The availability of health commodities is key to expanding access to family planning and reducing unintended pregnancies, both of which are vital to supporting familial health and well being. Private pharmacies and drug shops are important providers of family planning products in many low- to middle-income countries (LMICs). In fact, USAID’s Abt-led SHOPS Plus project conducted a data analysis of women surveyed in 36 LMICs and found that 41 percent get their method from pharmacies or drug shops and 11 percent from general shops or markets. Despite their importance, drug shops and pharmacies face a number of constraints, including a lack of stock (stockouts), which hinder their ability to deliver commodities to the communities they serve. Interviews conducted by Abt through our partner, Banyan Global, indicate that lack of access to finance is one of several factors driving stockouts. Without access to a regular supply of working capital, drug shops and pharmacies can struggle to maintain an adequate inventory of drugs and other supplies. Meanwhile, suppliers in LMICs have access to credit, but the financing is often unstructured and informal, and therefore unreliable.
Based on the findings from our assessments and insight we’ve gleaned from SHOPS Plus finance programs, several suggestions for expanding financing within the private sector supply chain emerge, notably these three:
- Demonstrate the economic viability of pharmacies and drug shops. In Nigeria, the SHOPS project supported a financing model that built the capacity of local financial institutions to better address risks and costs associated with financing the pharmacies, drug shops, and supplies. This model helped demonstrate the private health sector has the capacity to repay loans, and increased financial recognition of the strategic value of pharmacies and drug shops.
- Partnering with the “right” financial institution is a key ingredient to successfully expanding access to financing. In Nigeria and Tanzania, microfinance institutions proved the most appropriate partners for reaching drug shops and smaller pharmacies, whereas commercial banks were most appropriate for medium and large pharmacies.
- Improving cash flow delivers results. Interviews with staff of drug shops and pharmacies indicated that improved access to financing addressed cash flow constraints, enabling them to expand the range and quantity of family planning products they offered.
By establishing relationships between financial institutions and private sector health enterprises, more health commodities—including family planning commodities—can reach local communities. Further, through the SHOPS Plus partnership model, loan funds are disbursed directly to commodities suppliers against an invoice, and the drug shop then repays that loan directly to the financial institution. This arrangement ensures that cash is not diverted to other activities, reducing credit risks for the bank. In addition, the direct link between supplier and drug shop helps ensure the quality of commodities and reduces the cost to drug shops by bypassing the distributor markup.
Ultimately, this intervention helped create a long-term, sustainable source of funding for pharmacies and drug shops in Nigeria, while supporting the country’s journey to self-reliance. By building these relationships, similar dynamics can be recreated in other countries.
Learn more about SHOPS Plus.