In Sub-Saharan Africa, access to healthcare is limited, the quality of care is often poor, and the need is great. The continent carries a disproportionate share of the global burden of many diseases from HIV/AIDS to high blood pressure, and this disease load is exacerbated by widespread poverty, food insecurity and poor sanitation.
- In this challenging environment, where public funding for healthcare is grossly insufficient, many lower-and middle income individuals and families lacking health insurance turn to small private healthcare providers, where they pay out of pocket for treatment of skin infections, diarrhea, malaria as well as maternal and antenatal care and chronic disease. While these clinics are increasingly the health care providers of choice for a large part of the population, they struggle to meet demand. After years of neglect, many clinics are not providing what constitutes even a basic level of care and their lack of basic financial recordkeeping makes it difficult for them to obtain loans to support upgrades and expansions.
In 2012, OPIC provided a $5.4 million loan to the Medical Credit Fund (MCF), a nonprofit health investment fund that is working to provide support to these clinics that are often too large to qualify for microfinance lending, but lack the financial track record to obtain bank lending. MCF provides loans as small as $5,000 to small and mid-sized health clinics in Tanzania, Ghana, Kenya and Nigeria to support investments in updated equipment and general maintenance so they can gradually improve the care they provide, serve more patients and eventually qualify for traditional bank loans. The fund lends through an incremental process in which first-time borrowers start with a small loan of about $5,000 and graduate to larger loans based on performance and need. MCF is also supported by the Calvert Foundation, The Soros Economic Development Fund, the International Finance Corp., the Bill and Melinda Gates Foundation and other foundations.
MCF Managing Director Monique Dolfing-Vogelenzang recently spoke with OPIC about the challenges of improving healthcare in Africa and how these loans it provides are making a big difference.
Explain some of the challenges these health clinics face in obtaining financing.
Barriers to credit include the quality of the care being provided and whether it is considered sufficient, as well as the quality of a clinic’s finances. Many of these clinics have limited financial records, or an erratic income level, which poses a high risk for banks.
Medical Credit Fund introduced a set of standards so that we can rate the clinics and also provide a path for them to improve the quality of their care. We also provide a technical assistance program around business skills to provide training on the job, to make sure they have audited financial statements.
How do you identify clinics that are good candidates for borrowing?
We work through a network of local NGOs and associations of private healthcare facilities to recruit clinics. We also have a set of minimum criteria, for example, a minimum number of patents, and we look to see real interest on the part of management in working to improve the quality of care. Also, there must be a willingness to provide the necessary financial data. The location of the clinic is also considered.
Medical Credit Fund says it provides financing for the “missing middle” of the healthcare sector. Explain this.
This is a term that refers to small and medium enterprises in any sector. Microfinance is often available for very small operations and larger enterprises can obtain financing through traditional channels. But it is that sector in the middle that has challenges accessing financing. For a bank, it can be as time consuming to provide a $10,000 loan as a $1 million loan.
Can you describe some of the ways these clinics have used their loans and how has this impacted the care they are able to provide.
Some have invested in water tanks so they will have access to clean water, or in equipment like an ultrasound machine or a blood analyzer. They will also invest in infrastructure like fixing the roof, retiling the floors, or adding screens, or air conditioning or refrigerators. These investments help to improve infection prevention, provide an increased level of services, and improve the management of patient flow, so that they can ultimately treat more patients.
One clinic in Kenya used a $5,000 loan to repaint the facility, introduce a new waste disposal system and buy a sterilization machine for its operating theater. It has found that by improving the facility it attracted new patients and the additional business covered the cost of the loan.
What is your success rate, both in terms of receiving loan repayment and preparing these clinics to qualify for traditional bank financing.
As of the end of 2012, the repayment rate was at 98.3 percent.
Many of the clinics we support are now graduating from the first to the second loan. The second repayment period is usually 24 to 30 months. The size of the first loan is $5,000. The average size of the second loan is $25,000.
We are helping these clinics build a financial track record showing they have borrowed money and repaid it, and that they have improved their quality level of services. The latter is measured according to international standards that have been developed specifically for these types of clinics in resource restricted settings. By reducing the risk and building trust, we hope to reach a tipping point where this market of small clinics and health centers, which are providing such a large portion of the health care in sub-Saharan Africa, proves to be an obvious and good investment case for banks.