WASHINGTON — Two new financing mechanisms aim to inject private capital and creativity into reducing preventable blindness in developing countries.
Worldwide, about 253 million people are visually impaired, including 36 million who are blind, according to the World Health Organization. Some 80 percent of global blindness is preventable, including from cataracts, one of the leading causes.
Two new mechanisms, one launched last week, and the other a few months ago, are aiming to test whether development impact bonds and a private investor funded holding company can help bring an injection of capital and new partners to address the dearth of eye care in many places around the world.
New data published on World Sight Day reveals that progress on ending the leading cause of blindness in developing countries has been at a near standstill since 1990. The rate of blindness is set to double by 2030, affecting women disproportionately.
Their launches follow a decade of experimentation from businesses and debt funds, working to prove the viability of providing eye care services, in particular cataract surgery, to the poor, largely using sliding scale payment models. If the new DIB and private holding company succeed, they may point to new ways that partners can work together to finance eye care in developing countries and prove the sustainability of business models in new environments.
“We are going to have to think very creatively if we are going to achieve what we think are achievable goals … including a need to think differently about money,” said Brian Doolan, the CEO of the Fred Hollows Foundation, an organization focused on treating and preventing blindness.
The Cameroon cataract development impact bond
The Cameroon Cataract Development Impact Loan launched last week with the aim of delivering 18,000 cataract surgeries over five years in Cameroon. The DIB hopes to meanwhile improve the country’s local capacity and skills to address eye care problems. The country has a backlog of about 115,000 cataract surgeries, and just three ophthalmologists per 1 million people, compared with a global average of about 31 per 1 million people.
The Overseas Private Investment Corporation will invest $2 million to finance the project, through a hospital run by the Africa Eye Care Foundation. The Netri Foundation will also inject upfront capital. The Conrad N. Hilton Foundation, The Fred Hollows Foundation, and Sightsavers are the outcome payers that will provide returns for investors based on the success of the hospital.
If the hospital succeeds in providing 18,000 quality cataract surgeries, as determined by an independent evaluator using WHO standards, OPIC will receive an 8 percent return. If the project doesn’t meet targets, OPIC will still get a 4 percent return, an unusual set up mandated by the agency’s regulations on minimum earning levels. The other investor, the Netri Foundation, has decided to forgo any interest payment.
Prior to this bond, the Hilton Foundation had been looking to explore using philanthropic dollars to catalyze innovative financing, said Justin McAuliffe, a program associate at the foundation. The foundation has an “all hands on deck” approach “to try to explore as many models as possible to generate investment and really move the needle,” he said.
Finding a strong outcome payer from the offset helped the stakeholders push through complex and evolving negotiations, said Lily Han, a senior investment principal at D. Capital Partners, the intermediary that helped put the deal together.
With the outcome payers lined up, the next challenge was securing upfront financing from investors for the hospital. Funds were not available from traditional sources, such as banks, Han said. The DIB was designed to help solve the challenge of finding upfront capital.
OPIC stepped into this role, providing a $2 million loan for the hospital and marking the first time a development finance institution has been involved with a DIB. The investment is part of OPIC’s Portfolio for Impact Program, which was designed to give the agency flexibility to do deals focused on innovative early stage initiatives with high levels of impact, even if they are comparatively small in size. Most investments are in the $1 million to $5 million range.
Through its involvement, OPICs aims to “catalyze and grow this market” so that private sector investors will participate in the future, said Dia Martin, a managing director on the social enterprise finance team at OPIC. “One of the challenges for the deal is it’s a new kind of structure that really requires upfront investment. That’s why I think it’s a great space for DFIs to play in now, to develop a track record, to help develop structures and develop in a way that makes it easier for the private sector to come in.”
Until now, low-income countries such as Cameroon haven’t been able to attract this sort of private capital, due to the lack of human resources and other uncertainties. An OPIC investment may nudge those investors to think about coming in, Martin said.
Global Vision, a new holding company
Earlier this year, new holding company Global Vision launched with the aim to build and scale a network of surgical eye care centers, providing sustainable care for some of the leading causes of vision loss and blindness. The company will work to either open its own hospitals with local teams or partner with local organizations and help them scale with funding and training on operational best practices.
The structure mirrors a model that has been successful in microfinance, through which companies create networks of institutions to provide consistent governance, operations, support, and oversight from international teams to ensure the quality of services. By creating a brand, companies can more easily attract financing while still deploying the model in local operations.
The launch of the company, and of the individual eye care centers, includes a grant from the Fred Hollows Foundation. Convergence, a blended finance consultancy, has provided a grant to help with the design and scale of the model.
Global Vision founders Ben Midberry and David Green started working together about seven years ago at Deutsche Bank’s Eye Fund 1, a nearly $15 million debt fund launched in 2010 that aimed to reduce blindness by supporting the growth of sustainable eye hospitals that support the poor. Their latest endeavor grew out of that work.
“It’s not really a question of does the model work, it’s really a question of successfully adapting it into new markets,” Midberry said. The goal is for each surgical center to break even in the first two years. The facilities will likely be a modest size, with controlled staff and fixed assets so costs can be predictable. The first surgery center will be in Vietnam and others are in the works, with partners sending staff to train personnel in existing institutions.
Bringing what works
Sustainable business models for eye care have been proven in many countries, with India serving as a key example. In India, operations such as Aravind Eye Hospitals are able to serve people from all economic backgrounds, including the poor, who don’t have to pay, by bringing down costs and relying on payments from the middle class to offset free surgeries to the poor.
“I think that this has a demonstration effect,” Midberry said. “If it is a successful model it will … replicate successful social enterprises into new markets and really scale by creating a platform that enables philanthropy, development finance institutions, and private investors to work together in a coordinated way.”
One key to better eye care is not just training good ophthalmologists, but having the infrastructure to train managers and mid-level employees. That is something that both the DIB and the fund will work to do.
Global Vision will also invest in technology and new products in the eye care space, working to reduce the prices of some of the key materials necessary for treatment, particularly for cataract surgery.
“What this model is doing is [exploring] how to replicate that business model,” Doolan from the Hollows Foundation said. “So what we would hope is that this model will be replicated and there will be lots of competing initiatives, because showing that you will get an economic return and ensure people who can’t afford it will get access is part of the model.”
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