Piloting a VIA Global Health Inclusive Financing Product

Low- and middle-income countries (LMICs) represent a significant and rapidly growing market: a market size of $130 billion in medical equipment, constituting 30% of global healthcare spending, and an average of 6% annual growth rate in healthcare expenditures.   Yet, despite this market size, only 13% of medical device manufacturers have a presence in these markets, resulting in billions of people lacking access to life-saving medical equipment and supplies that enable the delivery of quality and affordable healthcare. Although healthcare disparities between the global "north" and the global "south" can be attributed to a number of factors, the market failure in access to information, products, and services presents a significant equity issue.  

Specific to medical products, the market fragmentation in LMICs presents the following barriers:  First, there are few clear ways to exchange information about buyer needs and seller offerings, resulting in information asymmetries.  Second, smaller markets and buyers do not confer the type of purchasing power that can enable price and time efficiencies that can then be passed on to end users and beneficiaries.  Third, there are significant transaction risks for buyers and sellers given the limited sales and shipping channels.

These challenges were the impetus for the creation of VIA Global Health in 2015, when the founder identified equitable distribution of medical products as one of the barriers to equitable health outcomes, and a barrier that could be addressed through a services platform that serves as a channel to connect buyers and sellers.   VIA Global Health is a business to business (B2B) service delivery platform that facilitates transactions between purchasers of medical equipment and supplies in LMICS, primarily small and medium sized enterprises who don't otherwise have access to large procurement channels and pricing, and suppliers of medical equipment and supplies who would not otherwise serve small and fragmented markets in most of African countries.   

In the past 5 years, having sold products into 80 countries to over 400 different customers, VIA has unique visibility into the market dynamics and the needs of both customers and suppliers.  One of the most pressing challenges that our SME buyers have expressed, is that of working capital constraints.  In other words, without better access to affordable capital or debt, our customers make numerous small volume purchases, incurring higher shipping costs and longer time frames that they then pass on to their customers in the healthcare sector.   They are often neglected in big procurement platforms and pricing negotiations enjoyed by the governments or by multinational companies, or very large distributors in domestic markets.  Most of our buyers serve the private sector and the NGO/FBO/CBO sectors, who collectively represent a considerable proportion of healthcare delivery in LMICs.  However, due to the market fragmentation and domination by only the large players, the financial and time cost to access life-saving medical products disproportionately affects them and the communities whom they serve. 

With growing emphasis on health equity and improving health outcomes in LMICs, innovations in health financing and debt capital have merged.  However, particularly in the past two decades, these initiatives have been focused more heavily on product development, product pricing, and clinical service delivery, and less on equitable distribution.(Accelerating Improvements in Health Product Distribution: Examining Opportunities for Blended Financing in sub-Saharan Africa. Salient Advisory, March 2021).  

From a 2021 report by Salient Advisory, findings suggest that for healthcare start-ups and distributors to grow and scale efficiently, they need, among other things: risk-tolerant capital to develop and deploy technology-driven innovations; and access to affordable working capital and ability to secure affordable debt. (Salient Advisory, 2021)  

There are important and valuable health financing facilities that are springing up, but in our stakeholder analysis and consultations, they do not meet all of the needs of SME distributors and purchasers of medical equipment. Some financing products are specific to the health service delivery institutions themselves (e.g. direct to hospital or clinic networks), are exclusive to certain suppliers, or they are loan programs with terms that are barely better than what local banks are offering, or are fintech solutions that operate on a much higher transaction scale and volume, and therefore still unattainable for the SME sector.   

There is not currently a B2B solution that offers a "Buy now pay later" solution specific to medical product distribution and the SME segment. 

VIA Global Health is a service delivery platform that enables local medical equipment buyers to find, order, and receive medical equipment directly from manufacturers.   VIA makes critical information visible: product information for buyers; and demand data for suppliers.  VIA's platform and services also level the playing field through greater transparency and inclusiveness regardless of purchasing power or geography- we will treat a small sole proprietor in Mali the same as a larger distributor in Namibia.  Additionally, VIA de-risks business through the facilitation of transactions, guaranteeing payment and product delivery, thereby creating a safe marketplace for all. 

This proposed fintech solution, a financing product for VIA customers will effectively serve as a "line of credit" or "buy now pay later" mechanism for our buyers to make larger purchases to better serve their own customers, and overcome some of the financial and time inefficiencies of many small purchases.    Through a risk assessment and stratification process, integrated with our existing customer journey and data, will enable VIA to extend the same terms to SME buyers that suppliers typically only offer to customers in the "Global North"

This would be a "pilot" phase with a strong learning component, in which we would further develop the process and maintain a small revolving credit fund to extend to select buyers, and use the data and experience to further develop a larger financial product (model) for which we can secure a larger level of debt capital for underwriting the fund. 

Our primary target population are our SME customers of medical products in LMICs, many of whom are distributors or small NGO/FBO clinical networks who manage their own procurement. VIA currently has a network of over 3,000 prospective customers who have engaged with us in some way or another (site visits, quote requests), of whom 500 are active customers (at least one purchase).   We have sold into over 80 countries, and we will provide the same services to our buyers regardless of their size, purchasing power or geography.  These SME buyers are currently underserved by existing procurement platforms and channels, and financing facilities or credit products in their own markets.

These SME buyers serve the public sector, private sector, and NGO/FBO sector within the healthcare service delivery ecosystem, so our secondary target population are the beneficiaries of healthcare in clinical environments who might not otherwise have access to life-saving medical equipment.   Through our modeling, we have touched the lives of over 5 million people with the products that we have sold and for which we have ensured delivery. 

A third target population for this solution will be the suppliers of medical products who might not otherwise serve LMIC markets, either because of resource constraints, or a lack of interest, or an aversion to navigating the transaction and logistics hurdles.  VIA considers itself a service provider to suppliers who want to serve these markets, but do not want to manage the processes themselves.  Extending financing terms to our buyers, while securing payment to the suppliers, is likely to help suppliers expand their sales in these challenging markets.  

VIA has spent over 1 year engaging with stakeholders, potential funders, and our own customer network to better understand the need, and the type of financing product that will best serve our buyers and these markets.

In addition to the 2021 Salient Advisory Report (cited earlier), VIA recently conducted a survey among our SME customers and in-depth interviews to assess the type of financing to which they currently have access, and to shape our thinking on the model development, risk management, and operational requirements such a product would require.  We have also spoken with potential funders of debt capital or trade financing to underwrite this product, but at a much higher level than what VIA is prepared to absorb at this time without a smaller scale pilot.   We have formed an Advisory Group comprised of individuals with backgrounds in global health, development finance, and consumer credit products and B2B lending. 

At an organizational level, though we are still a small company (10 people), we have made and fulfilled a commitment to have 75% of new hires be based in the markets we serve, so we can be more responsive to and reflective of our customers' needs.  In 2022, VIA has made 2 new hires based in Nairobi and will be opening an office there in May 2022.

VIA is proposing this solution to Solve not exclusively to raise funds, but rather to join us as a thought partner in the process, by bringing together expertise and interdisplinary perspectives that can help advance this fintech solution to the next phase.   This is in parallel to us securing other monetary and non-monetary support from other sources, including our own equity investors, grant capital donors, and business model.

Through our own experience and understanding of the Solve community, we feel that our fintech solution would benefit from thought leaders and content experts to ensure the pilot provides relevant insights to shape the next phase.

With even $75K from Solve, as well as the Solve program and community engagement, VIA believes this pilot could position the solution for a higher level of investment from other prospective funders and stakeholders who wish to see a proof of concept.

Currently, SME distributors of medical products are not large enough to "get the attention" and secure negotiations with suppliers, and therefore have challenges in accessing products and finding a channel for purchasing and delivery.

SMEs in general in LMICs are also typically underserved by existing financing or credit programs, most of which might be very expensive and therefore untenable, or specific to particular products or brands, or are very risk-averse in currency conversion etc, or are intended for much larger procurement and "ticket sizes"

There are B2C finance products that are growing in availability, but often at a much smaller level and not sufficient for purchasing critical medical equipment and supplies.

These limitations in other solutions are what has driven VIA to propose a fintech alternative that is specifically designed for our customer base and at the transaction level most relevant to them ($1000-$50,000).

If supported with this pilot, VIA expects to establish a risk assessment and stratification algorithm most relevant to our platform and buyers and to begin a small scale revolving fund through which we can refine the processes, understand the operational aspects, and demonstrate the proof of concept to other stakeholders and potential investors of debt capital or trade finance. 

VIA's broad impact goals are to continue our exponential growth in the sales of appropriate and affordable medical equipment and supplies into LMICs, specifically serving SMEs and fragmented markets that are often excluded from macro procurement channels.

By closing an equity gap in medical product distribution, we are also closing an access gap for the beneficiaries and users of life-saving medical equipment and supplies. We have already touched the lives of over 5 million people with the products we have sold though our platform, and hope to double that within next 3 years.

We plan to achieve these by committing to services that meet the needs of our buyers and our suppliers so that they have a sustainable and reliable channel for connecting with one another.

A financing solution for our buyers is one of our strategic initiatives to help them grow their businesses, and for suppliers to continue to expand sales into these markets.  A second initiative is focused on optimizing logistics to confer time and cost efficiencies to our buyers. 

VIA does not always know the "ultimate" destination of the products we sell as we are primarily a B2B solution. However, we use metrics provided by our supplier partners who have data on use case, life-span, and other details through which we can develop an impact score.  We also use qualitative data such as the geographies we serve and feedback from our buyers to understand how our channel and services have helped them meet the healthcare needs of their communities.

We also have extensive data on transaction history and user engagement, all of which helps us understand where and how our buyers are interacting with us, what they are looking for, and what types of products are in demand in LMICs. 

Our theory of change is based on the baseline information and insights we have already gathered from our customers, existing stakeholders, and prospective funders.  This has shaped the need definition and the differentiation that our fintech solution should embody.

From there, we believe that affording our buyers a line of credit will help them with their working capital constraints and better meet the needs of their respective customers through the efficiency and cost savings of larger purchases.

We also believe that affording some financial terms to SME buyers in LMICs similar to what suppliers offer to their customers in the "Global North" closes the equity gap that exists in access to information, products, and services.  

To achieve this, we believe, and have been encouraged to pursue, a pilot that demonstrates the following: a risk assessment formula to apply to prospective buyers for whom we have data and transaction history; a small allocation of credit to different risk profiles to inform the level of credit and terms that manage risk while meeting their needs, and indicators on the overall performance of a revolving credit fund in how that changes transaction size, customer orders and growth, and provides some security to suppliers that VIA is a reliable intermediary.  Collectively, outputs from this pilot should demonstrate the feasibility of a model for a higher level of debt capital (first loss) for a larger credit offering on the VIA platform.

VIA's core technology is our "website" or marketplace and the data that it generates.  Insights from our platform help us understand these markets better which in turn enable us to communicate with our suppliers, source the right types of products, and reach the customers who might otherwise not be served but who have needs and demands that VIA can meet.

Our other core technology is not technology at all, but human centered design around the types of services we offer and how to most efficiently provide those to our buyers and suppliers. 

VIA has a commitment to have 75% of staff from and/or based in the markets we serve, and we have developed an HR strategy and processes to address DEI.

Our business model is based on revenue from sales, which is essentially a 12% sales commission that we collect from suppliers so that we do not pass on any mark up to our customers in LMICs. 

In exchange for this "fee"- we provide all of the marketing, product page hosting, and manage the logistics and other transactions with the seller, and provide market data back to suppliers about the performance of their product or products.

VIA also has received grant capital from Bill and Melinda Gates Foundation (BMGF), USAID, and Merck for Mothers to accelerate our investments into our platform and services to better understand and meet the needs of buyers in LMICs and address known barriers in medical product distribution.  We have identified and engaged with a few prospective investors for the fintech solution, but all of them are interested at a higher level of capital and larger scale, which is why we are seeking pilot support in monetary and non-monetary forms, from MIT Solve.

VIA relies on a combination of funding for our financial sustainability.

We expect to close Series A funding with equity investors by end of 2022, we have received grant capital from BMGF to continue addressing medical product distribution in LMICs (they cannot provide the capital for the fintech fund itself), and most importantly, the very core of our business model is through revenue from our sales.

In 2021 we achieved $960,000 in sales, and our target for 2022 is $3 million.

Because our revenue model is based on sales and transactions, not on the fintech product itself, this proposed solution is a value-add, or a catalytic experiment intended to demonstrate the viability of a product that we know is needed by SME medical product distributors, which we can use to secure debt capital from other investors in development finance or trade finance.

VIA has already demonstrated the viability of our core business model, the platform and services channel that connects suppliers of medical products, with SME buyers in LMICs.  We have done this primarily through very lean operations, angel/seed investment capital, and grant capital allocated to prioritize investments that are focused on improving services to address equity and operational gaps in medical product distribution.

As such, VIA is constantly in a learning phase of our growth, committed to profitability by 2024 through our sustainable business model, and making critical investments that add value to our SME buyers as well as our supplier partners. 

Grant capital has come from BMGF, USAID, and Merck to enable VIA to make investments that better serve the access and equity gaps in LMICs that might otherwise "take longer" even if they are central to our impact goals.