Spotlight: Creative Capital

An important priority of the Bill & Melinda Gates Foundation is increasing the number of modern contraceptive options available to women in the developing world so they can choose a method that best meets their needs.

Historically, implant suppliers have been reluctant to make their products available in the developing world at an affordable price. We realized we could tackle this market failure by structuring and executing agreements with implant suppliers that guaranteed significant demand for their products in select low-income country markets if they were willing to provide them at an affordable price. If these companies don’t sell an agreed-upon number of units each year, the foundation would provide financial support for the purchase of the shortfall amount by third-party donors for distribution in low-income country markets or make cash payments — backstopped by the foundation’s balance sheet — to make them whole.

In the case of the contraceptives mentioned above, our foundation — in partnership with the governments of Norway and Sweden, as well as the Children’s Investment Fund Foundation — negotiated a series of guarantees with Merck & Co. Inc. and Bayer AG to make contraceptive implants more widely available and affordable in 70 priority countries. By de-risking new market entry for these companies, we are on track to help make available an anticipated total of 55 million modern contraceptives to women in the developing world and save our philanthropic partners more than $500 million.

As our forecast of huge demand for these products was realized, our guarantees were never called, so these deals didn’t cost the foundation a penny, but they created an important measure of certainty for our private-sector partners. More important, they catalyzed the creation of what is now a large, sustainable market for implants in the developing world, so the impact will continue for years to come.

A version of this content originally appeared as part of the Beyond Trade-Offs series on The Economist digital platform: https://beyondtradeoffs.economist.com/improving-lives-innovative-investments.