Why pharmaceutical channel partners need more than better access to capital to deliver results
Half the African population still lacks access to safe, effective, quality and affordable health products. In response, donors and development partners are collaborating with financial institutions to design new mechanisms that improve the availability, affordability and accessibility of quality health products. This reflects a growing global consensus on the need to mobilize alternative resources to achieve Universal Health Coverage and the health- and poverty-related Sustainable Development Goals (SDG 3.8)¹.
These models move beyond traditional grant funding by mobilizing catalytic capital, leveraging local private sector capabilities and unlocking more sustainable sources of working capital for Africa-based pharmaceutical channel partners. Initiatives such as blended finance facilities, guarantee-backed credit lines and working capital funds are being deployed to support manufacturers, distributors, wholesalers, pharmacies and other channel partners in overcoming liquidity constraints.
While many organizations are involved in procuring and selling medicines and medical supplies, we will focus on pharmaceutical channel partners — private sector companies that operate between manufacturers and points of care, which include importers, wholesalers and distributors and marketplaces (aggregators).
Shrinking aid, rising medicine supply risk
Although decreasing, in many African countries, external sources represent 20% to 40% of health expenditures (WHO African Region – Health Expenditure Atlas 2023). As donor funding declines, pharmaceutical supply chains are becoming more financially exposed, with limited buffers to manage liquidity and procurement risks.
In the Democratic Republic of Congo (DRC), nearly 90% of health products are imported, with most international suppliers requiring upfront payment. Procurement lead times range from 1 to 8 months, tying up capital and heightening the risk of delays and stockouts.
To cope, many distributors have focused on providing warehousing and transportation services to donor-funded NGOs and international organizations, services which now account for 40% to 90% of their total revenue. These service contracts subsidize working capital, enabling distributors to prefinance stock and bridge long payment cycles from clients that can take up to six months. However, even this model is proving unsustainable; as major donors like USAID phase out programs, this source of financing rapidly shrinks.
Exploring new sources of working capital
Without access to alternative working capital, distributors face widening cash flow gaps and a declining capacity to procure and supply essential medicines. Dedicated working capital facilities are being introduced to help bridge these gaps and strengthen the resilience of pharmaceutical supply chains across Africa.
These facilities aim to provide more predictable and responsive financing tailored to the operational realities of importers, wholesalers and distributors, with the intended outcome of increasing access to quality medicines. However, their ability to deliver impacts depends on the capacity of local supply chain partners to manage and deploy these resources effectively.
Internal capacity gaps in working capital management limit access
Access to working capital alone is also not enough. Many pharmaceutical channel partners have weak internal working capital management practices that negatively affect how they manage receivables, payables, inventory and cash, often resulting in longer cash conversion cycles.
This is often due to limited access to financial management systems, low visibility in operational data and gaps in workforce capabilities in areas such as forecasting, credit management and cash planning. As a result, many wholesalers and distributors struggle to sustain operations, expand geographic coverage and ensure timely delivery of medicines where and when they are needed².
Pharmaceutical Channel Partners’ Quality Management Poses Risks for Health and Financing
Trust in the private sector’s ability to meet quality standards remains limited among potential customers, including public health systems and providers of working capital facilities. Many pharmaceutical channel partners do not meet quality and regulatory requirements and operate without certifications that demonstrate compliance with WHO Good Storage and Distribution Practices (GSDP) or the Model Quality Assurance System (MQAS).
Their lack of capabilities to ensure proper handling and transportation of health products increases the risk of degradation or wastage before products reach customers. In the worst case, this lack of quality compliance raises the likelihood of substandard or falsified medicines entering the downstream supply chain. These quality gaps limit access to financing by constraining revenue growth and scalability, as donor-funded NGOs, a key client segment in the African health sector, often require compliance with recognized standards to award contracts.
Financing non–quality compliant pharmaceutical channel partners pose serious risks for health systems, donors and financiers. Public sector clients risk procurement failures, stock disruptions and a decline in public trust in the health system. Donors may see their contributions diluted by poor implementation and linked to substandard health outcomes. Financiers face potential losses from supply chain failures, reputational harm and regulatory breaches.
Providing access to working capital without addressing these two challenges is like “pouring water into a leaky bucket” — it will not lead to the expected impact. To ensure financing delivers both health and financial outcomes, channel partners need more than capital.
What is needed to achieve the desired impact when increasing access to capital for pharma channel partners?
Access to financing helps address liquidity challenges, allowing pharmaceutical channel partners to maintain adequate stock levels and respond to demand fluctuations. But the value generated by this investment depends on how effectively working capital is managed. Tailored advisory services must accompany funding to build absorptive capacity, and translate investments into improved availability, affordability and quality of medicines.
Here are four recommended practices for those financing pharmaceutical channel partner working capital:
- Target “catalytic partners” to amplify impact: Pharmaceutical supply chains rely on a range of partners, including wholesalers, distributors, innovators and pharmacies, some operating at a national level, others sub-national and others locally. While each plays a role in ensuring product availability, some operate at higher volume, support others in the ecosystem or have the infrastructure to extend geographic coverage. Prioritizing financing for these “catalytic partners” helps move beyond individual transactions and unlock systemic impact in health product access, affordability and availability.
- Ensure compliance to quality standards: Even when channel partners receive quality-assured products, that quality can be compromised without strong warehousing, transport and traceability practices and associated quality management systems. Weak practices put patient health at risk and erode trust in supply chains, increasing reputational and financial risks for both donors and financiers. Strengthening compliance with WHO and national regulatory standards is essential not only to maintain product integrity but also to meet eligibility requirements for procurement contracts and financing. Robust quality systems help ensure that medicines remain safe, effective and trusted throughout the supply chain.
- Strengthen working capital management capacity: Weak practices around inventory, receivables and payments increase the risk that investment falls short on both financial performance and intended impact. Improved working capital management builds absorptive capacity, allowing channel partners to deploy funds more effectively and achieve sustained gains in availability and affordability of medicines.
- Generate data to guide on-going investment decisions: Evidence helps determine whether investments are translating into improved affordability, access and availability of medicines at the facility level. Without a deliberate focus on evidence generation, promising financing mechanisms risk remaining isolated initiatives. Generating evidence strengthens decision-making on the deployment of catalytic funding, attracts co-investment and supports the development of responsive national policies³.
Financing without capability, quality or data is not just inefficient—it is risky. The promise of innovative financing in health lies not in the capital itself, but in how that capital is deployed, absorbed and translated into measurable improvements in product availability, affordability and quality.
It is more urgent than ever to fund what works. That means pairing capital with the capacity to use it well.
[1] High-Performance Health Financing for Universal Health Coverage (Vol. 2 of 2): Driving Sustainable, Inclusive Growth in the 21st Century (English). Washington, D.C.: World Bank Group. http://documents.worldbank.org/curated/en/641451561043585615
[3] Meghan Bruce Kumar, Miriam Taegtmeyer, Jason Madan, Sozinho Ndima, Kingsley Chikaphupha, Aschenaki Kea, Edwine Barasa, How do decision-makers use evidence in community health policy and financing decisions? A qualitative study and conceptual framework in four African countries, Health Policy and Planning, Volume 35, Issue 7, August 2020, Pages 799–809, https://doi.org/10.1093/heapol/czaa027