The International Finance Corporation, the private sector arm of the World Bank, is in discussions to create new equity and debt funds totalling up to $500m to finance commercial healthcare projects in Africa.
The initiatives, which could be launched as soon as this autumn, include an equity fund with up to $100m in capital and a debt-finance facility worth up to $400m, as well as a programme of technical assistance grants for $50m.
The agency would provide funding, but also work with other official agencies, philanthropic groups and private banks, and attempt to tap wealthy individuals willing to invest significant sums and balance financial with broader "social" returns.
The projects will fuel a growing debate around the merits of stimulating greater private sector involvement in funding and delivering healthcare to tackle disease in Africa. It challenges the conventional approach that concentrates on using donor cash and local tax-derived support to the public and non-governmental sectors.
While many health activists and politicians argue that Africa's disease burden has worsened in recent years because of privatisation and underfunding of public services, others claim the state has proved poor at managing, stifled initiative and encouraged bribery so even nominally free healthcare is unattractive, ineffective and costs patients money.
The project draws on a $2.6m research project conducted by McKinsey, the management consultancy, which is being finalised and was funded jointly by the Bill & Melinda Gates Foundation and the IFC.
The analysis highlights a growing commercial market for healthcare in sub-Saharan Africa, representing both healthcare services delivered by private health insurance, and regionally manufactured medical goods including generic medicines.
The challenge for the IFC, the Gates Foundation and other backers will be to ensure that for-profit healthcare services supported by the debt and equity funds in Africa do not simply back businesses that "cherry pick" richer patients but instead reach the poorest in rural areas in lower income countries who suffer most.
The IFC may provide up to $50m from its own funds for the equity vehicle, while other organisations, including the Gates Foundation, will also be involved. The US official Overseas Private Investment Corporation is also currently studying the launch of a series of Africa capital markets funds.
It plans to talk to commercial banks based in Africa about underwriting loans for a further debt facility, which could prove more important for start-up healthcare companies, and which would be able to help overcome the currency risk for capital coming instead from abroad.
Estimates released by the IFC suggested that 60 per cent of health expenditure in sub-Saharan Africa was privately funded, with a market excluding South Africa worth nearly $19bn.
