Better money: minimum volume/pledge guarantee

Independent studies (Mercer 2005, McKinsey 2006) have highlighted significant inefficiencies in the global aid architecture and, at country level, in the financing and procurement of RH supplies. Funding is often small, delayed, unpredictable or volatile due to lack of alignment of financing and procurement cycles either in the general government budget, or through donor funding or  loan arrangements; and is further compounded by the to lack of co-ordination of the procurements.

As a result, procurers are forced to (a) procure in small volume contracts that are not able to achieve best prices or customer service, (b) engage in costly emergency shipments, and/or (c) face longer supply lead times because suppliers cannot reliably plan production lines.  Moreover, unpredictable financing and supply flow impedes effective supply chain management that can lead to stock-outs and wastage, as well as deter decision-makers from scaling-up country programs.

A subgroup has been established within the Coalition´s Systems Strengthening Working Group to explore the global inefficiencies in financing and procuring RH supplies, and oversee the development of a (i) a global financing and pledge guarantee ("PG") that would improve the funding flows and ii) a minimum volume guarantee ("MVG") that would enable aggregation of demand forecasts and enable organizations to better negotiate volume discounts and better terms and conditions from manufacturers.

Members of the subgroup, also referred to as the MVG/PG Counterpart Group, include the Bill & Melinda Gates Foundation, DFID, KfW, Netherlands Ministry of Foreign Affairs, World Bank, and UNFPA.  USAID is represented in an advisory capacity.  More information about the Counterpart Group, its members and its work is available through the Secretariat. 

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November 2007,   RHSC

Categories: Innovation, Featured, Systems Strengthening Working Group