Social Impact Investing

Impact Investments:
An emerging asset class
Global Research
29 November 2010
Table 16: Health market sizing
Data point Source Healthcare example
Annual household income of target market Case study Brackets A–E, Urban, Unattended births
Target market (# of unattended births, mm) N4B 113
Anticipated penetration rate Case study 40.0%
Anticipated customer base (# of unattended births, mm) 45
Average price of unit Case study $43–$301
Aggregate revenues over 10 years, bn $2–$14
Estimated operating margin Case study 5.0%–10.0%
Estimated profit opportunity, bn $0.1–$1
Total invested capital, bn $0.4–$2
Source: J.P. Morgan. Case study indicates the particular case study used for each sector. "N4B” indicates The Next 4 Billion, 2007,
WRI.
Table 17: Income brackets
INDIA, calculated as in Table 9
NIGERIA
Average number of people per household = 4.75
India Economic Activity Rate = 57%
Average number of earners per household = 2.7
India
Household
income
2005 PPP
(upper bound)
Nigeria
Household
income
2005 PPP
(upper bound)
A 11,923 8,835
B 9,936 7,363
C 7,949 5,890
D 5,962 4,418
E 3,974 2,945
F 1,987 1,473
Source: World Resources Institute, UN Statistics Division
Affordability: Income brackets A – E
In measuring affordability in this sector, we are able to reference the customer base
that both LifeSpring and R-Jolad are targeting, summarized in Table 18 and
referencing the income brackets in Table 17. LifeSpring is targeting customers with
daily household incomes of $2–$5, which translates into an annual household income
of $720–$1,800. This means that its business aims to serve those in income bracket
F, in particular. However, R-Jolad has customers from a wider income base, as
illustrated in Figure 23. From this data, we see that over 50% of R-Jolad’s customers
earn less than $1000 per annum. Especially since the R-Jolad data does not
specifically reference that these are household incomes, we will again apply the
conservative assumption that the bottom income bracket may not be able to afford
these health services. As such, we retain brackets A–E in our target market. In
practice, the roll-out or expansion of demand-side financing reforms (i.e. health
insurance) is likely to have a large influence on which customers will be able to
access maternal as well as overall healthcare services delivered through the private
market. Additionally, the design of demand-side financing reforms is likely to have a
major impact on private sector providers – if national/state health insurance programs
only reimburse for public services, or reimburse differentially, this will have a major
impact on the size of the market.
Table 18: Affordability test
India
Daily household income
of target customers $2–$5*
Annual household
income of target
$720–
customers
So, comparing to Table
17 we target:
$1,800
Brackets
A – F
Nigeria
< $930 for more than
50% of patients**
Brackets
A – E
Source: J.P. Morgan. * LifeSpring corporate brochure available on website.
** The Business of Health in Africa, Annex I, IFC, Dec 2007.
Figure 23: R-Jolad patients by income
level
pa = per annum
> $930 pa
39%
< $930 pa
61%
Source: The Business of Health in Africa, Annex I,
IFC, Dec 2007.
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