Monday, March 09, 2009

Selling Bonds to provide vaccines

Investors in the UK can buy bonds that will help provide vaccines to the developing world. International Finance Facility for Immunization raises cash to give free vaccines to over 72 countries. The money raised goes to the Global Alliance for Vaccines and Immunization.

IRIN gives us more details about the bond, and explores the new concerns that socially conscious investing has in this global recession. For more on the bonds, you can click to the GAVI website.

“Normally, when people see a brochure with a poverty-stricken baby on the front, they are being asked for charitable contributions,” said Alan Gillespie, IFFim’s chair, “But with these bonds, we are saying ‘Here are the needs, we are asking you to make an investment.’ Your capital will be paid back with interest from rich donor countries.”

Similar to bonds that governments issue to cover debt, the vaccine bonds raise cash to buy and distribute vaccines by promising a return on investment, said George Richardson, the head of capital markets at the World Bank, which manages the bonds. “We are not asking for handouts. These are investments that support a good cause and have fixed market returns,” he said.

But a good cause is not enough to convince UK secondary school teacher Rosanna Magdalen to make the minimum investment of US$1400, even when she is told that amount can immunise 130 children against five life-threatening diseases, or that her earnings will not be taxed.

“Great idea, the principle is fantastic. I would do it if I had the extra money, but I think anyone would be loath to take any risk in the current financial climate," said Magdalen. "I think HSBC [bank] will be hard pressed to find anyone who would invest. Banks are no longer seen as infallible.”

Risky unregulated lending has been blamed for the global recession, which has forced governments in the US and Europe to pledge some two trillion dollars to rescue their economies.

The World Bank’s Richardson said while he cannot change consumer distrust of banks, vaccine bonds give people a socially-responsible way to save. “Even in a recession, there are people who will diligently put away money,” said Richardson.

On 2 March HSBC started offering the IFFim vaccine bonds as a five-year tax-free savings account with a 16-percent return. The governments of the UK, France, Italy, Spain, Sweden, Norway and South Africa have collectively pledged US$5.3 billion over the next 20 years to repay investors.

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