Legal and financial models for public-private partnerships: Making global outreach more feasible

In recent years, providers of health care services in low- and middle-income countries (LMICs) have shown a substantial and sustained interest in exploring public-private partnership (PPP) finance options.1,2 These options are designed to capture private investment flows and to increase private sector partnership with public and philanthropic organizations to facilitate efficiency, accessibility, and innovations in the global health market. This article addresses financing mechanisms for establishing PPPs in global health.

Types of investment

Several alternatives are available to investors in medical outreach projects. These alternatives include the following:

Official development assistance

Historically, official development assistance (ODA) has been provided bilaterally by individual country donors to a recipient LMIC.3 ODA is conditional in nature such that project funding from the donor country was contingent on meeting benchmarks set by the recipient country. These policies may have, for example, required the passage of supporting legislation, reforming government health ministries, and innovating health delivery systems in the area of vaccines and acquired immune deficiency syndrome (AIDS) prevention.4

Catalytic investment

Catalytic investment is a form of either venture capital to “seed” a new health project or partial credit guarantees offered by donors to protect against and mitigate a potential default on concessional loans made by commercial lenders.5


Socially responsible investments (SRIs) are designed to screen for and meet certain environmental, social, and governance indicia and expectations on the part of investors. Generally, investors use these criteria to determine whether to withdraw from an agreement or not to invest in ventures that have ties to industries such as tobacco, conflict diamonds, and petroleum production.6

Impact investing

A subset of SRI is impact investing, where the desire for profits is balanced against the desire to generate socially and environmentally desirable outcomes, with resulting acceptance of a lower profit margin. In 2016, SRI accounted for more than $8.7 trillion in assets in a total market of $40.3 trillion in assets professionally managed in the U.S.7

Social impact bonds

A social impact bond (SIB) is a PPP vehicle that channels private financing from investors to a specific health care project.8 If the initiative succeeds, the host government repays private investors with the initial capital plus interest. If the project fails, the host government pays nothing, and the private capital is lost to the investors. Thus, SIBs move the risk of project failure from the public sector to the private sector.

The up-front private capital that investors provide is used to fund public health projects that generate quantifiable and verifiable social and environmental impact. Usually, the host government contracts with a project sponsor to implement a health care initiative in exchange for a promise of payment when the expected, negotiated social outcomes are achieved. The project sponsor raises capital from private investors, philanthropic organizations, and commercial sources. Although the word “bond” is used, it is actually a loan.

Repayment of the loan or bond is contingent on the success of the project and delivery of expected outcomes. Parties to the SIB agree to the anticipated outcomes, metrics of evaluating whether the outcomes have been achieved, and a payment schedule. The host government agrees to pay in accordance with the payment schedule if the outcomes are successfully achieved. If those outcomes are satisfactorily achieved, then the loan is repaid with interest. However, if the health care provider delivers outcomes that fall short of the minimum expectations, then the government does not pay, and investors may lose their principal investment.

Thus, a SIB is a performance-based system that is organized around a debt obligation to repay investors; however, the financing is provided up-front rather than when results are obtained. Moreover, SIBs tend to focus on existing health care delivery systems rather than on creating new infrastructures (that is, hospitals, labs, and training facilities).

For example, the Western Cape Departments of Health and Social Development in South Africa have allocated up to 24 million rand to roll out three SIBs aimed at improving the health, nutrition, and developmental status of pregnant women and of children up to five years old who live in low-income communities. Two corporate donors have committed another 24 million rand to bring the total amount of the bonds to 48 million rand.

As another example, the Cameroon government—in conjunction with the Kangaroo Foundation, Grand Challenges Canada (a Canadian government-funded innovation fund), Social Finance (a U.K. not-for-profit organization), and the World Bank’s Global Financing Facility—is developing a performance-based financial bond to improve care for premature babies across the country. The SIB will raise up to $9 million to implement a train-the-trainers program for its use in five regions of Cameroon. Investors will be reimbursed and potentially will receive a bonus if targets are met.9

The law on foreign investments and loan issuances varies from country to country and will determine, in large part, the speed and flexibility with which SIBs may be structured. New legislation may be required in some instances. Also, legal issues related to flood or earthquake damage may be considerations in terms of their possible impact on the project.

Another important consideration in setting up SIBs, or innovative financing models in general, is the existence of funds to cover transaction costs, such as legal fees, technical assistance, and the costs to the project sponsor, in addition to the actual investment capital from project investors. Furthermore, taxes, the ease of repatriating profits, and other complex financial matters must be negotiated in advance with the host government. In addition, the return on the investment may range from 2 to 7.5 percent, and investors may decide to lower performance thresholds to ensure a return on their investment. SIBs also insulate the host government from having to expend precious public financing (for example, tax payer monies) if the project is unsuccessful. Thus, the project needs to be carefully negotiated so that all parties are vested in a successful outcome that makes the project worthwhile and can achieve a sustainable impact on global health.

Development impact bonds

Development impact bonds (DIBs) are a subset of SIBs and are basically the same instrument, except that donor agencies rather than government departments help to finance DIBs. DIBs essentially leverage financing from private investors with the participation of implementing bodies such as nongovernmental organizations (NGOs) and outcome funders, which are typically aid agencies.10

DIBs may be structured as an individual transaction impact bond or as a bond fund. Similar to SIBs, DIBs transfer the financial risk of the underlying health care programs to private sector entities that provide up-front funding with a view to achieving socially desirable outcomes. Although financial return is of interest to DIB investors, it is balanced against a broader view of achieving social impact goals within the health care sector, thereby creating a powerful stakeholder group.

Furthermore, DIBs can support and expand the role of government agencies in the health care sector by increasing their capacity to collect and measure data, use the project as a springboard to expand the coverage of health systems to more users, and use better medical technologies and approaches to deliver health care. Thus, DIBs should not be regarded as a parallel and duplicate means of health care financing, but rather as a means of correcting market deficiencies in delivering health care to underserved populations. Moreover, DIBs are not intended to privatize health care, but are trying to achieve a social impact result.

At the 2017 Global Entrepreneurship Summit, Mark Green, Administrator, U.S. Agency for International Development (USAID), unveiled a new DIB that launched in February 2018 with the goal of reducing maternal and newborn deaths. The Utkrisht Impact Bond (named for the Hindi word for excellence) will fund the project in the Indian state of Rajasthan, with up-front grant financing provided by the UBS Optimus Foundation. As donors to the project, USAID and Merck for Mothers will repay the investors the principal plus a return on their investment, depending on whether targeted goals are achieved. The project targets 440 health care facilities in Rajasthan in support of facilities meeting the certification standards established by the National Accreditation Board of Hospitals and Healthcare Providers and the Federation of Obstetric and Gynecological Societies of India. The project will be implemented by an NGO, Population Services International, and the Hindustan Latex Family Planning Promotion Trust, with both co-investors contributing more than 20 percent of the capital required for the project.

As another example of DIBs, the Cameroon Cataract Bond will support the Magrabi ICO-Cameroon Eye Institute (MICEI), a hospital based on the social enterprise model of eye care developed in India by the Aravind Eye Care System.11,12 Aravind uses cross-subsidization pricing, high volume, and revenue diversification strategies to provide quality cataract surgery to the poor at little or no cost. The Conrad N. Hilton Foundation is the DIB’s primary outcome funder and will fund 80 percent of the amount owed to investors if the project succeeds. The Fred Hollows Foundation and SightSavers, both organizations dedicated to preventing and treating blindness, are each providing 10 percent of the remainder. The Overseas Private Investment Corporation (OPIC), a U.S. government agency, is committed to investing $2 million to the project to be combined with an additional $250,000 in financing from the Netri Foundation.13 Up-front financing from these institutions will provide MICEI with start-up capital for the first five years of its operation. During that time, MICEI can focus on delivering high volume and quality cataract operations and preventive care.

It is critical and, ultimately, ethical to understand the investors’ needs and priorities. If private investors are focused on the return on their investment, then perhaps negotiating guarantees to the project is a way to mitigate investment risk. Judging capital investment market conditions and the timing of the release of the SIB or the DIB also may be paramount. For example, timing the announcement of the DIB with the opening of the hospital would have allowed the MICEI to provide investors with data on the number of patient visits, patient income level, and number of staff members required to run the hospital.

Social networks and global health care initiatives

Social networks have the capability of pooling resources to reduce health care disparities and propel economic development in LMICs. For example, local authorities, religious groups, and lay organizations can engage and connect with even the lowest socioeconomic members of their communities. Social networks save millions of lives and billions of dollars in health care expenses and lost productivity, positively affecting a country’s economic growth.

The Rostropovich Vishnevskaya Foundation, based in Washington, DC, formed a PPP to introduce a nationwide rotavirus immunization program.14 Their team working in outpatient departments in Gaza, Palestinian territories, determined the incidence of diarrhea for 18 months before and 18 months after the introduction of rotavirus vaccine among all children younger than five years old with three or more loose stools per day. The PPP achieved 97.4 percent immunization coverage within a year, and the incidence of diarrhea dropped by 32.2 percent.

The National Institutes of Health has facilitated collaborations to improve public health via PPP in the development of products that would otherwise be too risky for private companies.15 For example, the Medicines for Malaria Venture, the Global Alliance for TB Drug Development, and the Foundation for Innovative New Diagnostics have successfully demonstrated the importance of PPP.

Renal transplant teams based at University of Glasgow, U.K., concerned about low organ donation rates among individuals from the Indian subcontinent, partnered with local Hindu faith-based temples throughout the west of Scotland to promote awareness of living kidney donation through public forums with successful outcomes.16

Renal transplantation in the U.S. costs approximately $150,000, whereas in India the procedure costs approximately $40,000. In Guyana, the annual per capita income is $1,219, so it is difficult for a person from an average socioeconomic class to get renal replacement therapy. In 2007, a young boy was diagnosed with kidney failure. His mother was willing to donate her kidney and appealed to the business community and general public to help her son get a transplant in India and dialysis treatment in Guyana. An investor in New York, NY, turned to his social networks of transplant surgeons from the Uniformed Services University and the Walter Reed National Military Medical Center, Bethesda, MD; nephrologists from Drexel University, Philadelphia, PA; and Guyanese nurses and physicians. With their donations, the boy received the lifesaving kidney transplant in Guyana.17 Subsequently, several other patients with kidney failure also received transplants. In addition, a surveillance program to detect kidney disease at an early stage has been established in which high school students are taught basic survey techniques and medical interview skills.18,19

Regulatory issues

No regulatory body supervises and takes action when operations result in poor outcomes in LMICs. It is possible that reports of relatively good surgical outcomes in developing countries encourages untrained teams to embark on missions beyond their abilities. The number and visibility of religious organizations involved in development and humanitarian aid among faith-based organizations has increased dramatically. In the U.S., for instance, government funding for faith-based organizations almost doubled to 19.9 percent in 2005 from 10.5 percent in 2001.20 The dilemma is whether the prospective beneficiaries should be informed of all of the affiliations and history of the donor NGO, including potentially negative information. Because of a lack of an organized effort to report outcomes, investigative journalists have led the way in exposés. A New York Times report on Operation Smile, which allegedly sacrificed safety to reach its goal of treating 10,000 children a year, serves as a good example. The newspaper’s reporting led to changes in the organization that resulted in improved outcomes.21


Health initiatives must involve integration and collaboration and support national health policy. Health care initiatives also demonstrate the commitment by governments and faith- and non-faith-based organizations in directly targeting diseases, such as diabetes and hypertension, that disproportionately affect patients in LMICs. This article has described various examples of financing PPPs. Each financing mechanism has pros and cons. It is important to source the right partners—those investors who have compatible and mutually supportive goals. This arrangement is dynamic, and goals and priorities change over time, especially because SIBs and DIBs have a long gestation period before they are ready to launch. Despite the complexities, PPPs represent new opportunities for a dynamic partnership among public, philanthropic, and private actors.


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  20. Pew Research Center. Faith-based programs still popular, less visible. Available at: Accessed December 6, 2018.
  21. Abelson R, Rosenthal E. Charges of shoddy practices taint gifts of plastic surgery. New York Times. November 24, 1999. Available at: Accessed December 6, 2018.

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