Elisabeth Schröder

Improving Health at Scale - Social Franchising Innovations at PSI

East Asia and Pacific
11. Oct 2017

Not your ordinary NGO

“We're not your ordinary NGO” – Population Services International (PSI) make it clear to visitors browsing their website that their approach to improving healthcare for the poor does not follow the charity model traditionally associated with NGOs. Quite the contrary: “We take a page on franchising from the corporate playbook by establishing networks of branded health centres that bring affordable, reliable and high quality services to millions.”

Leveraging over twenty years of expertise in social franchising and operating 25 franchise networks across Africa, Asia, and Latin America, PSI is the world’s largest social franchisor for health.

In the light of changing donor landscapes, overburdened public health systems, lack of quality assurance in private sector health services, and the need to contain new diseases, the case for leveraging existing private healthcare infrastructure is strong. The social franchise approach strengthens private healthcare providers with the aim of achieving greater scale and impact: PSI’s franchisees offer increasingly integrated health services covering a range of health issues such as family planning, malaria, HIV, tuberculosis, and maternal health, while assuring high quality and affordable prices.

While the strength of franchising resides in principles such as formalisation and standardisation, PSI recognises that there is no one-size-fits-all solution for health systems across countries and contexts. The recent programmatic brief “A Review of Social Franchising Innovations at PSI” (2017) highlights three targeted social franchise models that are currently being piloted in PSI franchise networks.

Tunza Social Enterprise model (East Africa)

In a quest to increase financial sustainability, PSI’s donor-reliant franchise network Tunza is transforming into a commercially viable social enterprise. Since its launch in Kenya in 2008, Tunza achieved significant reach by expanding into Burundi, Malawi, Tanzania and Uganda.

PSI is planning to make the new social enterprise operationally profitable in five to six years by increasing franchisee revenues and shifting from donor subsidies to a membership-fee and revenue-sharing model to pay for franchisor services. To increase revenue streams, the social enterprise model will build franchisees’ capacity through strategic marketing support, business management systems and skills training, quality audits, etc. PSI further undertakes to keep prices affordable for clients paying out of pocket by pooling procurement to realize economies of scale, and for those who cannot pay out of pocket by linking franchisees to formal health financing schemes. Ultimately, the social enterprise will serve more clients with improved quality and a wider scope of health services.

To test if Tunza can be self-sustaining, PSI is piloting the social enterprise model with selected providers that are willing to pay initiation fees and share their incremental increased revenue. The transition follows a segmentation approach: ‘High performers’ with great health impact can join the social enterprise. Other franchisees that need more guidance will receive targeted support until they are also ready to graduate to the social enterprise.

Red Segura fractional franchise network (Latin America)

PSI’s fractional franchise network in Latin America, Red Segura, operates in Guatemala, Nicaragua, and El Salvador. Under a fractional franchise model, providers franchise only a specific package of products and services from the franchisor. In order to scale up healthcare access in the region effectively and sustainably, PSI is now pursuing a full-format franchise strategy, which provides franchisees with access to a proven business model and brand in exchange for royalties.

With a primary care clinic model, PSI aims at attracting existing fractional franchisees as well as entrepreneurs with the opportunity to start their own health business. PSI is currently piloting model clinics and optimising operations until they are profitable. The next step will be that existing Red Segura franchisees will replicate the clinics following a standardized operating model, bringing consistent and quality health services to clients in Latin America.

Sun Quality Health’s monthly capitation model (Myanmar)

The Ministry of Health under the new government of Myanmar has committed to universal health coverage. In support of this strategy, PSI is testing how to effectively reach low-income communities with subsidies in its Sun Quality network of private health clinics, one of the world’s largest social franchises.

The pilot project replaces the fee-for-service model with a monthly capitation payment. PSI pays a fixed monthly rate to private general practitioners on behalf of eligible patients whom PSI identified as poor and at risk. The contracted GPs identify entitled patients through a health card and deliver an agreed package of primary care. The model’s aim is to unburden poor patients from out of pocket payments and to ensure access to timely treatment through a strategic purchasing mechanism.

The franchising model has been a huge success globally – think coffee, fast food and supermarket chains – because it has numerous advantages. The highly regulated business model allows the franchisor to exercise a high degree of control over the way of doing business and thus facilitates quality assurance. At the same time, franchising makes it relatively easy for entrepreneurs to become business owners. Even inexperienced managers can successfully run a franchise business because business operations are standardized and monitored by the franchisor. The typically strong branding creates awareness and trust, and together with the easy set up enables franchise networks to grow fast and reach even remote locations. Thus, franchising is perfectly suited to bring a proven business model to scale – which is oftentimes a major stumbling block for inclusive businesses. 

PSI’s social franchise models demonstrate ways to bring affordable, high quality healthcare to poor populations at scale. The franchising model has proven that it is suited not only to distribute junk food to all parts of the world, but also to make essential products and services accessible and available to the BoP. Could franchising be the answer to the unsolved challenge of scaling up inclusive business?

This blog is a part of the October 2017 series on NGOs in inclusive business, in partnership with endeva.

Read the full series for insights on what kind of roles NGOs have carved out for themselves, either as partners of companies, as intermediaries, investors, or even as entrepreneurs and their lessons learnt in doing so.