While many problems around the world require public sector intervention, the private sector and its unique advantages have been underutilized in the worldwide effort to reduce poverty, promote education, deliver healthcare, and serve the world’s poor.
Julie Sunderland, the Director of Program Related Investments for the Bill & Melinda Gates Foundation, explains how the Foundation works to include and incentivize the private sector in order to accomplish these ambitious goals.
Julie Sunderland: There are lots of problems around the world that require public sector intervention, require donors and governments to provide resources to address, you know, whether it’s public health goals, whether it’s education goals. But one of the things that the Foundation is really excited about is how to leverage the private sector. And the reason that we’re really excited about that is that we know that markets don’t currently work well for the poor. But we really believe that markets can be made to work well for the poor. So if you think about it, you know, why don’t markets work well for the poor. Well they don’t work well because first of all the poor don’t have any money which means they’re low margin. They’re not a particularly attractive market. You know, the poor whether they’re in inner cities in the U.S. or whether they’re in, you know, a rural area of Africa they have some of the most challenging distribution channels which means for a company it’s really hard to even get to them.
The transaction costs of reaching the poor are really – are higher and worth more than the poor as a customer. They live in some of the most difficult markets in the world, you know, just from a risk perspective. So a lot of companies are like ah, you know, I don’t understand these markets. I don’t understand the risks. They don’t have a lot of information about them. So whereas, you know, you can go and get minute detail on consumers in the U.S., you don’t even know what these consumers look like, you know, what are the basic information about these markets. And lastly a lot of the procurement, a lot of the buying of goods and services for the poor is done through governments and is done through donor agencies. And it’s hard for companies to – it’s hard for those two worlds to talk together and work effectively together. So it’s really not surprising that most companies don’t focus on the poor. It’s a tough market. At the same time the Foundation knows that if we’re going to solve the problems that we’re trying to solve – and it’s not just for the Foundation, it’s for all of us. If we’re going to try to solve these problems, we’ve got to tap into the creativity and the capability and the innovation potential of the private sector. You know the private sector brings skills that we absolutely need. It brings, you know, scale manufacturing and an understanding of how to optimize manufacturing to drive down costs.
It brings innovative capacities. So, you know, some of the greatest innovations that we’ve had in the world have come out of the private sector. It attracts extraordinary talent. So, you know, the most talented people, the most creative people are most often going into companies these days. So if we want to solve the problems that we’re trying to solve we’ve got to figure out how do we tap into that extraordinary capability of the private sector. So what we’re thinking about doing is how do we pull those partnerships together. How do we get a bunch of different types of organizations that haven’t talked to each other together to say hey, markets don’t work well for the poor, for good reasons. Private sector brings extraordinary capability to solving those problems. How do we bring those two things together. For the Foundation we think about it in a number of different ways. We think about how do we derisk, how do we work with private sector partners to derisk their interest and their capital allocation toward these markets. And we can use our investment tools to do that.
We can use, you know, whether it’s a guaranteed, a derisk, a market or whether it’s providing equity investments, you know, to go into a new opportunity. We can think about using our capital to derisk. The other thing that’s really important is getting people to talk to each other. So, you know, the donor markets, the government markets are a big opportunity for companies. You know we’ve got companies like all of the big pharmaceutical companies providing vaccines and providing commodities and providing different types of products into these markets. They’re big markets. But the donor community, the procurement processes within governments and donors don’t always talk well to these companies. So one of the things that we’re doing is really thinking about how do we catalyze those multi-stakeholder discussions where we can bring together foundations, we can bring together governments, we can bring together the private sector such that those two cultures can begin to talk to each other and figure out how do they use the different resources to really tackle these big social problems in a way that has the potential to open up these markets for these companies and solve problems for the people that are really focused on the social problems.
Directed / Produced by Jonathan Fowler, Elizabeth Rodd, and Dillon Fitton