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Banking on Health and Financial Institutions

Global trends including health reform, new public and private health insurance options, and increased health expenditures are expanding the role of the private health sector in many developing countries. These shifts add up to business opportunities for banks willing to make the investment to enter the health care market. Yet in many countries financial institutions are not lending to the health sector in significant ways. Financial-sector assessments the United States Agency for International Development (USAID)-funded Banking on Health project conducted reveal that many lenders believe the health sector is risky. Bankers often are not aware of the sector's financing needs and repayment capacity, and they are not always comfortable analyzing and structuring loans to health care businesses. Financial institutions cite a need for market information about the sector. Bankers typically do not know how to market to health care businesses that often are small and disbursed throughout the country. In addition, banks stress collateral concerns, identifying political risk in taking a health facility as collateral and the lack of a secondary market for medical equipment. Often financial institutions do not offer loan products that meet the financing needs of health care providers, resulting in a mismatch between financing needs and bank terms.