Data shows that the Medical Credit Fund (MFC), PharmAccess Foundation’s health entrepreneurs’ financing unit, reached a major milestone recently, crossing the Sh1 billion loan disburse (Sh 1,002,604,900 for the fiscal year 2020).
This an impressive loan book growth, especially for a non-bank entity. In 2016 the loan book stood at Sh 1,079,700, a pointer to the impressive climb in disbursements over the short period.
With the private health sector increasingly playing a bigger role in our health system, its strengthening is crucial. MCF, is amongst the few organisations dedicated to financing such businesses.
Kennedy Okongo, director, MCF, notes the performance so far is good, given the constrained positions most businesses face. Covid-19 has brought with it a new medical order, quadrupling PPE use, facilities needing larger space, new critical care infrastructure equipment and higher wage demands from staff.
Cash flow for most health entrepreneurs is a major headache. One of the biggest challenges is getting financing, given most banks struggle to understand the health sector’s opportunities and operations.
As a non-bank, MCF partners with mainstream banks for loan disbursements. Mr Okongo notes that some banks’ unwillingness to grow their health portfolio as a concern. My observations are that, you are more likely to get financing for a car, than a loan to buy an X-ray machine. Quite ironical, given the immobility of an X-ray!
He cites MCF’s focus on the health sector, innovative products and trainings to support health enterprises deliver on their loan objectives as key strengths. Trainings in business practice, customer service, and partnerships with industry players like architects, ensure safe building design of funded facilities, in turn contributing to higher chances of success.
Impressively, MCF’s loan default rate stands at 4.5percent, against an industry average of about 15percent, suggesting that despite fears, health workers are safe bets on loans. Mr. Okongo, notes that this is actually an increase from MCF’s previous two percent default rate, attributing it mainly to dental clinics in its loan portfolio being affected. Dental clinics are currently reporting reduced patients, possibly due to reschedule appointments.
Roughly five percent of loans are rejected by the fund, mostly due to poor records or applicant’s unwillingness to join the coupled training programs structured to improve repayment chances
The average loan ticket is Ksh 1,474,000 and median tenure time being 97 days. The latter metric, is particularly important, as it reflects growth in short-tenured “emergency financing” for health entrepreneurs. During this cash flow negative times, these are lifesaving for businesses.
MCF’s loans are particularly attractive to distributors of pharmaceutical supplies, while hospitals use funds for equipment financing and working capital. In terms of regional distribution, uptake in Nairobi is high, followed by Mount Kenya and Nyanza regions.
One of his concerns, he says is shedding light on MCF role as a financial partner and not a donor entity.
Dr Omete is the former medical adviser at PharmAccess Foundation