Sustainable Access to Markets and Resources for Innovative Delivery of Healthcare (SAMRIDH) is a blended finance facility for healthcare in India. It was developed by USAID in partnership with Indian government, academia and private sector and implemented by IPE Global (a global development consulting group). The Facility arose out of the COVID-19 pandemic, where it became clear that the resources and funds required to strengthen India’s response were beyond what the public sector and philanthropic institutions could provide.
SAMRIDH has formulated strategic partnerships with financial institutions and philanthropic organizations to facilitate platforms for structuring and execution of innovative and financial instruments and transactions. Consequently, in a short span of time, it has used these partnerships to scale over 35 novel innovations that include solutions such as hand-cranked defibrillators, cold-chain technology to strengthen the supply chain, and drones to deliver healthcare services to remote and hard to reach regions of India. In this way, SAMRIDH is playing a crucial role in strengthening India’s healthcare systems and building its preparedness to effectively respond to future health emergencies.
We spoke to Himanshu Sikka, Project Director, SAMRIDH and Chief Strategy and Diversification officer and Lead – Health, Nutrition & Wash, IPE Global, about scaling health solutions, key learnings from using blended finance in India, and how they see blended finance in India evolving in the future.
How does SAMRIDH use blended finance to scale high-impact health solutions in India?
By combining commercial capital with public and philanthropic funds, we mitigate barriers to private investment in healthcare and unlock affordable capital for healthcare enterprises in the form of grants, equity, debt, and other financial structures. We have been able to create a blended financing facility with $300 million in grant and debt commitments from philanthropies, leading banks, and non-banking financial companies to support social and market-based health enterprises. Currently, for every $1 of philanthropic capital that has been raised, an additional $8-$10 has been mobilized through contributions from the private sector, project implementers, consumers, governments, and other development partners. In addition, we adopt a "capital plus" approach and provide business advisory services and mentorship for process and product improvements, to ensure financial viability and sustainability of the healthcare enterprises we support.
One common critique of blended finance is that transaction costs are very high. Could you explain how SAMRIDH overcomes this challenge?
In a blended finance transaction, each partnering entity comes with its unique objectives and motivations. As an intermediary facilitating these partnerships, SAMRIDH tries to align its solutions with the motives and expectations of each stakeholder to establish a ‘shared value partnership’. It’s a complex and time-consuming effort but we have found it to be crucial for the sustainability of our initiatives, as each entity is then drawn to the partnership with a sense of shared ownership and accountability.
To execute these complex structures in short timelines and with lower transaction costs, we collaborate and strategize with other structuring agencies. To this end, we have adopted a portfolio-level approach which provides both higher impact and scale. We have already made some headway in this direction with important partnerships that will support in developing blended finance structures, such as portfolio level guarantees and Social Success Notes.
One of our key partnerships is with Caspian Debt, a leading non-banking financial institution and provider of collateral-free debt to impact-led Small and Medium Enterprises (SMEs). Under this financing initiative, Caspian Debt and SAMRIDH offer affordable debt capital in the form of Social Success Notes to SMEs in the health sector. This portfolio-level approach has made it possible to simplify complexities associated with a typical result-based payments program and shall be able to drive growth capital to 15+ health businesses within six months. It can be further replicated in other high-impact sectors.
What have been your main learnings when it comes to using blended finance in India?
Some of the key learnings include:
- Leverage the strength of cross-sector partnerships to maximize impact: Designing blended finance structures calls for cross-sectoral collaborations involving financial institutions, philanthropic funders, private investors, government stakeholders, public funders, and the investee community. We have learnt the importance of aligning the expectations of all stakeholders in a transaction in an effective manner so that it works for all concerned, while also making sure that we solve all the legal and regulatory issues early in the process.
- Transition from tailoring individual transactions to adopting portfolio-level structures: Blended finance transactions involve multiple stakeholders with varying expectations and risk appetites. Typically, risk investors will seek returns, while philanthropic donors are focused on achieving impact per dollar. In our experience, creating program-level structures that follow a template and can be executed with multiple partners has proven to be time-efficient and viable to process multiple transactions.
- Develop financial structures that can be templated but are also flexible: A collective effort by the ecosystem to build a central repository of knowledge for blended finance structures can play a significant role in simplifying and replicating successful structures. To drive this objective, we are collaborating with our partners to create templated models and standard operating procedures for each blended finance instrument developed within SAMRIDH. While templated for easy adoption, these models are designed with an understanding of the varied capital needs of social entrepreneurs and allow customization at individual transaction level to meet the unique requirements of each business.
- Co-create and go beyond offering financial support: Enabling affordable scale capital is only half of what's needed to support the scale up of high impact health solutions. Innovators and early-stage businesses also need handholding to design effective go-to-market strategies for long-term sustainability and impact. Recognizing this gap, at SAMRIDH, we compliment the financial assistance provided to enterprises with technical assistance and business advisory support. Through this approach, we work alongside health innovators and businesses to design robust business models, get greater market access opportunities, and align products and services to the demand of vulnerable communities.
- Adopt a standardized approach to measure impact and enhance uptake of blended finance: Lacking a uniform approach for credible measurement of social impact often inhibits the participation of philanthropies and donor organizations in blended finance. To mobilize these additional pools of capital, we need to invest in developing standardized metrics targeting globally aligned goals to strengthen the impact management and measurement practices. This will help promote the advantages of mobilizing blended finance transactions and provide a road map for structuring future transactions.
How do you see the blended finance market in India evolving in the future?
Recently, we have seen the emergence of a growing and promising social finance ecosystem in India. We’ve also seen concurrent efforts to use blended finance transactions that have succeeded in securing financial returns and creating social impact in various development sectors. It is evident that blended finance can play a critical role in unlocking greater commercial investments to supplement the limited resources available to India’s ambitious development goals.
However, in addition to catalytic grant funding such as that of USAID to de-risk commercial investment in so-called high-risk ventures, we also need more private sector players and corporates to adopt blended finance instruments and share their experiences to grant legitimacy and promote widespread integration. This requires concerted efforts among stakeholders to consolidate the learnings from isolated interventions and develop a centralized framework that enables exchanging transaction details and building a better understanding of blended finance.
I think the onus is currently on the policymakers to back blended finance as a viable tool to achieve socio-economic goals. The ecosystem will grow if the government starts taking a more active role and addresses some of the key legal and operational roadblocks that make the transactions difficult to implement. We are seeing this openness to experimentation play out with the announcement of several landmark initiatives, such as the Social Stock Exchange that allows social enterprises to access funds from donors, philanthropic foundations, and corporate social responsibility (CSR) spenders through the zero-coupon bonds . More recently, the 2022 Union Budget also highlighted plans for setting up thematic funds for blended finance in "sunrise" sectors such as climate action, deeptech, digital economy, pharma, and agritech.
In my opinion, the time is ripe for a shift in the market narrative for blended finance. This can be achieved through building consensus among government and non-government partners, peers, and large ecosystem players that blended finance can potentially revolutionize the way we conduct development finance in India.