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IFC: Health Investments in Africa

IFC: Health Investments in Africa. February, 2013. I. CONTEXT. IFC – Over $85 Billion Invested in EMs Since 1956. IFC’s Net Income and Net Worth. I FC FY11 Highlights. S&P, Moody’s AAA Portfolio $ 42.8 billion Committed $12.2 billion Syndicated $6.5billion # of companies 1,737

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IFC: Health Investments in Africa

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  1. IFC: Health Investments in Africa February, 2013

  2. I. CONTEXT

  3. IFC – Over $85 Billion Invested in EMs Since 1956 IFC’s Net Income and Net Worth IFC FY11 Highlights S&P, Moody’s AAA Portfolio $42.8billion Committed $12.2 billion Syndicated $6.5billion # of companies 1,737 # of countries 102 Sub-Saharan Africa 18% Net Worth (U.S. $ billions) Middle East and North Africa 13% Global >1% Net Income (U.S. $ billions) East Asia and Pacific 16% Investments by Region FY11 Committed IFC financing in FY11: US$18.7 billion Latin America and the Caribbean 25% U.S.$ billions South Asia 6% Europe and Central Asia 22%

  4. IFC in Healthcare • Since 2000, invested more than US$2.5 billion in 150 private health services and life sciences projects in more than 50emerging markets • Approx. 75 currently active investments across all regions Dynamic participant in the health services and life sciences, seeking to innovate and extend reach within the emerging markets.

  5. Evolution of IFC’s health strategy in Africa Jan – Dec 2008 Initial Preparation Phase Dec 2005 – August 2006 Formulate Partnership Report dissemination, fundraising formation of joint IFC-World Bank Team based in Nairobi, Kenya and Washington DC IFC and the Bill & Melinda Gates Foundation formulate partnership Dec 2007 Scoping Study & Strategy Development Jan 2009 Onwards Implementation The Business of Health In Africa Report published and strategy presented to the Board Research & Analysis, Policy Advice, Debt & Equity Financing Key Findings • 60% of health care in SSA is financed by private sources • 50% of health care in SSA is provided by private sector • Government constraints means the private sector will continue to play an important role in the medium term • Investment demand is expected to be $25-30 billion over the next ten years • Most investments in the private sector will be in SMEs • The role and potential of the private sector is not well understood. It is ignored by governments and donors alike

  6. Overview of the Health in Africa Initiative MISSION To catalyze sustained improvements in: (i) Access to quality health-related goods and services in Africa (ii) Financial protection against the impoverishing effects of illness, with an emphasis on the underserved

  7. What We Have Accomplished (Advisory & Research) Countries of Policy Operations Sample Policy Outcomes Sample of Reports Published • Led review of National Health Insurance in Kenya; contributed to expansion of benefits and $75M increase in contributions • Reform of inspections of private providers in Kenya (leads to increased patient safety) • Kenya e-Health strategy adopted (wins UN award in Sept. 2011) • Public-Private Dialogue and Ministerial reorganization in Congo pave way for reform of regulation and quality assurance for public and private health providers Business of Health in Africa December 2007 Widely cited: FT, Economist, text for universities Country Assessments 2010 - Ongoing 3 published so far; used for guide policy work. 3 in the pipeline Healthy Partnerships June 2011 Benchmarks countries; groundbreaking analytical piece. Widely cited Strategic Review of NHIF February 2012 Reviews/benchmarks NHIF’s performance.; used to guide reform of NHIF In-depth policy work (7 countries) Specific policy projects (2 countries)

  8. What We Have Accomplished (Access to Financing) Cumulative Funds Invested/Mobilized by IFC in Health Sector in Africa 2005-2012, US$m Cumulative # Projects by IFC in Health Sector in Africa (including by two funds) 2005-2012 HiA begins HiA begins Bottom Line: • Equity and direct investments exceeded forecasts • Debt facilities have fallen short * Estimate

  9. Focus: Access to Debt/Equity Financing Indirect - debt: Wholesaling Banks to cater to entities that need$10,000 - $0.5 million of funding Improve access to long-term debt for health care organizations, including SME’s, through local financial intermediaries Indirect - equity: Wholesaling PE Funds to cater to entities that need$0.25-$5.0 millionof funding Create equity investment vehicles (finance + management support) for health care companies providing services to the low-income Addressing healthcare financing needs in 3 ways Direct Investments - debt & equity: to cater to entities that need $3.0 million and aboveof funding Direct investment (debt and/or equity) in centers of excellence and networks

  10. Summary of Investments • Indirect Investments (Debt): • US$27 million in 2 investments in 1 country • Wholesaling through banks have not been successful due to inadequate uptake • Indirect Investments (Equity): • AHF Investments: US$32.3 million in 10 investments in 7 countries. A US$105.4m fund & US$8.4m T.A facility managed by AureusCapital mandated to invest in base of the pyramid (“BoP”) • IFHA: A Eur 50.0m fund lead by OnnoSchellekens & Max Coppoolse in partnership with PharmAccess • IFHA Investments: Eur 14.7 million in 6 investments in 4 countries • Direct Investments: • US$113.2 million in 5 investments in 4 countries • Need to explore new approaches to grow direct investments

  11. Health Investments: What We Have Learned • Lessons and Insights: • The health sector, along with banks, are in need of long term local currency financing • Wholesaling through banks has not been successful because of: • IFC RSF’s are not attractive to banks • Banks demand low cost local currency financing and appropriate incentives to invest in the SME healthcare market. • Health SME’s and banks require TA support to develop bankable business proposals and to develop health sector knowledge respectively • Significant equity funding needs persist in seed/ early stage of healthcare companies • Begin to explore use of blended finance to invest in early stage/ venture capital funds and fund focused on BoP • Few bankable opportunities which fit our existing investment criteria – particularly minimum investment ticket requirements

  12. III. FOCUS AREAS

  13. Overview of Strategy for Direct and Indirect Investments Current Strategy Add-On Proposed Strategy Indirect: Concessional Financing Indirect - debt: Wholesaling Banks ($10,000 - $0.5 million) Direct: Map Unexplored Markets; Explore Accessory Segments Facilitate N-S/S-S Transfers Proactive Facilitation of Transactions Indirect - equity: Wholesaling PE Funds ($0.25-$5.0 million) Direct Investments - debt & equity: ($3.0 million and above)

  14. Indirect Investments Strategy Goal: Explore concessional financing to stimulate healthcare investment activity by banks • Approach: • Develop a pilot facility with a regional bank and strategic partner; and • Learn from the pilot facility and scale regionally. • Key Components of concessional facility: • local currency; • low cost and/or performance based grant; • long tenor; and • strategic partners/TA • Example: • Blended financing facilities with health equipment manufacturers being explored in Kenya along the lines below: Concessional Terms Concessional Terms IFC Bank (2nd loss) SMEs Facilitate relationship Strategic Partner (1st loss)

  15. THANK YOU

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