Undernutrition (nutrient-deficient and underweight) and overnutrition (overweight and obesity) rates are rising in Asia. According to a 2013 report by the Food and Agriculture Organization (FAO
) and a global study on obesity published in 2014 by medical journal The Lancet
, 65 million people in Southeast Asia are undernourished and 22 per cent of men and 28 per cent of women over age 20 are overweight or obese. This dual burden places immense stress on public health systems and endangers the development of the young growing population and national economies.
Economic and Health Impacts of Malnutrition
Many low-income communities are struggling to afford safe and nutritious food and continue to suffer the devastating impacts of nutrient deficiencies which lead to high infant mortality, stunting and wasting, and delayed development and impaired cognition. Concurrently, rising urbanisation and per capita income in developing cities have caused a shift from traditional diets to an increased consumption of processed foods and “fast food”. This change in diet is accompanied by a higher predisposition to lifestyle-related diseases such as diabetes, hypertension, cardio-vascular diseases and certain cancers.
The dual burden of malnutrition, which encompasses undernutrition and overnutrition (overweight and obesity), places additional stress on national health systems and increases medical costs for governments and communities. Wider reverberating effects may be felt by national and regional economies in terms of lost productivity and higher business costs, and ultimately, a hit on regional economic momentum. Between 2000 and 2009, undernutrition alone resulted in a loss of gross national product across Asia of up to 11 per cent.
Funding and Knowledge Gaps
Nutrition practitioners who participated in a workshop on nutrition finance organised by the Milken Institute
in 2015 acknowledged that the enormity of the challenge requires scaling up existing nutrition interventions. Governments, NGOs, philanthropic organisations and private companies have invested in nutrition-specific interventions, and improved sanitation and access to fresh and healthy foods.
In spite of this, the same study by The Lancet
estimates that Southeast Asia requires additional funding of $6 billion a year for nutrition interventions. Among others, the injections will be expected to fund: clinical trials to substantiate investments in food and nutrition, which includes research of plant-based proteins and alternative foods; data collection and analysis of local and regional contexts to better-inform nutrition investments and advocacy programs; and nutrition interventions in countries such as China, Vietnam, Philippines, Indonesia and India, which have seen declining overseas development assistance and institutional funding since progressing from the low-income category to middle-income.
Potential Sources of New Funding to Bridge the Gap
Given the acute funding gap and limited funding sources, the Milken Institute Asia Center
is examining ways to engage new forms of capital that could broaden and diversify the pool of investors willing to support high-impact programmes like malnutrition intervention. Innovative financing options such as volume guarantees, the social impact bond model, and the small and medium businesses/impact investing fund may be applicable. How will these options work?
A volume guarantee ensures purchase of nutrition products at a pre-determined quantity and price to encourage investment in production. As profit margins for food companies are generally low, profits diminish further when selling to low-income communities. The guarantee, usually from a donor organisation such as the Bill & Melinda Gates Foundation
, can help local producers manage business risks and generate more attractive profits. This could, in turn, appeal to investors and provide growth capital to reach more markets. The challenge of applying a volume guarantee lies in accurately mapping market demand and identifying suitable interventions and marketplaces that will benefit from this type of funding incentive.
Social impact bonds can be useful to reach new investors and new sources of funding, but tend to be less popular in Asia as these new instruments are perceived to be extremely risky. The model is dependent on data that articulates a link between a nutrition intervention and its cost-savings to a government or donor. Unfortunately, insufficient data exists to prove a direct causal relationship to justify the structure of a social impact bond. A reduction in stunting rates, for instance, may be a result of several interventions such as improved nutrition, education and sanitation. This model may be useful in cases where intervention has direct measurable impact, such as school feeding programs in Cambodia or shorter hospital stays due to improved nutrition.
Impact investment or small and medium enterprises (SME) funds are seeded by institutional investors, development finance institutions, and banks to provide growth capital for social enterprises or companies with both a financial and social mission. A nutrition-focused investment fund could help to catalyze investment into nutrition projects that run for a minimum of five years or typically longer, and generate below market or near market returns for investors. Currently, SME funds have yet to be effectively targeted towards nutrition partly due to the lack of investable companies, which are either too small or not adequately profitable. To create a more robust pipeline, an incubator or acceleration program could be created to provide technical assistance to entrepreneurs and existing companies working in nutrition.
Taking Action, Sooner than Later
Malnutrition threatens the development of individuals and limits their means to a secure and stable livelihood. The debilitating effects may be lifelong and puts a strain on national health budgets and labour productivity. Increasing the momentum to address malnutrition will largely depend on the availability of additional funding, which goes beyond the budgets of traditional funders such as governments and donor agencies. As philanthropic activity grows in Asia, local and regional foundations and philanthropists could provide a much-needed boost to the nutrition agenda. A concerted effort to demonstrate the inter-linkages of nutrition with child and maternal health, education, food security, and gender and health promotion, will also be helpful to achieve greater alignment with investors, donor agencies and governments.
About the Authors
Belinda Chng is Associate Director of Innovative Finance and Program Development at the Milken Institute Asia Center and Caitlin MacLean is Director of Innovative Finance at the Milken Institute. This piece is adapted from the forthcoming Milken Institute’s Financial Innovation Lab report on “Innovative Finance to Address Nutrition in Southeast Asia”. The authors can be reached at email@example.com and firstname.lastname@example.org.
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