To invest in working capital, equipment and staff, and to enable improvements in quality of care, facilities need access to finance. Medical Credit Fund (MCF) provides this. MCF has disbursed more than 8,000 loans worth over €150 million to more than 2,000 clients. In 2022, MCF focused on empowering female entrepreneurs with access to finance, in particular through digital loans.
Supporting healthcare SMEs
The private sector contributes significantly to healthcare provision in sub-Saharan Africa, but health facilities are unable to provide high-quality care that meets the needs of the community. This is because private healthcare businesses are often micro, small, and medium enterprises (MSMEs), which face severe challenges in access to capital.
Most banks and other financial institutions do not perceive the health sector as viable, and most health facilities cannot meet banks’ eligibility requirements. And many of the health entrepreneurs operating small businesses are women, who have traditionally been unable to access loans due to a lack of collateral.
Part of PharmAccess Group, Medical Credit Fund (MCF) is dedicated to financing small and medium-sized healthcare businesses in Africa. MCF aims to help healthcare facilities access finance to invest in working capital, equipment and staff, and ultimately widen access to quality healthcare. Financial digitalization and mobile money are increasing, making this easier. So far, MCF has disbursed more than 8,000 loans worth over €150 million to more than 2,000 clients.
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 increases, thereby increasing their revenues and enabling them to repay loans. MCF’s success – a 96% repayment rate – demonstrates that healthcare in sub-Saharan Africa is a viable investment option, encouraging others to invest.
The Global SME Finance Awards 2022 awarded MCF as the SILVER winner in the Responsible Digital Innovator category. Organized by IFC, a member of the World Bank Group, the Global SME Finance Awards celebrate the outstanding achievements of financial institutions and fintech companies in delivering exceptional products and services to their SME clients.
Empowering female health entrepreneurs with access to finance
There is a significant gender gap in access to finance in sub-Saharan Africa, even though 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.
In 2022, 84 of the 318 clients MCF reached were female entrepreneurs. We disbursed loans to 280 women, and we aim to grow this number further in 2023.
Our blended finance model MCF-II, which works with public and private social investors, focuses on direct lending through digital loans. MCF-II was fully operational throughout 2022, giving entrepreneurs access to one of our most successful products: the digital loans.
Digital loans do not require traditional collateral, which is a limiting factor for many female entrepreneurs. Instead, the provider’s history of mobile money receipts serves as the basis for the loan, and the digital revenues are used directly to pay back the loan.
Digital loans have been available in Kenya since 2016 (branded as Cash Advance in Kenya) and we are rolling them out to Ghana and Tanzania in 2023, with Nigeria also on the horizon. As we extend these loans, we will continue to investigate how we can better serve women.
Tackling challenges to realize the potential of digital loans
Many countries in Africa faced macroeconomic challenges in 2022, with high inflation and currency devaluations. Kenya came to a standstill around the election and is still facing difficulties. Uncertain situations like these cause investors to stop investing and banks to ration their lending.
MCF has remained active in this context despite the challenges, although we did not disburse as many loans as planned. In uncertain environments, shorter-term working capital solutions like digital loans are essential to help healthcare providers continue services. Digital loans are disbursed and paid back faster, allowing MCF to mitigate risks in changing market circumstances.
We are grateful to our partners, including the Dutch Ministry of Foreign Affairs, British International Investment, Swedfund and Philips, whose support through the crisis has enabled MCF to carry on our crucial work. MCF will continue to make launching digital loans a priority in 2023.
To realize the full potential of digital financing for healthcare, governments need to ensure policies and regulations are favorable. However, policy and regulation often have the opposite effect. For example, in Nigeria, there is a vested interest and resistance to the rollout of mobile money services, despite their potential to drastically improve financial inclusion and the provision of healthcare.
Similarly, in Tanzania, mobile money is taxed at a higher rate than traditional transactions. And in Ghana, a new levy of 1.5% on electronic transfers is discouraging people from using digital solutions, especially those who make small transfers.
Our progress was also hampered in Nigeria and Tanzania in 2022 due to a regulatory environment that is not conducive to establishing a micro fund institution on the ground. But we continue to work towards our goals, to give more health entrepreneurs access to finance that will help them grow and improve quality.
'All hands on deck’ Learn more on how our MCF Ghana team supports health providers during economic turmoil
Enhancing the value of quality and technical training
When a healthcare SME wants to take out an MCF loan, MCF and PharmAccess work in partnership to offer them technical assistance (TA) aiming to reduce risks and enhance business performance. Following the loan, we support borrowers to improve quality through SafeCare. We also build local capacity through curricula in health management and subject-specific training, organized by local partners.
In 2022, our goal was to include 80% of MCF II clients in a TA or training program; we exceeded this for clients with a term loan. 89% of them followed a TA or training program. Our digital loan recipients took part in an onboarding process that included self-assessments developed by SafeCare, as well as support calls and webinars on quality improvement.
Many of these clients also took part in the MCF and SafeCare TA Facility project funded by MSD for Mothers. Through this project, we set up a TA Facility in Kenya and reached over 100 health SMEs between September 2021 and October 2022. These facilities went through a quality improvement journey, including training on investment in quality and risk management.
An important aspect of the TA Facility was gaining insights into the best approach balancing the fully on-site more expensive approach, fully online and/or hybrid support. We found that health SMEs engage more with online tools, and they work more on quality improvement when some physical interaction has taken place at the start of the TA journey. In 2023, we will work to find the right balance and create an impactful TA package for clients with a digital loan product.