Tune-In :: Textile Universe News
15 December 2017
05/02/2011
A to Z - Tanzania

In 2002, Jacqueline Novogratz traveled to Arusha, Tanzania, to meet Anuj Shah, CEO of A to Z Textile Mills. A joint partnership between Sumitomo Chemical, ExxonMobil, and UNICEF had been forged to develop a long-lasting insecticide-treated bed net for malaria prevention. The trio had called on Acumen Fund—a nonprofit social venture capital firm founded by Novogratz—to identify an African partner capable of locally manufacturing and distributing the technology.

Novogratz was confident that the nets could revolutionize the prevention of malaria, a disease that disproportionately affects the poor, killing approximately 250 million people annually. Although bed nets have been a proven prevention method against malaria transmission, the dominant technology in the early 2000s required retreatment every three to six months. The long-lasting insecticide treatment would extend the nets’ lifetime to five years.

A to Z was Acumen’s prime candidate to make the nets, as it had been in operation for more than 25 years and employed more than 1,000 people. Instead of awarding A to Z a grant—the conventional form of financing in the global health field—Acumen provided a $325,000 three-year loan with a 6 percent annual interest rate. The initial financing contract stipulated a royalty-free technology transfer of the nets from Sumitomo Chemical, and helped A to Z purchase new, specialized bed net weaving machines. In 2005, an additional $675,000 of capital structured as partly debt and partly a grant was committed to test the viability of a retail market distribution strategy. “I remember thinking that if the company produced 150,000 nets a year, we would have made a major contribution,” Novogratz recounted in her 2009 book The Blue Sweater: Bridging the Gap Between Rich and Poor in an Interconnected World.

Following the successful technology transfer, Sumitomo Chemical and A to Z each invested $7.5 million in follow-on financing to start a joint venture. By late 2010, A to Z was on target to produce 30 million nets—up 20 percent from 2009—and to sell them to international aid agencies for approximately $6 each. Its staff of 7,000, who are mostly women, has made the company one of the largest employers in Tanzania.

A to Z was Acumen’s game changer. By 2006, the textile firm had repaid its first loan to Acumen, and it is on schedule to repay its second. Although the loans were small compared with A to Z’s total financing, Acumen was the only partner willing to risk the initial capital to prove the company’s capacity to produce the nets. And only after A to Z achieved a proof of concept was the follow-on financing raised. The investment showed that, with capable investees, social venture capital (SVC) can succeed financially and contribute to global health.

This is a part of an artcle by Hima Batavia, Justin Chakma, Hassan Masum, & Peter Singer from Stanford Center on Philanthropy and Civil Society. Full article and more on market minded development and Acumen on this link.

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