Huge Gap
In Kenya, public funding covers only 34% of the total healthcare expenditures. The government policy thus explicitly supports private sector involvement in the healthcare sector. To meet the increased demand, there is an estimated funding gap of US$ 1.4Bn per annum. Through its tested pay-for-results and DFC guarantee management workstreams, KIM has already made some progress in closing this gap with more results expected over the coming months.
Bridging The Gap
To date, as of September 2022, KIM has facilitated in over $21M capital mobilized for the health sector through its network of business advisory service providers (BASPs) and financial institutions (FIs). KIM offers its partner financial institutions training on financing the healthcare sector, helping bankers understand how to structure loans for healthcare players. KIM also matches BASPs with FIs for sharing and pitching of investment opportunities, ensuring FIs get quality pipeline of investment ready SMEs in the healthcare sector.
The project’s incentive fees act as a nudge for FIs and BASPs to actively pursue investment opportunities in the sector. SMEs in active engagement with KIM BASPs benefit from services such as opportunity assessment, deal structuring, due diligence, market analysis, business planning, proposal development, preparation of investor profiles and pitch decks and investors/financiers’ introductions. Examples of opportunities closed through BASPs support include:
- $10 million for a tech health insurance startup
- $0.7 million for a garment manufacturing company that is engaged in the production of personal protective equipment (PPEs) for COVID-19 containment.
- $0.5 million for a US majority owned health-tech company that supports low- and middle-income patients to find affordable health care options.
Some examples of opportunities financed by KIM partner FIs include:
- $1.1 million loan to a private hospital in Eastern Kenya that specializes in children to support its expansion plans to meet the growing demand for medical care.
- $0.4 million loan to a private hospital in Machakos county to support operating costs.
- $0.3 million loan to leading supplier of surgical equipment to support its operating costs and increase its supply coverage.
The How
KIM is also supporting scaling up utilization of the $8M United States International Development Finance Corporation (DFC) health guarantee fund at a leading bank in Kenya. To improve utilization of this guarantee facility, KIM is:
- Training the bank’s credit officers on health sector value chain financing. This will strengthen the staff understanding on how to identify, appraise and mitigate risk for health sector transactions.
- Linking the bank to KIM’s BASP network to access bankable pipeline of opportunities.
- Holding BASPs-FIs pitch sessions to present quality opportunities for financing consideration.
- Supporting the bank to review its health product offering to meet the market needs and align to current market demands.
- Training bank staff on DFC health guarantee administration, offering support on qualifying transactions that can be placed on the Credit Management System (CMS) to improve booking of loans in the CMS.
- Linking the bank to potential strategic partners in health sector to broaden bank’s scope for health transactions.
Pipeline
Finally, KIM’s BASP network has an exciting medium-term pipeline of over $30 million in health transactions. These include:
- $21.5M financing of accompany that uses the latest production technology to produce and distribute low-cost medical oxygen for the East Africa region.
- $3 million investment for a provider of on-demand telemedicine for communities across Kenya; and
- $6 million for a firm connecting patients with doctors/specialists and facilitating booking of appointments for patients.
