Roots of Impact believes in aligning capital with incentives to drive change for people and the planet. Social Impact Incentives (SIINC) is a catalytic funding instrument that rewards high-impact enterprises for achieving social impact and enables them to attract investment to scale. This case study is about how SIINC supported Clínicas del Azúcar (CDA), a leading private provider of specialised diabetes care in Mexico serving lower middle-income groups, in its ambitious scaling plans while allowing it to move to even lower income segments and ensuring high quality treatments to all of its patients.
Why was this investment catalytic?
SIINC helped Clínicas del Azúcar unlock its impact potential, raising investment, and scaling significantly. It has enabled the company to tap into even lower income segments and provide quality treatments to more than 100,000 patients so far, 95% of whom have access to specialised treatment for the first time in their lives.
Organisation type: Foundation
Financial instruments used: Social Impact Incentives is an Impact-Linked Finance instrument that rewards impact enterprises with time-limited payments for achieving additional positive outcomes. By representing an additional revenue stream, SIINC enables impact enterprises to improve their profitability and attract (more) investment to scale. In the case of Clínicas del Azúcar the maximum SIINC amount was $275k over 2.5 years and the company raised investment of $1.5M in equity in parallel.
Final beneficiaries targeted: Elderly people, People in poverty, People with diseases (either mental or physical)
Sectors targeted: Health
Country focus: Mexico
SDGs targeted: Goal 3: Good Health and Well-being, Goal 10: Reduced Inequality , Goal 17: Partnerships to achieve the Goal
Challenge and solution
In Mexico, diabetes has become the leading cause of death, with more than 14 million people living with the disease. Clínicas del Azúcar's mission is to give every person, regardless of his or her socioeconomic background, access to specialised diabetes care in proprietary, retail-type clinics. What sounded like a huge vision has already been a success with lower middle-income groups: after 9 years of operations, CDA, with 18 clinics, is the largest private provider of specialised diabetes care in Mexico today, reaching more than 100,000 patients, 95% of whom have access to specialised treatment for the first time in their lives. In addition, CDA offers its services at approximately 40% of the average price for private treatment. Given a short-term view to financial breakeven, CDA’s challenge in 2016 was not primarily to attract more investment to implement its aggressive scaling plan. The enterprise’s most daring task was to fully embrace its mission and successfully reach patients at the bottom of the pyramid (BoP). This is where SIINC came into play.
SIINC’s catalytic role
By providing impact-linked payments for real impact achieved at the BoP, Clínicas del Azúcar was able to position itself as an innovator in diabetes care and a pioneer in prevention techniques. At the same time, Clínicas del Azúcar was able to achieve solid economic returns. Yet this was not the only benefit of SIINC: tracking specifically designed impact metrics allowed the impact enterprise to stay true to its impact path while crowding in the right type of investors who supported the bold move into lower socioeconomic groups. In other words: deeper impact at scale came into reach. SIINC was implemented by Roots of Impact (transaction manager), SDC (outcomes payer) and IDB Lab (trustee and fund administrator).
Clínicas del Azúcar performed strongly in all aspects of the intended targets. From a fundraising perspective, the enterprise directly secured $1.5M in equity parallel to the closing of the SIINC transaction. Later in the SIINC period, Clínicas del Azúcar was able to attract an even larger amount, with a debt round of $6M for expansion. Looking at the BoP penetration, the results reported during the SIINC transaction period show an increase from 34% to 36%. When also including the period of developing SIINC – i.e. the anticipatory effect prior to the transaction start – as well as the effects after SIINC officially ended, CDA was able to report an even greater increase of BoP penetration from originally 32% to 37%.
Finally, the direct health outcomes for the BoP have been significant: average improvements in HbA1c levels ranged between 2.18 and 2.8 per six-month period, meaning substantial reductions in the risk of diabetes complications.
Insights and learnings
A number of insights and learnings that Roots of Impact took from this transaction are important to share:
- SIINC keeps the enterprise on the impact track. The SIINC component created a financial flexibility for CDA to experiment with new business strategies without jeopardizing the existing ones, all while keeping up business expansion and driving growth. This was of particular significance during a phase of currency fluctuation, where CDA would normally have had to cut down on its BoP penetration to avoid losses. With the SIINC arrangement in place, CDA was able to maintain its high-impact focus despite adverse operating conditions.
- SIINC helps to align the enterprise’s team to even exceed target results. By the end of the SIINC transaction, Javier Lozano (CEO and co-founder of CDA) expressed that he would have wished for the SIINC payments to have stretched over a longer time-frame, since having the incentive in place really drew the management team’s attention to the BoP segment.
- The effectiveness of SIINC relies on a good impact management and measurement practice. What became even more obvious than expected is the importance of working with enterprises that already have in place robust systems to gather and report on the data that Roots of Impact needed, or that can be adapted to do so with relative ease.
- Incentive co-creation with the enterprise is key. Co-creation of the incentive schemes and metrics together with the enterprise is a very powerful approach and strongly helps to align all stakeholders in the transaction for maximum impact.
- The more direct the enterprise’s influence on the outcomes, the more targeted the results. Another aspect to highlight is the importance of working with enterprises that have a direct control over the outcome they are seeking to inculcate. With CDA, Roots of Impact could measure exactly what they meant to promote with SIINC: a positive change in the access and health status amongst a specific segment of the population.
Roots of Impact, together with SDC, pioneered Social Impact Incentives (SIINC) in 2016. Two years later, Roots of Impact and the Boston Consulting Group took the initiative of defining the ImpactLinked Finance practice and its design principles. At the time of this writing (mid 2022), thirty ImpactLinked Finance transactions have been implemented across the world, in various sectors and for enterprises in different stages by Roots of Impact and its partners.
Full case study on Clínicas del Azúcar
Independent verification report
SDC case study on Impact-Linked Finance Fund