Nando's has joined a public-private partnership that has designed the Mozambique Malaria Performance Bond (MMPB), a development impact bond (DIB) which aims to address the funding gap for malaria interventions by increasing funding and efficiency for malaria interventions through a pay-for-performance mechanism. It will achieve this goal through: 1) a structure of sharing risk and returns across a range of stakeholders including public and private funders, impact investors, and health implementing organizations; and 2) a performance-based approach for NGOs implementing the malaria program that ties payment to impact outcome targets. The MMPB aims to cover 90% of the population at-risk with LLINs and 85% with IRS in the targeted areas.
Through its commitment, Nando's intends to set up the structural and financial mechanisms to oversee the MMPB, including the Goodbye Malaria Trust (GMT) and the Bond Against Malaria Mozambique (BAMM) Operating Company, which will ensure efficient roll-out of the MMPB, in partnership with Dalberg Global Development Advisors and AngloAmerican. Through the GMT, Nando's and BAMM are working with the Mozambique Ministry of Health to coordinate the program's implementation in the Maputo province, with the goal of launching a three-year pilot bond in January 2014.
The bond will raise money from impact investors looking for a financial and social return. If the malaria interventions are effective in reducing incidence rates by 30% or more by year three, the MMPB will repay investor principal with 5% interest. If the interventions are ineffective, investors are repaid 50% of their principal, with no interest and funders are absolved of further commitments.
As a board member of the Trust, Nando's is using its experience in Southern Africa to head a group committed to addressing malaria in Mozambique, raising a $9 million commitment for it, and contributing its human resources management experience for proper BAMM oversight, enabling effective implementation of malaria interventions.
Pre-Bond Phase (Through 2013): GMT is securing Global Fund-funded malaria insecticide (IRS) through a Memorandum of Understanding (MOU) with the Mozambique Government. It is also procuring insecticide spray equipment and training IRS personnel. BAMM will engage local communities and sensitize them to the spraying treatments. BAMM will oversee its first two rounds of spraying in Matutuine district of Maputo province. GMT will focus on fundraising for the First Pilot Bond and prepare all legal documents for circulation in January 2014.
First Pilot Bond (2014): BAMM will secure additional insecticide to expand spraying geography to three districts and contingency supplies of artemisinin-based therapies (ACTs). They will train community health workers to provide preventative and diagnostic malaria treatment. GMT will launch financial operations of the $25M Pilot bond in Q1 2014, working with Standard Bank as Custodian to disburse the initial $12.5M funding.
Phase I Expansion (2015): BAMM will expand to 5 districts in Maputo province, necessitating additional training of new IRS personnel and Community Health Workers, as well as acquiring more insecticide and ACTs. BAMM will oversee two additional IRS spray rounds. The $25M Bond will be fully deployed at the midpoint if the independent M&E agency finds the malaria prevalence reduction meets projections. If reduction does not meet expectations, the program will be shut down and investors will be repaid half of their outstanding principal, $6.25M.
Phase II Expansion (2016): BAMM will expand to cover the final three districts in Maputo province, employing the same tactics as prior years. At the end of 2016, the M&E agency will evaluate the prevalence rate reduction. If the target isn't achieved, investors are repaid 50% of their principal. If the target outcome is achieved, investors are repaid in full plus a 5% coupon. If successful, GMT will fundraise for the Second Bond to scale the program to additional provinces within Mozambique.
Malaria has a devastating social and economic impact in Africa. According to the WHO, the African Region accounts for 85% of malaria cases and 90% of all malaria deaths worldwide. In Mozambique, malaria remains the leading cause of mortality, accounting for 29% of all deaths and 42% of mortality in children under five. The need to channel more resources for effective delivery of malaria interventions is urgent in Africa, where the estimated funding gap to achieve universal coverage of essential malaria interventions through 2015 is $3.6 billion, and countries like Mozambique struggle with weak health systems that inhibit programmatic effectiveness. In Mozambique, the National Health Service has successfully reduced the incidence of malaria since 2006 by delivering essential services to the population, largely attributed to better testing through rapid diagnostic tests (RDTs). However, due to the funding gap, the country continues to lag behind in coverage of essential malaria interventions, such as Long Lasting Insecticide Nets (LLINs) and Indoor Residual Spraying (IRS), which only between 25% - 50% of populations at risk.
Increasingly, new financing mechanisms stand to play a key role in the development of more effective public health programs, including malaria. Development Impact Bonds (DIBS) are one such mechanism currently being explored. DIBs are impact investing, outcome-based, financing mechanisms where a development aid agency and/or government enters into an agreement with a private intermediary entity, who raises investment capital and provides services to achieve a targeted social outcome. DIBs leverage participation of investors who are typically absent from traditional aid funding, bringing new sources of funding to and new partnerships on critical issues. DIBs and their government-funded counterparts, Social Impact Bonds, are only beginning to be developed and implemented in certain sectors and contexts, and have great potential for use in the global health space.
The Mozambique Malaria Performance Bond has gathered a strong group of stakeholders to take the program from concept to inception. Given the number of different stakeholders necessary to the model, they are looking for four types of partners: (1) Corporations able to provide financial resources and management insight for the initial launch of the Pilot Bond for CSR purposes, and to reduce the cost burden of employee-absences due to malaria (2) Impact investors interested in receiving a blended financial and social return by investing capital upfront into the Pilot Bond, (3) Donors looking for guaranteed impact where they will only fully fund the program if the target reduction in malaria is achieved, and (4) Health-oriented NGO implementers who are interested in outcome-based work and potential bonuses for exceeding malaria reduction expectations.