Summary
- 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.
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
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