicate them.

Sometimes the solution can be something quite simple.

As finance minister in Nigeria, I introduced measures to regularly publish the government’s monthly accounts in a national newspaper, to increase transparency and reduce corruption. Simple but effective. And when we replaced a leaky, cash-based payroll system for civil servants with a biometric electronic payment system, the reduction in corruption saved the government more than 1.1 billion.

Similarly, in the world of childhood immunization, there are existing models with a proven track record of leveraging additional private capital in ways that amplify global health outcomes.

The International Finance Facility for Immunisation is one powerful example of this. Established in 2006, this institution was created as a means of accelerating the impact of long-term donor commitments by turning pledges into funds. IFFIm does this by issuing “vaccine bonds” on capital markets — making the funds immediately available.

By 2020, this approach, known as frontloading, is expected to have enabled IFFIm to disburse approximately 3.5 billion in funds toward life-saving vaccine programs through Gavi, the Vaccine Alliance. By harnessing the power of private sector capital through bond markets, this model has enabled Gavi to make vaccines more widely available.

With Gavi’s Advance Market Commitment for pneumococcal vaccines, donors commit funds to guarantee the price of vaccines for a predictable number of years to come once they have been developed. These financial commitments provide vaccine manufacturers with an incentive to invest in vaccine research and development, and to expand manufacturing capacity. In exchange, companies sign a legally binding commitment to provide the vaccines at a price affordable to developing countries in the long term.

Since its launch in 2007, the AMC has helped significantly reduce the price of the pneumococcal conjugate vaccine, which protects children from pneumonia, the single-biggest killer of children under the age of 5. This commitment has enabled more than 109 million children to receive the vaccine.

While both of these models are innovative, they are far from experimental. These solutions are tried and tested, with clear and proven impact. So much so, in fact, that they are now being emulated elsewhere, beyond immunization.

The International Commission on Financing Global Education Opportunity, set up to encourage investment in education in developing countries, is now at an advanced stage of creating its own version of IFFIm.

Other IFFIm-inspired models are also being explored to improve nutrition in developing countries and support the prevention of future epidemics. At the same time, a new version of the AMC is being looked at by other agencies as a way to help reduce child mortality.

The point is, innovation doesn’t always have to mean coming up with an entirely new solution. Sometimes it can pay to look around at what’s already out there and working.

During World Immunization Week — following the Commonwealth leaders meetings to discuss how they can protect their citizens from infectious disease, poverty, illiteracy and climate change, and how to pay for it — remember that we don’t just need innovation, we also need imitation and adaptation.

  • Ngozi Okonjo-Iweala is currently chair of the Board of Gavi, the Vaccine Alliance and senior adviser at Lazard. She is also chair of the board of the African Union’s African Risk Capacity, an innovative weather-based insurance mechanism for African countries.
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