More than 2,000 delegates from donor and recipient countries, philanthropies, NGOs and the private sector are gathered in Busan, South Korea this week for a major meeting on aid effectiveness.

The goal of the 4th High Level Forum on Aid Effectiveness is to come up with a common road map and principles for the provision of international aid for development. It’s a daunting task. Every country and group brings its own interests to the table. For example: should donor countries “tie” foreign aid to the purchase of commodities in the donor country? Should donors condition their aid on the political freedoms available to civil society groups in the recipient country? What obligations do recipient and donor countries have? What about countries like China and Brazil that are both recipients of aid and donors?

All tough questions. And tomorrow, the heavy hitters –including Secretary of State Clinton–will arrive to hash out these discussions at a higher political level.

In the meantime, our friends at DEVEX have been hosting an ongoing discussion about  aid-innovations that help stretch the value of the donor dollar.  One of these innovations is the Pledge Guarantee for Health— a creative financing system for global health commodities that the UN Foundation had a hand in helping to develop.

Here is how it works. PGH facilitates short-term loans to developing country recipients on the basis of pending aid commitments. This enables recipients to avoid stock-outs, emergency shipments, and high costs that can arise when they must wait for funding to replenish supplies of critical medicines. The PGH is flexible, and transactions are structured to accommodate needs of both recipients and donors. Thanks to PGH facilitating the process and guaranteeing the bank loan, health supplies are procured up to eight months faster, and commodity premiums are reduced by up to 83 percent.

“We applaud the efforts of countries like Zambia and development partners to create a system that gets health aid to where it’s needed fast and in time to avert emergencies,” said Eva Jarawan, health manager for the World Bank’s Africa region. “Innovative financial mechanisms like the Pledge Guarantee can make a real difference in delivering anti-malaria bednets and other vital health supplies quickly and efficiently to communities which need them the most.”

In Zambia, once the guarantee was issued, it took the government of Zambia and UNICEF less than three weeks to deliver the bednets to the district-level.

Richard Gush, CEO of Standard Bank corporate and investment banking, said that Standard Bank was pleased to be part of a partnership that will save lives.

“We are privileged to be involved in this project, the first under the auspices of the PGH, and to be able to contribute through providing a financial solution that could help solve a continental problem,” he said. “We recognize that the African private sector has a leadership role to play when it comes to creating solutions to meet Africa’s development challenges and being responsive to the needs of the communities in which it operates.”

Ray Chambers, the U.N. Secretary-General’s special envoy for malaria, said: “While Zambia has made tremendous progress in malaria prevention in recent years, the recent resurgence reported by the World Health Organization highlights the need to remain vigilant and ensure that nets are not only financed, but arrive on time. The success of this innovative deal provides us with an important new tool in the fight to end deaths from malaria by 2015.”

The percentage of Zambian households owning at least one anti-malaria bednet increased from 38 percent in 2006 to 64 percent in 2008. With the additional bednets, Zambia will be able to make more progress toward achieving the health-related Millennium Development Goals.

The Bill & Melinda Gates Foundation investment in PGH is part of an initiative announced last year that commits a total of $400 million in program-related investments during a two-year period to deepen the impact of the foundation’s work through non-traditional means. These include the use of financial tools such as low-interest loans, loan guarantees and equity investments to secure financing for the charitable activities of select organizations and programs that fall within its core focus areas.

Also check out an op-ed by Maura O’Neill, chief innovation officer at USAID, on how innovations in water purification are efficiently bringing clean water to people in rural Kenya.

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