PSI CEO on family planning's 3 'exciting new funding trends'

By Lean Alfred Santos 29 January 2016

Karl Hofmann, president and CEO of Population Services International. Photo by: Environmental Change and Security Program / CC BY-NC-ND

Tucked under Goal 3 of the recently agreed Sustainable Development Goals that focuses on ensuring healthy lives and promoting well-being for all is a target to provide universal access to sexual and reproductive health care services, including family planning, by 2030.

But despite the optimism that this target can be achieved — partly due to the relative progress achieved under the Millennium Development Goals since 2000 — global development leaders are quick to admit that the momentum towards achieving these targets may be halted if one perennial issue is not addressed: funding.

Karl Hofmann, president and CEO of Population Services International, shared on the sidelines of the fourth International Conference on Family Planning in Nusa Dua, Indonesia, this week that while international agreements — including the SDGs and the Family Planning 2020 global partnership launched in London in 2012 — have provided a credible blueprint for development stakeholders to follow in addressing family planning issues, much of the good work will be in vain if robust resources are not allocated to operationalize them.

“There is a message from [UNFPA Executive Director Babatunde Osotimehin] about a shortage in commodity funding for family planning,” he told Devex in an exclusive interview. “I think we have some serious challenges to fund the ambitions that we have laid out.”

Commitments under the FP2020 initiative, explained the chief of the Washington, D.C.-based group, including finding ways to reach 120 million new users of modern contraception in four years have been “less than satisfying.”

How can we solve this resource problem to fund the family planning and other sexual and reproductive health and rights programs?

Hofmann shared his thoughts on resource mobilization and the role of the private sector, among other sources of potential funding. Here are some highlights from that conversation:

Aside from multilateral and government financing, what are some of the other funding opportunities that could help boost family planning and SRHR initiatives, especially in developing and least developed countries?

I would say there are three exciting new trends that we have to take advantage of and be aware of. One is the critical importance of raising resources at the national level ... I'm not talking about bilateral donors, [nor] international finance institutions, but mobilizing domestic resources [like taxation and appropriations] for core issues — not just on family planning, but for the broader issue of health in the development agenda.

I think the second area of change and promise for us is the fact that we're at this moment in global development where hundreds of millions of people have been lifted out of poverty over the past 20 years. There's a tremendous upward momentum in the lives of even the poorest parts of the world. And we have to take that into account and recognize an ability to mobilize resources from consumers — not just governments — in terms of their own health outcomes … If we assume that everything has to be free, we'll never get there. It's about allocating the available subsidy in a rational and optimal way.

The third area that I think is really important in terms of new funding trends is what I would call new philanthropy models. You have high net worth individuals like Indonesian billionaire Dr. [Dato Sri] Tahir of the Tahir Foundation, and he is emblematic of a lot of people who are so far still an untapped resource in terms of funding these innovative changes [and programs].

So national resources, money from consumers, and nontraditional philanthropy are all exciting developments on how we look at how to plug these [funding] gaps.

What business models can be implemented to engage more firms in family planning and SRHR initiatives? How can this be made sustainable?

I think we have to recognize that when we are trying to reach the most marginalized and poor communities in the world, there is a need for subsidy. It has to come from somewhere. But there is also the reality that you can't meet the needs of everybody with a free offer when, in fact, there is an ability to pay on the part of some segments of the market.

It's really about understanding the marketplace and segmenting it appropriately ... The days are gone where we can afford to be generous with a public subsidy in a way that is wasteful. We have to be much more rigorous about leveraging the subsidy and ensuring that it goes only to those who require it.

So the business model could involve, for example, cross-subsidization. An actor in the marketplace could market a certain product or service in a cost-recoverable way, or even a surplus-generating way, and then reapply that surplus to the lower segments of the market that need subsidy. I think there's a lot to be learned from social enterprises in this regard. There are some important opportunities for the private sector, which may not look at this marketplace as a very interesting place to invest, but I think the role for social marketing organizations and others is to bring that demand forward so that it is ready to be responded to by the private sector.

There has been a lot of talk this week about inclusive business as a form of social enterprise. How can this be nurtured and eventually scaled up to boost SRHR initiatives in more remote areas?

I think there's a very broad conversation now about an effort to connect funders with scalable social enterprise models … People like to talk about it, but few have cracked the code about how actually to do this. You know, we look at the social impact bonds, development impact bonds, and other nontraditional financing tools and there is still expectation on the part of many people that they will be able to get market returns and measurable social impact.

In fact, there has to be a trade-off there somewhere. People need to be willing to accept less than market returns if they want measurable and scalable social outcomes. But I think it's a really interesting conversation and lots of big private sector players are now very interested in this space too.

There is also the dilemma of what to prioritize between profitability or market returns and social impact, isn’t there? In your opinion, what should come first?

It depends on the funders. The private individual, the private foundation or a private investment fund can decide what rate of return they are willing to accept for their capital. But a publicly traded private sector company has accountability to its shareholders.

But my sense is that there is a broad movement towards this middle-space that is an overlap between financial reward and measurable social impact. I think many of the biggest companies are interested in this space because they think that many global consumers, young global consumers, have an expectation that their consumption decisions will also have a social aspect. And I think companies are trying to figure out how they can respond to that growing demand in a way that meets their need for financial performance, but also demonstrates social impact.

If I have to choose between the two, give me the sustainable social business approach and a profit and loss statement over CSR anytime. I would rather be embedded in the business model than I would be waiting for a corporate foundation to make a funding decision, because the CSR side may be the first to go in hard business times. If the social impact is baked into the business model, then that's more sustainable over the long-term.

You’ve talked previously about "building the NGO model of the future." Can you tell us more about this idea?

I think we are trying to create our own future for our own enterprise that is a nationally rooted, but globally connected, network. So I think that's how we get economies of scale, and I think that's how we share learning [and] best practices. It's inspired by what the global private sector does. It's a respect for the need to have national roots, but it's also recognizing that, particularly in our space, we need to have global connectedness and organic links that allow national social enterprises to be resilient and sustainable, precisely because they're connected globally.

We and many others are trying to be present in that [middle space] because we want to. My NGO has been around for 45 years and has tried to faithfully spend public subsidy. I think the future for organizations like mine is not fundamentally about spending public subsidy, it's about figuring out how to unlock that magic overlap between consumer demand, available subsidy, social impact [and] financial return. This is a sustainable future, what we're being called to under the SDGs and all of us are trying to figure out how to meet the needs of the people in a more sustainable way.

Follow the discussion at the International Conference on Family Planning in Indonesia, where @DevexLeanAS and @richard_devex are on the ground bringing you updates and interviews. Join the conversation @devex using #ICFP2016.

About the author

Lean 2
Lean Alfred Santos@DevexLeanAS

Lean Alfred Santos is a Devex development reporter focusing on the development community in Asia-Pacific, including major players such as the Asian Development Bank and the Asian Infrastructure Investment Bank. Prior to joining Devex, he covered Philippine and international business and economic news, sports and politics. Lean is based in Manila.


Join the Discussion