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Financing for Inclusive Business
Innovations to meet the SDG investment gap and other financing considerations for entrepreneurs

Opening the financing spigot on SDG3 — health and well-being

Opening the financing spigot on SDG3 — health and well-being
Why more business and financing innovation is needed to achieve our global health goals

By Kusi Hornberger and Omer Imtiazuddin

Kusi Hornberger is an Associate Partner and co-lead for the Finance and Investment practice for Dalberg Advisors based in their Washington, DC office. Omer Imtiazuddin is a Senior Advisor for Innovative Finance at USAID’s Center for Innovation and Impact also based in Washington, DC.


The global community has committed to an ambitious set of 17 Sustainable Development Goals (SDGs) through 2030—including SDG3—“to ensure healthy lives and promote well-being for all at all ages.” The goal’s targets include drastic reductions to maternal mortality, ending preventable deaths of newborns and children under age five, and eradicating the epidemics of AIDs, TB, malaria, and neglected tropical diseases.

Yet, multiple suggest that we are not on track to reach those targets—even if we massively scale up coverage of existing interventions including medicines, vaccines, bed nets, and medical devices.

We need significantly more innovation—and financing to support that innovation—if we are to successfully achieve our global health aspirations. Estimates from the WHO suggest achieving the SDG health targets will require new investments increasing over time from an initial US$ 134 billion annually to $371 billion by 2030. In an environment of declining “Official Development Assistance” (ODA), new and innovative sources of private financing will be critical to fill the gap.

Currently private capital isn’t being invested at nearly the level needed, particularly to global health products and services focused on serving base of the pyramid populations in emerging markets. According to the most recent Global Impact Investing Network (GIIN) Annual Survey, a total of 42 emerging market focused impact investors collectively allocated just $5.7 billion to healthcare in in 2018. So, why isn’t more private capital flowing if there is such a big need? 

Here are two key findings from USAID's Center for Impact and Innovation's recent report, Unleashing Private Capital for Global Health Innovation, which provide insight into the innovator challenges in successfully attracting private capital to scale their solutions and investor challenges to deploying more private capital.

An insufficient number of innovators cross “the valley of death” and reach minimum commercially viable scale

“Many innovators but few entrepreneurs” – Healthcare impact investor in India

Innovators from medtech to digital health to service delivery face the challenge of reaching a point of minimum commercial viability—the point at which they might be considered ‘investable’ by commercial (and even many impact) investors. This is for many reasons:

  • Innovations developed by technical founders often have a narrow focus on product and technology and insufficient focus on economics and the path to commercialisation.
  • Others may start operations with grant funding and struggle to make the transition to long term commercially sustainable sources of capital.
  • Further, there is a mismatch between the types of capital available in terms of return expectations and duration, and what is needed and appropriate to support innovators’ efforts from seed to early stages to growth and then to maturity.
  • Finally, working in base of the pyramid markets may result in higher transaction costs and additional risks, which lowers the willingness of investors to provide innovator-entrepreneurs with appropriate financing.

Insufficient capital of the right type and duration from “smart,” health-focused investors

“Healthcare is incredibly complicated, so the threshold of knowledge to be able to invest is high.” – Foundation programme-related investments team

On the other side of the equation, not enough capital is flowing from investors who struggle to invest in health social enterprises, despite increasing demand and mandate for them to do so. The challenges for investors are diverse:

  • From the beginning, investors can face challenges fundraising and finding interested partners to invest in healthcare companies with higher perceived risk.
  • Next, they can often face difficulty in finding a vetted pipeline of health innovation companies in the markets in which they operate.
  • Further, they face challenges in identifying investment talent that understands healthcare innovations and base of the pyramid markets.
  • Finally—and most importantly—most investors are reluctant to invest, simply because they do not feel smart enough to do so. On the equity side, their teams may not know the technical specifies of the product or market well enough to be sound managers. On the debt side, they don’t even pretend to begin to understand the repayment or business model risks due to lack of familiarity with these types of businesses.

A path forward

These challenges can be overcome. Here are two ways global health innovators and investors can “open the spigot” of capital over the next decade. 

Support facility (a fancy finance term for a financial assistance programme) focused on helping global health innovators successfully navigate “valley of death.”

Experts and advisors with targeted experience and knowledge could provide “hands on” technical assistance and on-going support and mentorship to innovators across the spectrum of stages and types. In addition, an innovator support facility could also offer access to networks of investors and local partners, who can serve as resources for innovators to tap into for funding and strategic partnerships. In tandem, the facility can provide grants and concessionary “patient” capital to early stage innovators to support them through longer start up periods.

Blended finance facility dedicated to building the investor ecosystem by making it easier for investors to deploy existing return-seeking capital

This sort of facility could offer financial de-risking that would mobilise return-seeking funds that would otherwise not be available. By lowering future perceived risk and giving investors the opportunity to realise meaningful returns on their investments, this would then create a virtuous cycle. The facility would also build investors comfort levels by providing expert advisory services to those with limited healthcare expertise. Learnings and best practices could then be shared across the sector.

Both ideas have garnered interest from a wide range of stakeholders and are advancing towards next steps. If you are interested in being part of the journey, please get in touch with us. 


Additional Resources:

USAID Report: Unleashing Private Capital for Global Health Innovation

Omer Imtiazuddin
Omer Imtiazuddin is a seasoned investment professional, with over 20 years of experience in the commercial and impact investing sectors. He is currently a Senior Advisor in Innovative Finance at USAID working on initiatives to use USAID’s catalytic funding and expertise to leverage more private capital into development. During his career in the global development sector, Omer has worked as an impact investing expert with a number of social venture capital funds, family foundations and grant-making organizations. In recent years, Omer has focused on designing, testing and scaling innovative financial models, such as outcome-based instruments, blended finance products and development impact bonds (DIBs). At USAID, he is leading the work for a $30 million DIB for the elimination of cholera in Haiti. Omer is a recognised thought-leader in the impact investing space--he has advised on numerous global health and impact investing task forces, lectured at Wharton, Duke and MIT business schools and is cited in mainstream media including the Financial Times. Omer received his BA from Yale University and an MBA from the Wharton School at the University of Pennsylvania.

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