Today at Davos, Devex and MSD for Mothers launched Partner for Progress, a report assessing how donors are engaging and supporting the private sector in Reproductive, Maternal, Newborn, Child and Adolescent Health (RMNCAH). Convergence contributed data on the number of blended finance deals targeting RMNCAH and insights from our CEO Joan Larrea on the potential of blended finance for RMNCAH.

One critical component of achieving the Sustainable Development Goals (SDGs) is improving the health of women and children around the world. RMNCAH is explicitly included in several targets for Goal 3 (Good Health & Well-Being):

• Target 3.1 aims to “reduce the global maternal mortality ratio to less than 70 per 100 000 live births”
• Target 3.2 aims to “end preventable deaths of newborns and children under 5 years of age”

These ambitious targets must be met with equally ambitious efforts; there is an estimated $33 billion financing gap for eliminating preventable maternal, child, and adolescent deaths by 2030. Blended finance is one important approach for mobilizing the additional sources of capital needed to achieve RMNCAH targets.

Based on Convergence’s database of over 400 historical blended finance deals, in the past several years only eight blended finance solutions have focused on RMNCAH. To date, less than 15% of blended finance deals have been aligned with Goal 3 (Good Health & Well-Being), and about 15% of these deals target RMNCAH. That’s not enough.

Blended finance for RMNCAH is gaining momentum

However, there are signs that blended finance for RMNCAH is gaining momentum: five out of the eight RMNCAH blended finance deals have been launched in the past five years. Together these eight deals represent nearly $560 million in total investment mobilized for RMNCAH in developing countries, with an average deal size of $70 million (the average deal size of all blended finance deals is $319 million).

Figure 1: Growth in blended finance solutions for RMNCAH as a subset of deals aligned with SDG 3

RMNCAH transactions vary across deal types

So far, we’ve seen multiple types of blended finance vehicles deployed for RMNCAH, including blended funds, projects, and impact bonds. Interestingly, impact bonds have accounted for less than 5% of all blended finance deals aligned to Goal 3 (Good Health & Well-Being), but 25% of solutions addressing RMNCAH.

Figure 2: Percentage of deals across deal types for RMNCAH and SDG 3

Impact bonds are a relatively new funding mechanism where investors provide upfront risk capital to a project, which is repaid by an outcome funder (typically development agencies or philanthropic organizations) based on the achievement of pre-agreed project outcomes. Impact bonds offer a number of advantages as a financing mechanism, including greater attention to impact and a shifted focus on outcomes as opposed to outputs¬. At the same time, impact bonds can be resource-intensive to design and have not mobilized additional private sector investment at scale. Although it’s still early days, impact bonds offer potential for a specialized issue area such as RMNCAH.

One of the landmark blended finance solutions for RMNCAH is the Utkrisht Impact Bond, which aims to reduce maternal and newborn deaths in India by leveraging upfront capital provided by UBS Optimus Foundation to improve the quality of health services in private health facilities in Rajasthan. Convergence supported the development of the Utkrisht Impact Bond through our Design Funding program, which we have documented in a case study.

Concessional capital is key for RMNCAH

The $33 billion gap in financing for maternal, newborn and child health offers a unique opportunity for blended finance initiatives. Specifically, the use of concessional capital within a capital structure – the most frequently deployed blending archetype in RMNCAH deals – will be key in catalyzing private-sector investments and scaling blended finance solutions for RMNCAH. Development agencies have played a particularly active role in funding RMNCAH blended finance initiatives, providing concessional capital for six out of the total eight deals.

While blended finance alone will not fill the RMNCAH financing gap, it does make it possible for concessional capital to go much further than it otherwise would. Quoting our CEO Joan Larrea, in the report launched today: “If you write a grant check, once the grant dollar is out the door it gets a finite impact return. If you take that same grant dollar, in a blended finance structure of some sort, you are investing in something that is an economic engine. A good blended finance model is economically sustainable. That grant dollar will run several more laps before it is exhausted.”