Medical Credit Fund raises additional USD 17 million for healthcare impact investment in Africa
September 12, 2016
(OPIC)
Today, the Overseas Private Investment Corporation (OPIC, the U.S.
Government’s development finance institution), Calvert Foundation (an impact
investing organization), a private foundation and a Dutch private family office
announced the closing of a USD 17.45 million agreement to expand the Medical
Credit Fund (MCF). This new injection will allow the fund to further catalyze
healthcare investments and achieve greater impact on healthcare for underserved
populations in sub-Saharan Africa.
Since 2010, MCF has been working to provide access to credit for small and
medium-sized healthcare enterprises in Africa. So far, more than USD 16 million
in loans has been disbursed, leading to quality improvement at about 70% of the
facilities.
While MCF will continue to cater to the needs of these health SMEs, the
expansion will allow the fund to simultaneously meet the demand for larger and
more flexible loans. It can now facilitate loans of up to USD 2.5 million – a
significant step up from its previous USD 350,000 ceiling. Also, MCF can now
finance not only healthcare providers but also other players in the healthcare
sector such as medical education institutions or suppliers of medicines and
equipment. Finally, the expansion will enable MCF to explore new partnerships in
other countries in sub-Saharan Africa. As part of the mission to enhance
affordable quality healthcare services for underserved populations, the loans
are connected to an elaborate clinical and business improvement program offered
in collaboration with PharmAccess and local technical assistance partners. This
increases the impact of investments considerably.
OPIC, one of MCF’s first investors, has expanded their commitment to the fund.
“Medical Credit Fund has truly been exceptional in their contribution to
development by expanding the healthcare that is provided to low-income patients
in Ghana, Kenya, Nigeria, Tanzania, and Uganda,” said Elizabeth L. Littlefield,
OPIC’s President and CEO. “OPIC is pleased to support Medical Credit Fund as
they continue to provide financing to small and medium-sized healthcare clinics
throughout Sub-Saharan Africa.”
Calvert Foundation was also on board as one of the first investors in 2012. “We
are thrilled to begin the next chapter of our relationship with MCF,” says Beth
Bafford, Investments Director at Calvert Foundation. “Over the years, MCF has
delivered proof of the power and impact of credit for businesses working in
underserved or overlooked sectors. Their unique mix of capital, business and
clinical support has yielded tremendous results. This new financing will also
allow them to diversify outside of clinics to meet the needs they see evolving
across medical education, supplies, devices, and distribution.”
Although it delivers more than half of healthcare services, the private
healthcare sector in Africa is chronically underfunded. Dr. Wisdom Amegbletor,
CEO of New Crystal Health Services Limited, a chain of hospitals in Ghana,
attests to the difficulty in obtaining capital. "Banks in Ghana shy away from
the health sector and if they decide to lend to you they do so at cut throat
interest rates. With MCF's assistance I obtained a loan from uniBank which went
into procuring badly needed supplies. It is refreshing to know that MCF is
expanding its loan sizes and also seeking to cover the whole health value
chain.”
Building on a strong foundation
Since starting operations in late 2010, MCF has made considerable headway in
showing that health SMEs are bankable and that investing in the private
healthcare sector pays. Its risk reduction and risk sharing model has been
successful in attracting banks into the healthcare sector. The on average 97%
repayment performance makes for an attractive portfolio. Now, banks regularly
take the lead in seeking collaboration and are starting to take an increasingly
large share of the risk in loan agreements with MCF.
Up to end of July 2016, MCF and its African partner banks disbursed more than
USD 16 million in loans to over 650 healthcare providers. In collaboration with
PharmAccess and technical assistance partners, it has trained more than 950
health SME staff members on both business performance and clinical performance,
using the SafeCare standards. About 70% of healthcare providers show improvement
in terms of quality of service delivery after their second SafeCare assessment.
“We have built strong partnerships, established more efficient processes and
disbursed hundreds of loans to healthcare providers who were able to improve the
quality of their services as a result. This track record would not have been
possible without the commitment of our donors and investors, who recognized the
business potential as well as the social importance of investing in the private
healthcare sector. We are very proud to be taking this next step and look
forward to achieving even more impact together,” said Managing Director of the
Medical Credit Fund Monique Dolfing-Vogelenzang.
Catalytic capital
In 2012, MCF raised USD 10.6 million from OPIC and four leading international
foundations. This was made possible by, among others, the Dutch government, the
G20 SME Finance Challenge and the US Agency for International Development, who
provided first loss and technical assistance grants to the fund.
In 2015, MCF started preparing for the expansion thanks to the support of the
Dutch Good Growth Fund’s Seed Capital & Business Development (SCBD) program
and Pfizer Foundation. Pfizer Foundation provided seed capital and SCBD provided
a blended investment. This, in combination with a loan from Calvert Foundation,
allowed MCF to reduce the investment risk for its follow on investors. Although
the expansion builds on the experience and processes developed over the last
five years, it also required the testing of innovative financing schemes for
health SMEs, the development of an expanded pipeline and additional management
capacity. Together, the grant, blended investment and loan had a catalytic
effect on operations and on securing this next round of financing.
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