Bart Schaap, Chief Financial Officer.

Home to 15 per cent of the world’s population, Sub-Saharan Africa receives just 1 percent of global expenditure on healthcare. Governments in the region are increasingly aware that this inequity is hurting economic growth and are embracing universal healthcare to promote a healthy and productive population.

Bart Schaap, Chief Financial Officer at Medical Credit Fund (MCF), notes that public insurance is just one part of the solution for improving health. “It’s one thing to offer universal healthcare to your citizens. But the next question is ‘okay, where can I go?’” The region suffers from a dearth of healthcare facilities, especially ones that provide quality care. For Schaap, the solution is obvious: “If you want to address the great need in Africa for increased capacity—for doctors, beds, facilities—and greater quality in healthcare, you need to provide businesses with funding opportunities and operational advice. You need to look at the supply side.”

It was with this mindset that PharmAccess, a foundation that has been a pioneer in improving access to quality healthcare in Africa, founded Medical Credit Fund (MCF) in 2009. MCF’s mission is to expand lending to small- and medium-sized healthcare enterprises (Health SMEs) to help them grow. Headquartered in Amsterdam, it forges partnerships with local banks to help it manage the loans. A key component of MCF’s approach is delivered through a sister organization, SafeCare, that works with borrowers to improve the quality of healthcare provided. To date, MCF has disbursed some 2,900 loans to hospitals, clinics, diagnostic centers, laboratories, pharmacies, training institutions, and equipment providers in Ghana, Kenya, Liberia, Nigeria, Tanzania, and Uganda and Tanzania for a total value of $51 million.

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As many of the loans it provides are relatively small, MCF is continually looking for ways to lower administrative costs. Digital technology has been a real boon. With more and more patients in Africa paying for health services via smartphone apps like Kenya-based M-PESA, MCF developed a loan product tailored for the digital era. As Schaap puts it: “We take a percentage of the companies’ digital revenues and this automatically repays their loan. Three months later they get a message saying the loan has been repaid and asking if they want a new one. They repay without even thinking and don’t have to bring cash to the bank.”

A crucial complement to MCF’s loans is the partnership with SafeCare and the technical assistance their experts provide. “For some businesses, it is easy to understand what to buy—a car, a tractor, for example. Healthcare can be more difficult,” says Schaap. “Take medical equipment: ultrasounds range in price from five thousand dollars to fifty thousand dollars. Which model should you buy? What is a good investment?”

With a mission so closely aligned to its own, IFC in 2016, jointly with the World Bank’s Global SME Finance Facility, decided to support MCF by approving a $4.5 million loan. This support helped MCF secure a larger financing package from a variety of investors, including the development finance agencies of the UK and French governments and several other impact- oriented investors. According to Natalia Donde, the IFC investment officer who led that transaction, “MCF is attempting to create a sustainable business model in the healthcare SME lending space, which is essential for increasing access to quality healthcare for a population that needs it most. It is a difficult space and MCF’s work is extremely inspiring as it is truly changing the lives of many people in Africa.”

Lending to healthcare SMEs in Africa brings many challenges. Schaap highlights one that may not be so obvious to those operating outside the sector. “Banks can be reluctant to finance a healthcare business because of the damage it can potentially cause to their reputation,” he said. “If you finance a healthcare facility and they don’t repay, what do you do? Are you going to shut them down and sell their assets?” Schaap says “banks often decide to avoid that reputational risk by simply not financing them—but of course that is not very humane either. MCF’s credit risk appraisal in combination with SafeCare’s quality assessments often gives them the comfort to co-invest in healthcare businesses.”

Default rates for healthcare businesses in Africa is relatively low. Through its history, MCF has had a non-performing loan rate of between three and five percent. “These people don’t disappear just like that. They want to run their business properly,” says Schaap. There is one area, however, where they have a serious knowledge gap. “While other SMEs know how to talk to banks and financiers, very few doctors know the language. That’s why we started MCF— to bridge the gap so they can speak the languages of healthcare and business,” he says.

As for MCF’s future development plans, Schaap believes that tech-enabled solutions hold great promise, given their potential to cut administrative costs and make lending less risky. “We first developed our digital product in Kenya and we plan to expand to other countries. Technology is really changing the landscape. I hope to see many more banks entering this market of social importance,” he says.

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