In October 2009, the United Nations Foundation launched the Pledge Guarantee for Health (PGH), an innovative new financing mechanism that promises to improve the predictability and effectiveness 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 per year. This growth holds out obvious potential for those who wish to invest in health systems and provide health commodities to the millions who need them. But it also increases the pressure to better manage the often fragmented and volatile inflow of those funds.
As recipients await the disbursement of 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 feast or famine by allowing donor recipients to better manage the unpredictable inflow of donor funds. The Pledge Guarantee for Health offers this facility by allowing governments and non-governmental agencies to turn their unrealized aid commitments into bankable donor pledges, which they can then use to obtain short-term, low-cost commercial credit. In this way, the PGH increases the efficiency of existing resources, leverages existing market-based mechanisms, and enhances country ownership.
The PGH was developed under the auspices of the Reproductive Health Supplies Coalition with 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. Donor commitments to fund the operations and implementation of the PGH have been encouraging thus far. The Bill & Melinda Gates Foundation recently awarded the PGH funding for operations, including coverage of an interest facility. Staff recruitment is now underway.
For more information please contact Aron Betru of the United Nations Foundation.