How Can DFIs Contribute to the COVID-19 Response?

The COVID-19 health crisis is also a healthcare supply crisis. Companies around the world are struggling to meet demand for both basic and complex healthcare supplies and equipment, including personal protective equipment (PPE) for health workers, diagnostic supplies, sanitizers, and critical care medical equipment. Hospitals and governments are entering bidding wars and banning exports of scarce supplies—measures that are likely to disproportionately hurt small and poorer countries, with less ability to pay and limited local manufacturing capacity.

In this context, development finance institutions (DFIs)—with their large array of financial instruments, mandates to help the poorest countries, and high risk appetites—could be well placed to support accelerated and expanded production and distribution for key medical supplies and equipment, particularly in low- and middle-income countries (LMIC).  

DFI involvement in the healthcare sector has been limited to date. Investments are mostly concentrated in upper-middle-income countries and generally support for-profit hospitals and clinics, pharmaceutical manufacturing, and financial services for health (like insurance). Some DFIs have also acquired equity positions in healthcare investment funds or expanded support to small and medium enterprises producing laboratory diagnostic services and medical supplies. Yet, other potential investment areas have remained largely neglected across the health sector—including those, like medical equipment, with direct relevance to the coronavirus response.

DFIs are already scaling up support to existing clients with the goal of maintaining their solvency and limiting long-term economic damage. They have also, collectively, announced their intention to “promote new investment in goods and services necessary to global health, safety, and economic sustainability” as part of the crisis response.

DFIs can play a meaningful role helping the private sector scale up manufacturing capacity and ease supply chain disruptions for COVID-19 health products, as well as sustain service provision to meet other health needs in LMICs. This support would cushion the blow on LMIC health systems in the near to medium term while also proactively laying the groundwork to boost their resilience to future outbreaks. It would also have economic benefits beyond the health sector. As DFIs mount their own response, linking with other development partners, including the multilateral development banks and bilateral aid agencies, to identify potential investment areas and harness their expertise in client countries will be essential.

In particular, DFIs are well positioned to address five pressure points in the COVID-19 response that need financing. Let’s unpack these one by one:

1. Financing production scale-up of COVID-19 medical supplies

COVID-19 has changed payment terms and cash-to-cash cycles in many industries. Most prominently, suppliers of scarce parts and raw materials for medical equipment expect upfront payments from the finished equipment manufacturers, while end customers of such equipment may not necessarily have the ability to pay upfront.

Manufacturers may be stuck in the middle with significantly increased needs for working capital. DFIs can help provide working capital to ensure small-to-medium-sized medical suppliers facing a cash crunch can quickly fulfill orders and ramp up production of PPE, oxygen, and critical care equipment.

Beyond their immediate use for the health sector, PPE supplies are also needed to ensure workplace safety in other industries, such as retail, food manufacturing, and logistics/delivery. In addition to medical equipment manufacturers, DFIs could help expand private laboratory capacity, including manufacturing of rapid point-of-care diagnostic tests through a combination of working capital and fixed capital for reach expansion. In addition to extending credit to existing manufacturers of PPE and other medical supplies, DFIs could provide fixed capital to manufacturers in their portfolio who are able to repurpose their production to meet demand for items in scarce supply (e.g., apparel manufacturers shifting to PPE, cosmetic companies to sanitizers, or auto factories to ventilator parts). Expanding current agreements or investing in new producers could facilitate a pivot to PPE production for deployment in LMIC clients—but doing so would also harness entrepreneurial efforts that have cropped up in response to COVID-19 for longer-term impacts. With consumer demand for apparel plunging amid the economic recession, support to repurpose production may also offer positive economic spillovers for these industries. It may enable regional manufacturing clusters especially in regions such as sub-Saharan Africa which historically have not been producers of medical equipment such as PPE.

2. Easing barriers to distributing vital COVID-19 supplies

While scaling up manufacturing is a clear pressure point, so is effective distribution of supplies.

Logistics and transport have become a bottleneck to production continuity, inbound (for raw materials) and outbound (for finished product) logistics in many countries. COVID-19 has further highlighted the need for flexible, digital logistics companies (e.g., Kobo360 in Nigeria, Tusker by Logistimo in India, and Lori Systems in East Africa) that provide logistics platforms with high visibility and better exception handling tools. In addition to flexibility and efficiency, some of the new logistics platforms also contribute to greater sustainability. A potential upside of investing in such companies could be that in the medium to long term they can also contribute to the DFI sustainability agenda.

In addition, DFIs should consider how they can support existing health-focused distribution businesses that may be facing credit constraints due to altered payment terms. One example is private start-up pharmacies and distribution innovators in countries like India, Nigeria, Ghana, and Kenya that could distribute rapid diagnostic tests for COVID-19 through their networks (e.g.,  mPharma, Maisha Meds, or 1mg).

Finally, manufacturers who are repurposing their production lines to meet COVID-19 demand are suddenly facing an unfamiliar market landscape with urgent but diffuse needs for their products. To contribute effectively to the COVID-19 response—and protect their businesses—these suppliers need quick and efficient access to potential customers. A market connect platform could help link suppliers with customers in need, an intermediary function that has been noted as a significant gap in the current landscape. While the exact architecture requires further analysis, DFIs, in collaboration with development aid agencies, could support the creation and operation of such an effort.   

3. Investing in health data and health data infrastructure

COVID-19 has seen the emergence of entrepreneurial groups who pull data from different sources, and aggregate and synthesize it to create meaningful information for healthcare workers, scientists, epidemiologists, and policymakers. Such companies can play an important role in LMICs too in helping understand different demand scenarios and provide vital information to multiple stakeholders in the health sector.

4. Supporting health service continuity

As we’re already seeing, disruptions to routine health services caused by coronavirus lockdowns may create significant and possibly disastrous second-order consequences for already under-resourced health systems. Individuals—particularly in LMICs—are increasingly afraid, deterred, or simply unable to seek care for non-coronavirus health needs, including reproductive and maternal health, routine vaccination, TB, HIV, and even dialysis and cancer treatment.

In addition to investments that could help tackle the coronavirus crisis directly, DFIs should prioritize promising (if risky) companies that could help mitigate disruptions elsewhere in the health sector and promote continuity of services amidst the pandemic. Telemedicine, prescription delivery services, and other tech-enabled health interventions have been widely deployed in wealthy countries and China but remain in their infancy in many LMICs (in large part due to still-low smart phone penetration). Yet the current acute crisis is lending momentum (and a sizable market) to locally adapted innovators—and with additional capital (and a focus on equity), the rapid expansion and scale-up of these “no-touch” health delivery platforms may be possible, with persistent social and economic benefits even after the coronavirus crisis recedes.

Even with an aggressive expansion of telehealth and other forms of remote delivery, some health needs—for example, maternity care or trauma care—will still, necessarily, require in-person attention from a health professional. DFIs have traditionally focused most of their health exposure in the hospitals sector. They can leverage their existing investments to further expand and support critical care to contribute to both COVID-19 and longer-term outbreak response. In a similar vein, interruptions to public transport (and bans on private transport) may create an immediate need to expand low-cost ambulance services so individuals can access urgent care. Finally, DFIs could consider investments to support facility and infrastructure upgrades, with a focus on sanitation and infection control, to enable safe continuity of health services.

5. Supporting workplace safety

After a period of protracted lockdown—or, in some cases, less extreme measures—most countries will gradually seek to reopen and restart economic activity. Safe resumption of economic activity can begin earlier if workplaces are built and adapted to mitigate transmission risk, including sufficient distance between individuals; good sanitation (handwashing) facilities; frequent disinfection; and air circulation. The DFIs could capitalize on infrastructure upgrades to existing businesses to allow a more rapid return to work, reduce the risk of coronavirus resurgence, and create lasting benefits for worker safety.

For thoughts on what the DFIs can do to contain the fallout from the COVID-19 economic crisis, see Nancy Lee’s Eight Principles for the DFI Crisis Response.


CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.

Image credit for social media/web: Ekaterina/Adobe Stock