Financing quality: Empowering health entrepreneurs and staff through digitization
PharmAccess is striving for…
- The scale-up of mobile loans and digital tools, allowing health business to grow and improve their quality
- Better connectivity in remote areas and the right conditions and tax regimes for mobile banking and mobile money
- Institutionalizing SafeCare’s step-wise healthcare quality improvement approach
- Collaboration with corporations and large multilaterals like the World Health Organization, to use SafeCare’s digital resource mapping tools, especially during health crises.
Introduction
Private sector health businesses serve people in all income groups and complement the public sector provision. In some more remote areas, private and faith-based facilities are the only healthcare facilities available [29]. Private healthcare businesses, often micro, small, and medium enterprises (MSMEs), face severe challenges in financing and maintaining a high quality of care. Most banks and other financial institutions do not perceive the health sector as viable, and most health facilities cannot meet banks’ eligibility requirements. With increasing financial digitalization, healthcare facilities can access mobile loans through the Medical Credit Fund (MCF) to invest in working capital, equipment, and staff. Ultimately, this will help widen access to quality healthcare.
2.1 Medical Credit Fund: Growing our impact in the private health sector
The private sector contributes significantly to healthcare provision in sub-Saharan Africa, but companies are unable to provide consistent and quality care that meets the demand due to the gap in financing. According to a study by the International Finance Corporation (IFC) and McKinsey & Company, the region needed US$25-30 billion in new investment in assets such as hospitals, clinics, and distribution warehouses to meet health demands [30]. As the private health MSME sector continues to be poorly served by local banks and financial institutions, the gap in financing needs to be bridged in order to ensure sustainable, high-quality healthcare on the path to UHC. To support this bridging, the Medical Credit Fund (MCF), part of PharmAccess Group, is dedicated to financing small and medium-sized healthcare businesses in Africa. So far, MCF has disbursed more than 8,000 loans worth over €155 million to more than 2,000 clients. MCF also provides quality improvement services. Using the SafeCare quality improvement program developed by PharmAccess, MCF helps facilities receive an independent rating for the quality of care they provide. With this support, more underserved healthcare providers can access finance to grow their businesses, purchase medical equipment, improve quality, and prevent medicine stock outs. As the quality of their services improves, the number of customers and visits increase, thereby increasing their revenues and enabling them to repay loans. MCF’s success - a 96% repayment rate [31]– demonstrates that healthcare in sub-Saharan Africa is a viable investment option, encouraging others to invest.
2.2. Medical Credit Fund: Digital loans to empower (female) entrepreneurs
In addition to the gap in healthcare financing, there is a significant gender gap in access to finance in sub-Saharan Africa, and it has widened in recent years: currently only 37% of women have a bank account, compared to 48% of men [32]. At the same time, sub-Saharan Africa is the only region in the world where more women than men become entrepreneurs. But since women are less likely than men to own assets, many women-led businesses cannot access financing to reach their potential – including in healthcare. Digital lending can support women entrepreneurs. Following the success of MCF, in 2021 we launched MCF-II – another blended finance model that works with public and private social investors. Instead of working with banks to disburse loans, which proved challenging, MCF-II largely focuses on direct lending through digital loans, and it has experienced strong growth. The fund proved especially valuable during the pandemic, as it is an excellent way to enable health entrepreneurs to respond quickly in a crisis.
One of the most successful products is the digital Cash Advance loan, which provides quick access to funds. Cash Advance does not require traditional collateral, which is a limiting factor for many women entrepreneurs. Instead, the provider’s history of mobile money receipts serves as the basis for the loan. The digital revenues are used directly to pay back the loan. The Cash Advance loan is currently available in Kenya and is in the process of rolling out to Ghana, Tanzania and Uganda as a ‘digital loan’, with testing and refining of sustainable financing mechanisms using digital technology currently underway.
“Nigeria is yet to embrace mobile banking meaning people with no bank account are yet to wait for opportunities to save, lend, pay, and send money digitally. For Medical Credit Fund, a favorable mobile money environment means we can start rolling out our digital loan products for health entrepreneurs. As these digital loans do not require traditional collateral, it will also support bridging the financial gender divide in Nigeria which is with over 20% significantly higher than the Sub-Saharan average” [33].
Njide Ndili, Country Director PharmAccess Nigeria
Digital loans will be particularly interesting for Ghana because of its short turnarounds and shorter repayments. Long-term loans are currently extremely difficult for all financial institutions in Ghana due to inflation. Strengthening the private sector also complements what is currently provided by the public sector, which is vital in times of crisis. To realize the full potential of digital financing for healthcare, governments need to ensure policies and regulations are favorable. However, the challenge is that policy and regulation often have the opposite effect. This is especially striking in Nigeria, which is home to the continent’s largest unbanked population (64 million people) [34]. The government does not yet provide the required license for mobile money transfers to the dominant players in the field. While mobile money services can drastically improve financial inclusion in the country, conventional banks are likely pushing against their rollout. We welcome support to enable the rollout of these licenses in Nigeria. In Tanzania, mobile money is taxed at a higher rate than traditional transactions. Tanzania and Uganda have each introduced a tax on specific transactions that has made mobile money services less affordable. And in Ghana, a new levy of 1.5% on electronic transfers [35] is discouraging people from using digital solutions, especially those who make small transfers. Across Sub Saharan Africa, the lowest-income groups are disproportionally disadvantaged by tax increases on mobile money [36]. This needs to change. Positive measures can also encourage businesses, particularly MSMEs, to work with mobile money and use merchant accounts rather than personal ones. For example, the 2021 Regulatory Framework for Mobile Money Services in Nigeria aims to reduce cash dominance and increase the use of mobile money services [37]. And the Bank of Ghana introduced regulations to facilitate the onboarding of MSME merchants that may not meet the threshold for Know Your Customer (KYC) requirements.
2.3 SafeCare: improving quality of care with digital tools
Digital tools are valuable for increasing access to finance for MSMEs, and they also facilitate quality improvement. The COVID-19 pandemic revealed the power of digital tools for remote support – from patient care to the assessment of quality management processes. Tools like the remote SafeCare assessments could potentially provide invaluable data for World Health Organization (WHO) and the World Bank – they support global responses through resource mapping by highlighting what is going on in the facilities and what is needed where [38]. PharmAccess would like to collaborate with the WHO and World Bank to make the most of this opportunity, and we would welcome support to establish connections. More than 1,800 health facilities are currently working towards improving the quality of their services through SafeCare – a standards-based stepwise approach to quality assessment and improvement, supported by interactive data insights via the SafeCare Quality Platform. Through SafeCare, public and private healthcare facilities can assess their performance and receive a quality improvement plan. Some improvement points may require investment – such as new medical equipment – and the facility can set priorities before applying for finance. In 2021, SafeCare was of the WHO’s Top 10 Primary Health Care Innovations [39]. SafeCare’s impact and reach has increased significantly through the introduction of its digital tools. Currently poor quality of care costs the lives of more than 5 million people every year. To achieve UHC in the region, this challenge needs to be solved.
Digital platforms can guide and motivate healthcare facilities to improve without the need for in-person visits. The tools can also provide timely support in the form of self-assessments, like they did during COVID-19. Through SafeCare4Covid, facilities could assess their preparedness for the arrival of (new) COVID-19 patients in terms of resources and equipment. They could then prioritize their resources. Some countries, including Kenya and Tanzania, need to move beyond recognition and ensure the greater enforcement of quality standards to maximize the potential for finance to drive more sustainable healthcare. At PharmAccess, we are working to increase collaboration with large organizations like the WHO to adopt digital tools, including SafeCare for quality and resource mapping. The digital tools can bring stakeholders together to make the right improvements, thus improving the sector’s performance, access to finance, and, ultimately, the availability of quality healthcare for patients.
2.4 Investment Funds for Health in Africa (IFHA)
Established in 2007, Investment Funds for Health in Africa (IFHA) is the first private equity fund exclusively dedicated to investments in the private healthcare sector in sub-Saharan Africa. While MCF serves SMEs, IFHA generally targets larger companies. IFHA focuses on making investments with the strong potential to scale and contribute to increasing the quality, accessibility, and affordability of healthcare in Africa. IFHA makes investments across a diverse range of healthcare verticals, including hospitals and clinics, health insurance, wholesale and distribution, diagnostics, and digital health. AAR Hospital in Nairobi, Kenya opened its doors in 2021 and is now seen as one of the region’s high-quality hospitals. With investment through IFHA, Hospital Holdings Investment (HHI) built the hospital from scratch. Investing in digital health solutions IFHA was one of the first investors in CarePay; digital health solutions like CarePay’s platform M-TIBA are increasingly attractive for IFHA, particularly for their potential to serve efficiently at scale. Companies in the digital health space are also interesting for health insurers and funds, as they can help reduce costs and add value for their members. For example, digital tools provide an additional filter: patients who do not need to see a doctor in person can receive care through telemedicine and therefore put less pressure on the system. In addition, those digital health platforms can scale. Digital solutions are therefore key for the overarching goal: greater efficiency means more funds available for healthcare. Public and private health insurers and funds can be drivers of change in healthcare, and as such, they are valuable partners for IFHA and potential future recipients of IFHA funds. Healthcare facilities can quickly reach their natural limits in terms of physical infrastructure and staff, which means they often struggle to grow. Without scaling further, they cannot take advantage of economies of scale and the lower prices needed to make quality healthcare available to more people and affordable for everyone. Digitalization enables facilities to use data to drive efficiencies, as well as helping more people access healthcare virtually. Data also shows the funder where their money goes. C-Care is a leading healthcare provider in Mauritius and one of the successful investments of IFHA. It is an inspiring example of the power of digital solutions and data for healthcare. In addition to its six facilities, C-Care offers a range of digital options: patients can book appointments and lab tests and request a cost estimate online. They also have an advanced digital reporting infrastructure where the data provides insights across all entities and operations. IFHA is welcoming new investors A diversity of new private investment – for example, from family offices, development finance institutions, global strategic partners, big pharma, telecommunication companies, and insurers – would help drive digital technologies to enable healthcare businesses to reach economies of scale. IFHA has started preparations to raise funds for its third investment vehicle, aiming to create a blended fund that combines development and private funds. IFHA is connecting with potential investors who want to have a lasting impact on improving access to quality care in Africa.