For many reasons it behooves rich institutions and countries to pay for polio eradication programs in the few countries where the disease remains. At the same time, however, the actual work should be done by national governments, not by NGOs.

But it’s hard to do that just by writing a check.

If you give tens of millions of dollars to a minister of public health in Pakistan or Afghanistan or Nigeria, it’s very difficult to ensure that the money will be targeted narrowly at polio programs.

Thus was the loan conversion mechanism born. The money would be lent to the country by Japan. The loan would be in the form of official development assistance: it would be extended at concessionary rates, under a framework where the Japanese could be very confident that they would be repaid in full.

Then, when the loan came due, it would be repaid not by the borrower, but rather by the Gates Foundation – if, and only if, the country had kept up its end of the bargain in terms of vaccinating children in hard-to-reach parts of the country against polio.

Read the full article on the loan conversion mechanism by Felix Salmon at causeandeffect.fm