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Reaching the base of the pyramid

posted Apr 16, 2013, 4:31 AM by Jeff Knezovich   [ updated Apr 17, 2013, 1:30 AM by Kate Hawkins ]
Our latest webinar was sponsored by the SHOPS Project, and addressed private sector mechanisms for reaching the bottom of the economic pyramid. The event was ably chaired by Caroline Quijada, their Deputy Director.

Caroline explained that a market-based model is a model that is scalable, commercially viable and appropriate to the population segment at the base of the economic pyramid in any country. The SHOPS approach to market-based models is to understand the range of promising models, conduct research to identify barriers to scale and long-term viability, and provide technical assistance to support promising models and share lessons learned. The Monitor Group identified over 400 market-based initiatives and interviewed over 500 customers, investors and implementers. They found four model types with the most potential for health and you can learn more in two upcoming reports: ‘M-Enabled Inclusive Business Models in Health’ and ‘Direct Sales Agent Models and Health’ which will be available on the SHOPS Project website soon.

The view from India

Arunesh Singh’s presentation, was entitled ‘Reaching Base of the Pyramid Health Markets in India’. The rural base of the economic pyramid market in India is around 700 million people who live across 600,000 villages and over 80 million urban poor. These are highly fragmented markets in which there is low demand for health-related goods and there are high costs associated with entering these markets. A lack of access to quality products and of information is a barrier to use. For example 85% of women know about oral contraceptive pills but only 14% actually use them. People at the bottom of the economic pyramid have limited and irregular income which also hampers access.

To promote market-based partnerships in India, USAID has funded two projects: Market-based Partnerships for Health and SHOPS. Activities within their portfolio include:

  1. Dimpa (which has a focus on family planning especially injectable contraceptives)
  2. The eChoupal Health Initiative (which focuses on over-the-counter family planning and child health products)
  3. The Oral Rehydration Solution Rural Health Initiative (focusing on child health)
  4. The Advanced Cook Stoves Initiative

The Advanced Cook Stoves Initiative aims to reduce indoor air pollution. The cook stoves it supplies produce less smoke, cook faster and consume less fuel than traditional stoves. The Initiative is a partnership between a syndicated distributor, a product manufacturer and a microfinance institution to overcome barriers to access. The distributer focuses on rural markets through medium-sized towns. They employ village-level entrepreneurs who raise awareness and spread information. The entrepreneurs receive payment based on the number of stoves sold. The Microfinance Institution provides loans to those who are interested in purchasing the stoves. Lessons learned from these projects include: that cross-sectoral partnerships are important in terms of commercial viability and in implementing; partnerships enable risk sharing which allows the commercial sector to explore new markets; investing in a rural distribution network for health products is difficult but non-health companies can play this role; retailers need to incentivize demand as well as supply products, this requires careful selection, training, and support; additional easy to sell, high margin products can incentivize the entrepreneur by making the endeavor more profitable; and long term relationships with consumers are important.

The Challenge Fund model

The final speaker in the webinar was Colm Fay who presented, ‘Health care innovation at the base of the pyramid: A Challenge Fund model for addressing the “Missing Middle”’. He explained that the bottom of the economic pyramid market in Africa is substantial but widely geographically dispersed and therefore more difficult to access so it is more challenging for multi-national companies to reach it at scale. Ground-up models are working better at reaching these consumers, but they need both capital and expert advice in order to be successful. A Challenge Fund is a request from a donor in terms of the impact or the outcome that they wish to achieve, they do not state how this should be achieved so untested approaches and innovations can be trialled. Applications go through a competitive selection process and winners are awarded with capital grants. Enterprises can often access funds to get them through the start up phase. When they are larger it can be difficult to access funds, for example from donors, because of the programmatic and reporting requirements. What these enterprises are aiming for is commercial capital which allows them to scale their impact but because of a lack of investment in systems and capacity they often don’t look like attractive investments. These enterprises need funding in the ‘missing middle’ – this is what the HANSHEP Health Enterprise Fund is hoping to address.

The HANSHEP Health Enterprise Fund provides grants of up to $200,000 to those organisations in Ethiopia and Kenya who can show innovation in service delivery, technologies, partnerships and business models. The Fund is focussed on reproductive health, maternal and child health and HIV. It focuses on enterprises that have limited options to access growth capital – those in the ‘missing middle’. Applicants have to be revenue generating – although not necessarily ‘for-profit’ organisations. This helps ensure sustainability over the longer term. They have to be contributing to improved health outcomes and be targeting the poor. Importantly, in addition to finance the Fund also provides substantial technical assistance to address capacity gaps in the organisations that they work with and runs a platform for awardees to engage with investors early on in the process. Through targeted investment and the opportunity for learning to overcome operational challenges it is hoped that grantees will be able to grow their initiatives and become viable at scale over the longer term.

A video recording as well as an audio recording and PowerPoints of these presentations, and the question and answer session that followed them is available.

The next SHOPS-sponsored Private Sector in Health webinar is on health insurance and is scheduled for 6 June 2013. We hope that you will participate.

Many thanks to Elizabeth Corley for her help in organising this session.