In May 2013, global leaders in health and development announced a new 5-year, $100 million guarantee backed by the U.S. and Swedish governments to support the work of Pledge Guarantee for Health (PGH). PGH, an innovative new financing mechanism, aims to improve the speed and efficiency of donor aid for health commodities.
The last decade has seen dramatic increases in the level of funding for global health from approximately US$10 billion to over US$22 billion annually. This growth holds obvious potential for those who wish to invest in health systems and provide health commodities to the millions who need them. However, in the run up to the Millennium Development Goal deadlines in 2015, it has become critical to maximize the impact of each dollar of donor funding.
As recipients await the disbursement of committed donor funds, they often lack the means to purchase commodities or at least to do so in volumes that give them bargaining power over prices and terms of sale. As a result, they pay more and may need to wait longer for delivery. On the other hand, allowing donor disbursement schedules, rather than need, to time procurement often leads to a tendency to overstock, which in turn leads to wastage and ultimately, stock-outs.
Access to short-term, low-cost credit can smooth out this cycle of āfeast or famineā by allowing donor recipients to better manage the inflow of donor funds. Pledge Guarantee for Health makes this possible by allowing governments and non-governmental organizations to turn their pending aid commitments into bankable donor pledges, which they can then use to obtain short-term, low-cost commercial credit. In this way, PGH increases the efficiency of existing resources, leverages existing market-based mechanisms, and enhances country ownership.
PGH was developed under the auspices of the Reproductive Health Supplies Coalition and launched in 2009 with pilot funding and technical support from DFID, USAID, the Bill & Melinda Gates Foundation, the Ministry of Foreign Affairs of the Netherlands, KfW German Development Bank, and Dalberg Development Advisors. After a two year proof-of-concept at the United Nations Foundation, PGH is now an independent entity with funding support from USAID, RHSC, and the David & Lucile Packard Foundation.
For more information, please contact Aron Betru, Managing Director of PGH.