Microfinance Controversy? Not When It Comes to Health
06/03/2011
Thierry van Bastelaer discusses the need for pro-poor health financing to improve livelihoods.
I am not a health person (but as health colleagues at Abt gently remind me, that's not necessarily something to apologize for). As a mainstream poverty economist, however, I was regularly struck in my previous work by the devastating impact that the cost of health care imposes on poor families' incomes and livelihoods.
About 100 million people in developing countries fall into poverty every year due to the cost of health care. Take note-we are not talking about those millions who are too poor to access any kind of health care. This number refers to those who weren't poor before a health shock, but who have entered this most debilitating of vicious circles: health shock -> poverty -> less (or worse) health care -> higher vulnerability to sickness -> sickness -> sale of productive assets -> lower incomes -> higher poverty -> less (or worse) health care, and so on. Families that fall in this vicious circle can rarely reverse its dynamic. There is only one conclusion to make: if we want to be serious about poverty alleviation, we need to tackle health financing.
Few development concepts have given rise to as much hype and outsized expectations as microfinance. Given the thirst among many development professionals for silver bullet solutions, this is no surprise. What is more surprising is that, after about 40 years of modern microfinance, the discourse about microfinance has yet to stop swinging wildly from one extreme to the other. Witness recent statements by organizations or people who (should) know what they are taking about: "Microfinance is the most powerful anti-poverty strategy ever developed", says the Grameen Foundation, an offshoot from the Nobel Prize-winning Grameen Bank. Or "Bangladesh has set many examples. Deceiving people by siphoning off their money is another such example. This is nothing but sucking money out of the people after giving them loans," according to Prime Minister Sheikh Hasina of Bangladesh. There is currently no evidence to support either statement, but they are both characteristic of the passion that microfinance inspires in both its supporters and its detractors.
This is not the place to discuss the relative merits of these diametrically opposed views of microfinance. Suffice it to say that microfinance is finance, and that its value should be judged according to whether it meets the poor's financial needs in a flexible and reliable manner and at a reasonable cost-not whether it pushes them out of poverty, empowers women, and transforms societies. (All this would be nice, for sure, but I don't expect these results when I open a bank account, so why would a microfinance client in rural Kenya expect anything different?) I am sure that none of us would be satisfied with our bank if all it provided were loans-which is what microfinance is mostly known for. In order to meet our various financial needs (put our savings in a safe place, buy insurance, transfer funds, and yes, get the occasional loan), I need a variety of flexible, affordable tools. The poor need that even more than I do, because meeting their financial needs on a daily basis is more central to their very survival than it is to mine.
But, whether microfinance is a silver bullet to end all poverty (it's not) or a particularly devious new mechanism to keep people mired in poverty (it's not), one thing is beyond debate: microfinance reaches millions of people-most of them women-on a regular basis, usually once a week. This represents a huge group of people engaged in a generally trusting relationship with generally well-intentioned grassroots organizations-in other words, a largely untapped, massive opportunity to advance health outcomes for millions of poor families.
A small but growing number of organizations have realized the game-changing value of this opportunity. The captive market-so to speak-that microfinance clients represent includes some of the most vulnerable families in the world-vulnerable to illness, vulnerable to the impact of illness on financial resilience. So carrying out health-related activities with these families through already established and trusted channels can have an exceptionally high rate of return.
These activities can include the dissemination of health messages, the provision of treatment, the distribution of products, and the offering of health financing options such as insurance, savings, and loans. Many microfinance institutions-with guidance and support from Freedom from Hunger-take advantage of meeting with clients every week to share and reinforce basic health messages. Others, such as Pro Mujer in Nicaragua, require that every new client goes through a medical screening and receive immediate medical attention, or be referred to specialists at negotiated discount prices. Others add health-related financial products to their basic loans and savings portfolio to help their clients meet their health needs without having to sell productive assets and mortgaging their families' economic future. These products mostly include health insurance-which under the most promising model is underwritten by commercial insurers or HMOs, such as Healthcare International in Nigeria-although health savings and loan products are becoming increasingly available. Health savings allow families to regularly set aside small amounts that can only be used for paying for health care-generally outpatient costs-low interest health loans for emergencies can be repaid in small installments as part of the MFI's regular loan repayment schedule.
We will be talking about these issues at a satellite session on microfinance and health at this year's Global Health Council conference. Organized by USAID's SHOPS project, the session will feature practitioners from Freedom from Hunger, Pro Mujer, and HCI Nigeria as they discuss how microfinance can be leveraged to advance health outcomes for poor families. For more information, go to http://shopsproject.org/about/announcements/panel-discussion-wealth-and-health-leveraging-microfinance-better-health-outcome.
Thierry van Bastelaer is a health financing advisor at the USAID SHOPS Project and a principal associate at Abt Associates.
VERY INTERESTING DISCUSSION USEFUL FOR OUR “HEALTH REVOLUTION GROUP” IN TUNISIA
PS HOW COULD I REACH THE CONFERENCE ???
DR A. ZEMZARI MD MPH TUNIS
— ABDELKARIM ZEMZARI on 2011-06-04
Thierry,
Thanks for a great post. Financing health care is clearly an important issue. The Global Health Council could help promote further discussion of financing models by adding “health finance” to its categories on the Blog 4 Global Health.
— Elizabeth Corley on 2011-06-07
Dr. Zemzari,
The panel discussion on health financing will be held in DC on June 13, 2011 as a satellite event of the Global Health Council conference. We will stream a live audio webcast that day. The podcast will be archived at http://www.shopsproject.org. For more information, go to http://shopsproject.org/about/announcements/panel-discussion-wealth-and-health-leveraging-microfinance-better-health-outcome
— Elizabeth Corley on 2011-06-08
Dr. Zemzari: Here is a link to the page for this event, you can join via live webcast. http://ow.ly/5dgWh
— Dustin Andres on 2011-06-08