The Future of Health Financing in Africa: A Wake-Up Call (Part 2)

Wanjiku Ngigi
May 9
4 min read

Originally written under Digital Health Africa - DHA.

New challenges require innovative strategies. Healthcare financing is critical to effective, efficient and responsive health systems. History documents a recurrent trend of reductions in financial aid from Western countries. The most recent and massive aid reduction has been from the US. The US funding crisis has negatively exposed millions of individuals globally. The necessity of self-reliance as well as diverse international partnerships can therefore not be overemphasised.

Today, we shall zoom in on Social Impact Bonds (SIBs) as a method of raising revenue for health.

What are Social Impact Bonds?

Social Impact Bonds are an interface of private and the public sectors. SIBs involve private sector institutions or entities providing capital upfront for health. These funds are earmarked for specific health initiatives and have expected outcomes upon fulfillment. Upon fulfilment of these outcomes, the public sector via the government (mostly) repays the investors. This is often with interest. According to OECD, SIBs have been utilised across various social institutions with immense success and resolution of social challenges. SIBs can be adopted for low-resource settings. For instance, SIBs that were established to improve maternal and newborn health outcomes in Rajasthan, India, exemplified the potential of such instruments in low-resource settings.

Application in Healthcare Financing: A Case Study

An example of an SIB that created impact is the Cameroon Cataract Bond that was designed to expand access to high-quality cataract surgeries in Cameroon. It was launched in partnership with the Fred Hollows Foundation, the Conrad N. Hilton Foundation as well as private investors. The purpose of this SIB was to establish and equip new eye care facilities while improving the efficiency and affordability of cataract procedures. Upfront capital was provided by the investors and repayment was dependent on achieving predefined health outcomes, such as the number of successful surgeries performed.

By leveraging performance-based financing, the Cameroon Cataract Bond sought to enhance healthcare infrastructure, train medical personnel and improve vision for thousands of patients who would otherwise face lifelong blindness due to limited healthcare access.

Benefits of Social Impact Bonds

SIBs transfer the risk of financial strain from public to private investors. This facilitates progress of health initiatives and innovation of new health interventions.

Secondly, SIBs exist solely within multi-sectoral contexts. Through cross-sectoral collaborations, SIBs foster partnerships between various stakeholders, which causes diversity in the kinds of solutions provided which increases chances of success of proposed health programmes and initiatives.

SIBs are a form of outcome-based financing which means that paying back private investors depends on the attainment of the pre-agreed health/intervention outcomes. Achievement of agreed outcomes first with payment coming second offers a win-win for both the investors and beneficiaries (populations receiving care). This encourages accountability, efficiency and effectiveness of the agreed programmes.

The Challenges of Social Impact Bonds

Despite the effectiveness of SIBs, there are several disadvantages that hinder their use. First, SIBs are complex to establish and expensive to run. This is mainly because SIBs need to cater to the needs of a heterogeneous set of interests. They need to be responsive to the population’s needs, attract political goodwill and engage a wide range of impact investors. Setting up a working model that merges both interests of the public and private agents often requires a heavy investment of research, finances and time which may be discouraging for institutions.

Health outcomes may be difficult to define and measure. This is because health outcomes rely on more than financing elements. SIBs have to operate seamlessly within health systems with numerous influencers of change such as Human Resources for health, the population itself, resources available, medical technologies, availability of infrastructure for care amongst others. The intersection of these and more variables introduces complexities in measuring outcomes objectively and may need more time and resources to achieve.

Finally, ensuring long-term sustainability requires keen integration into existing health systems and detailed planning from the inception stages. It would therefore need motivated teams and tremendous time commitments. Political goodwill is key. In many cases, existing health systems are run by governments and innovative financing strategies would need to align with the interests of the governments-of-the-day to ensure continuity after the duration of the SIBs elapse.

Partnerships, Collaborations and Taxes

Partnerships cannot be ignored nor can the private sector be viewed as an enemy of the public good. SIBs, if managed ethically and keenly, offer a sustainable option of healthcare funding for Low and Middle Income Countries (LMICs).

Apart from SIBs, African governments may consider firming up regional collaborations for health. The African Union has been a catalyst for partnerships, with initiatives such as the African Medicines Regulatory Harmonisation (AMRH). AMRH is a programme of the African Union (AU) implemented as part of the Pharmaceutical Manufacturing Plan for Africa (PMPA). This programme was created in 2009 to solve for governance and value-chain based constraints within medicine supply in African countries. It so far has enabled provision of life-saving medicines at affordable costs across member states of the African Union.

Local governments must begin to consider taking full advantage of excise taxes, also termed ‘sin taxes’ for health sector development. Excise duties on goods deemed harmful for human consumption have been an essential source of funding for health in Kenya, for instance. This not only discourages the consumption of harmful goods but also provides financial backing for useful health programmes and initiatives.

The possibilities of innovative healthcare financing options are thankfully plentiful as new healthcare challenges evolve. It is therefore crucial to maintain a healthy curiosity and an enabling environment for innovation.

References

Bulgaria: Reforming the existing and designing of new measures for activating inactive persons and their inclusion in the labour market in Bulgaria Social Impact Bonds Output 4 -Innovative policy design of active labour market policies (ALMPs). (n.d.). Available at: https://www.oecd.org/content/dam/oecd/en/topics/policy-issues/employment-services/social_impact_bonds.pdf.
Mishra, A.K. and Dash, A.K. (2022). Development impact bonds in developing countries: an emerging innovation for achieving social outcomes. Journal of Social and Economic Development. doi:https://doi.org/10.1007/s40847-022-00213-0.
Sulser, P. and Madir, J. (2022). Innovative Finance in Health Care: Scaling Up Use of Impact Bonds in Public Health Care in Developing Countries.
Nepad.org. (2022). | AUDA-NEPAD. [online] Available at: https://www.nepad.org/programme-details/998.
Ochieng, J. and Rodgers Agwaya (2020). Excise Taxation in Kenya.