Accelerating access to committed donor funds

In May 2013, global leaders in health and development announced a new 5-year, $100 million guarantee backed by the US and Swedish governments to support the work of Pledge Guarantee for Health (PGH). PGH, an innovative new financing mechanism, aims to improve the speed and efficiency of donor aid for health commodities.

The last decade has seen dramatic increases in the level of funding for global health from approximately US$10 billion to over US$22 billion annually. This growth holds obvious potential for those who wish to invest in health systems and provide health commodities to the millions who need them. However, in the run up to the MDG deadlines in 2015, it has become critical to maximize the impact of each dollar of donor funding.

As recipients await the disbursement of committed donor funds, they often lack the means to purchase commodities or at least to do so in volumes that give them bargaining power over prices and terms of sale. As a result, they pay more and may need to wait longer for delivery. On the other hand, allowing donor disbursement schedules, rather than need, to time procurement often leads to a tendency to overstock, which in turn leads to wastage and ultimately, stockouts.

Access to short-term, low-cost credit can smooth out this cycle of “feast or famine” by allowing donor recipients to better manage the inflow of donor funds. PGH makes this possible by allowing governments and NGOs to turn their pending aid commitments into bankable donor pledges, which they can then use to obtain short-term, low-cost commercial credit. In this way, PGH increases the efficiency of existing resources, leverages existing market-based mechanisms, and enhances country ownership.
PGH was developed under the auspices of the RSHC and launched in 2009 with support from several donors and technical organizations. After a two year proof-of-concept at the United Nations Foundation, PGH is now an independent entity with funding support from USAID, RHSC, and the David & Lucile Packard Foundation.