NB Health Care

Wednesday
July 19
2017

Trang Tran / Chris Clubb

Addressing Eye Care in Emerging Markets with Blended Finance

The World Health Organization estimates that 39 million people suffer from blindness, of which over half are blind due to cataracts – the clouding of the lens in the eye. Additionally, over 90 percent of blind people live in the developing world. Loss of eyesight from cataracts, which is often curable, has a tremendous negative economic and social impact on low-income families, often reducing or eliminating the ability of at least one family member to earn an income. Bringing affordable eye care to the poorest people worldwide is a critical development need.

Unfortunately, traditional cataract surgery is often expensive and unaffordable for those most in need. The Aravind Eye Care System in India has pioneered an affordable eye care model, to lower the cost of cataract surgery by improving operational efficiency and using the profits from higher-income patients to subsidize care for lower-income patients.

The model recognizes that unlike other procedures, cataract surgery is highly repetitive with little variation, and the majority of costs are fixed (e.g., equipment). This means the more patients you treat, the cheaper each surgery will become. In economics, this is often referred to as economies of scale. Further, since the same procedure is performed over and over again, aspects such as cost projections, facility setup, staff training and operating methodologies can be easily standardized and replicated. This allows hospitals utilizing the affordable eye care model to treat low-income patients at little or no cost. However, while proving incredibly successful, the affordable eye care model has not been replicated enough to address the substantial market need.

 

Sixty eye care hospitals in 10 years

Expanding access to health care in emerging markets is crucial to achieving the UN Sustainable Development Goals, which is why Convergence decided to support GlobalVision to establish a global network of more than 60 eye care hospitals over the next 10 years. As part of Convergence’s Design Funding pillar, GlobalVision was awarded a grant to build on the affordable eye care model, which draws on strategies from the microfinance sector.

GlobalVision will oversee and provide financing to the network of for-profit eye care hospitals by raising more than USD $300 million in capital from public, philanthropic and private sources over the next 10 years. Each hospital will follow standardized operations and governance, be commercially self-sustaining and be led by local staff. GlobalVision has a robust project pipeline in key markets, with construction of the first hospital in Vietnam already scheduled for later this year.

GlobalVision is the seventh grantee Convergence has awarded to date. Convergence will award a minimum of CAD $10 million (approximately USD $7.7 million) in grants over the next five years, with initial funding provided by the government of Canada. Grants have already supported clean energy and smallholder livelihood projects in Indonesia and employment integration for Syrian refugees, among other projects.

 

Socioeconomic impact via blended finance

Convergence found GlobalVision compelling because of its significant potential socioeconomic impact, as well as its strategic blending of different forms of capital. Convergence’s mission is to support and promote the field of blended finance. To us, blended finance means the catalytic use of public and philanthropic funds to mobilize private sector investment into global development. Simply put, the presence of public and philanthropic parties at the table helps make a project or deal happen, which would otherwise receive little or no interest from the private sector.

GlobalVision blends grants, equity and debt over time to support different stages of growth for new hospitals. To set up each hospital, GlobalVision will channel grants to support initial market adaptation and startup expenses. As the hospital begins operations, equity will be used to support early operations and capital expenditures, until the hospital becomes profitable. Once a track record of profitability is established, debt will be used to scale up the hospital’s operations. By blending capital over time, this replicable strategy leverages public and philanthropic funds to de-risk startup hospitals in order to attract socially minded investors, and eventually private capital, while maintaining its social mission.

We believe that GlobalVision will be a prominent example of how blended finance can play a role in addressing health care in the poorest parts of the world, ultimately bringing better health and well-being to those who need it most.

 

Trang Tran is new products associate and Chris Clubb is managing director of new products and knowledge at Convergence.

Photo courtesy of Aravind Eye Care System via Flickr

 


 

Categories
Entrepreneurship, Health Care, Investing, Technology
Tags
affordable healthcare, alternative finance, Base of the Pyramid, entrepreneurship, global health, healthcare technology, poverty alleviation, public health, social enterprise, social entrepreneur, social entrepreneurship