You’ve probably heard the phrase pro bono, but have you heard of low bono?
In a low bono arrangement a company is not making a donation but a below-market rate amount of money on a product or a service. Often a low bono arrangement may be enough to ensure sustainability, rather than it being a charitable activity.
It’s a fairly new model of engaging the private sector — or at least a new term — and a practice the Global Fund to Fight AIDS, Tuberculosis and Malaria is employing in an effort to tackle some of the challenges the organization is working to address.
It is also one example of the innovative finance, models and approaches discussed Tuesday at the Devex Impact event at the Global Fund’s secretariat in Geneva, Switzerland.
The Global Fund recently created an innovation hub to bring together private sector partners from a number of industries to help tackle challenges around supply chains, financial and risk management, as well as program quality. Companies across a wide range of industries are partnering to design solutions to Global Fund challenges.
As a part of that process, SAP has designed grant management dashboards that provide greater visibility into programmatic, financial and management performance indicators. SAP sells the product at a dramatic discount, but can still cover its costs.
The Global Fund is not alone. Gavi, the Vaccine Alliance is also examining how it can work with the private sector in new ways — especially in ways that go beyond just a financial commitment or contribution.
Gavi is looking at supply chains and trying to determine how to innovate to improve the reach and efficiency of vaccines. In doing so, it is looking for long-term corporate partners who offer expertise and on-the-ground knowledge that the organization can leverage, said Marie-Ange Saraka-Yao, Gavi’s managing director of resource mobilization and private sector partnerships.
Innovative finance
New funding models are also critical to finance the sustainable development goals, and last year the Global Fund’s board gave the organization an additional tool for filling funding gaps. The Global Fund has been engaging with high net worth individuals and foundations but often those donors want to give funding to a specific program or country — something which they can now do.
As a result, the Global Fund has secured tens of millions of dollars from high net worth individuals in some of the developing countries where it runs programs. Tapping local wealth will be vital as the development community seeks to find additional ways to finance the SDGs, said Christoph Benn, the director of external relations at the Global Fund.
Local donors know their countries well — both the good and the bad — and so may be wary to donate to some causes or to government-related programs. What organizations like the Global Fund and others can do is provide an “established mechanism with the right accountability” for these high net worth individuals and create a way for them to channel their money.
“Wealth has been accumulating in many countries,” Benn said. “Trillions of dollars in wealth is sitting there, partly looking for social investments.”
Banking giants like Credit Suisse are also innovating and designing products that target base-of-the-pyramid consumers and small and midsize enterprises, which could play a part in the effort to develop new financing mechanisms for the SDGs. Client demand has driven the company to first develop microfinance products and increasingly explore additional impact investing products, said Laura Hemrika, the head of Credit Suisse’s impact and microfinance capacity building initiative.
“We need mortgage products, business loans, personal loans — there’s no reason people at the base of the pyramid don’t need those,” she said.
The challenge is developing the right types of products that are profitable, scalable and work for the customers at the base of the pyramid. Credit Suisse is partnering and supporting some capacity building and product development to help create additional financing mechanisms — a move that may also lead to increased investment opportunities for the company’s clients. But the company still has a lot to learn and certainly sees more room for innovation, she said.
What’s needed now
Financing and implementing the ambitious goals will undoubtedly be a challenge but there are actions that the international development community can take to push ahead.
In order to effectively tackle the SDGs, organizations and companies have to identify where their interests align best and focus their resources, time and energy addressing those particular goals or targets, said Janet Voute, Nestle’s vice president and global head of public affairs.
“You have to know as a company what you’re good at and what you’re not good at and what you need in a partnership,” she said.
Nestle, for example focuses on nutrition, water and rural development because they align with its business portfolio.
While working collectively is critical and partnerships are important, not everything should be a partnership, Voute said. Partnerships can be cumbersome processes — between discussions, nondisclosure agreements, legal approvals, contracts and communications plans — that can be long and drawn out. In some cases, collective action in the form of an exchange of ideas and no funds may be the better option, she said.
One way to improve efficiency in the partnership process is more thought from nongovernmental organizations and multilaterals about which corporation is best suited to partner on which issues, Voute said, adding that she spends a significant amount of time answering requests that are just not the right fit for the company.
A common theme that emerged Tuesday was around the need for companies from across sectors, NGOs and donor agencies to come together more regularly to collaborate deeply, learn from one another and cocreate solutions. Those convenings shouldn’t just be with pharmaceutical companies or focused around health but should be varied so that more companies can learn from one another and share experiences.
Gavi intends to play a convening role — a recent workshop for 40 corporates was hugely popular and what surprised Jeff Rowland, director of private sector partnerships at Gavi, was the reaction from many organizations that thanked him and said they rarely have opportunities to speak to one another.
An openness about what exactly a company's requirements for partnerships is also key — if a company has to earn a certain profit margin, even on a development-related project, it is critical to have that information to effectively work together, he said. Likewise NGOs and development organizations need to be clear about their own priorities.
These partnerships have to be anchored locally and they take time, said Arancha Gonzalez, executive director of the International Trade Center. Partnerships on a short time table will not succeed and, especially when it comes to economic development, it will be a “combination of granular interventions” that will make the difference.