A new find more product from Medical Credit Fund (MCF) is expanding mobile lending into the Kenyan health sector. Cash Advance is a short-term loan facility that uses the digital revenues of healthcare providers to secure and repay loans. In a sector where it can be difficult for smaller health providers to secure a regular bank loan, Cash Advance provides a digital financing solution that specifically targets small to medium sized health facilities.
Since its launch in there have been almost 600 Cash Advances to 163 borrowers. The total amount disbursed so far is equivalent to 1.4 million USD with a repayment rate 97% (versus 89% for general SME loans in Kenya). Loans can range from 100 dollars to 50,000 dollars and the average loan size is 2,500 dollars. 74% of all clients take a second Cash Advance after their first and, on average, repay in full after just over two months. In addition, traditional collateral requirements are not required, and the administrative burden of application is low. The mobile loans are also available for clinics in slums.
“It addresses the needs of small providers who do not qualify for regular bank financing,” says Financial Analyst Nicholas Mutegi, based in MCF’s Kenyan office. “The loans are mainly used for working capital in day-to-day operations.” Ease of access through quick processing times are also one of the reasons for the product’s success. Nick explains, “For a first loan the waiting time for approval is 48 hours. For subsequent loans it is 24 hours maximum. You don’t need traditional capital, there are no fixed monthly installments. Loan repayment is based on revenues generated through your e-till, the borrower can choose what percentage of revenue is used to pay back as installments.”
The facilities need to have a digital cash register (an MPESA Till) in order to receive patient payments. This encourages the use of digital money in hospitals. “Changing payment habits in the health sphere is important as digital payments are not as widespread here yet as in the rest of the economy,” Nick says.
Clinics also benefit if they are able to repay quicker. Choosing a higher payment percentage from digital revenues in turn incentivizes the hospital to encourage mobile payments rather than cash which result in any follow up Cash Advance applications qualifying for a higher loan amount – thereby creating a virtuous circle.
One of the clinics to benefit is Zamzam clinic. A repeat borrower, Cash Advance has enabled the facility to acquire a dental unit worth 5,000 dollars, better manage its cashflows especially when insurance payments are delayed and have access to short term working capital needs, such as timely salary payments and restocking of its pharmacy.
The owner of Zamzam clinic, Esther Muthoni, explains, “I’ve accessed 11 repeat cash advances to date. Bank terms are too bureaucratic compared to the ease with which I access Cash Advances. I am currently working to convert my facility to fully digital so as to push more than 80% of all our transactions through the till/digital register, and the remaining percentage will be insurance payments”
In the wake of the success of Cash Advance, a follow-up product has been launched by MCF. Mobile Asset Financing is based on the same features and technology and can be used for medical equipment assets such as ultrasounds and lab equipment. It is hoped this new kind of healthcare financing will continue the innovative new ways to serve the patient in Kenya’s booming mobile money economy.