Malaria in Mozambique: trialling payment by results

An anti-malaria fumigation drive in Mumbai, India. Photograph: Rajanish Kakade/AP

Malaria control programmes in recent decades offer overwhelming evidence that implementing an integrated, sustained malaria-eradication protocol covering prevention, diagnosis, and treatment achieves results. However, two factors have kept the disease burden posed by malaria high in some of the most underdeveloped parts of the world: lack of sustained financing and lack of co-ordination among interventions. And this is exactly why malaria is such a prime target for applying development impact bonds (Dibs), a new way of attracting funding for development issues such as malaria.

In Dibs, donors commit to pay for achievement of a particular development goal. Private investors provide the bridge funding to allow interventions to operate towards the goal. Others – such as governments and donors – implement interventions, and the investors are repaid if the goal is reached. Dibs create incentives for the investors to demand good data on progress, and give the implementers freedom to adapt their methods in reaction to ongoing data collection. They create a new tool for investment, demand accountability, and enable practitioners to work with flexibility and innovation – all of which drive results.

The Guardian recently put Dibs and their potential applications under the spotlight. What these applications have in common is a need for sustained financing and co-ordination – two things that Dibs provide by design.

It makes sense, then, that a coalition of public and private groups (including government, corporates, and public donors) is working to make malaria control in Mozambique the focus of one of the first development impact bonds soon to be issued. The Mozambique malaria performance bond (MMPB) is designed to increase funding for, and the efficiency of, malaria interventions. Over 10 years, the MMPB aims to protect up to 8 million people in Mozambique from infection and reduce malaria prevalence in the targeted areas by up to 75%.

The bond will raise money from investors looking to achieve a blended social and financial return, such as private foundations or social debt investors. The proceeds of the bond fund an integrated malaria control programme that addresses all aspects of prevention, diagnosis, treatment, and monitoring and evaluation through annual disbursements for 12 years. A central operations team with pan-African malaria control experience will manage the programme in co-ordination with local health providers and the ministry of health.

Depending on results, bond investors will be repaid by a public-private coalition of stakeholders who have vested economic interest in fighting malaria, including the government of Mozambique, southern African corporates whose businesses absorb costs imposed by a high malaria burden, and public donors whose fundamental mission is to combat malaria.

If the malaria interventions meet their performance targets, the end payers repay investors in full with 5% interest. If the malaria interventions are ineffective, investors are repaid only 50% of their principal, with no interest, the programme terminates, and funders are absolved of further commitments.

Some may question necessity for the complexity of this structure. If billions of aid dollars have been and continue to pour into malaria control for Africa, why is this new financing mechanism needed? The answer lies in the bond’s focus on payment for performance, and why this is particularly important for malaria control.

In the traditional funding model, health implementers rely on upfront donor funding, then deliver the specific, approved programme after funding is received, creating only indirect accountability for results. Thus, overall malaria control in certain geographies may include only parts of an integrated intervention, depending on donor priorities and available funding. As a result, effectiveness is unpredictable and gains can quickly erode if subsequent funding dries up or if a neighbouring area still harbours infected mosquitoes.

In contrast, by mobilising new resources from private investors, the MMPB reduces reliance on upfront donor disbursements. It also provides sustained, predictable long-term funding that protects programmes from disruptive volatility to enable effective and responsive operational planning. And perhaps most importantly, the bond structure enforces cost-effective funding by accurately measuring results and then directly compensating implementers for achieved impact.

Despite all its benefits, the malaria bond isn’t a silver bullet that will magically inject new money to solve problems. First, while the MMPB can mobilise funding from new sources in the private sector, all Dibs still rely on donors (where the bulk of development funding comes from) to repay investors and to scale up any corporate participation. Second, the solution remains complex; Dibs still need to co-ordinate closely with the government at all times to ensure sustainability and local government accountability.

Finally, implementing a completely integrated malaria control programme for the first time in an area will likely be more costly at first than previous interventions – but the theory behind this approach is that it will also be more effective, which will save money and, more importantly, save lives.

Lily Han is an investment principal with Dalberg Global Development Advisers, one of the private sector partners working to launch the Mozambique Malaria performance bond. Follow @DalbergTweet on Twitter

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Malaria in Mozambique: trialling payment by results