Can Private Financing Answer Uganda’s Health Care Woes?

Early this year, the U.S. and Swedish ambassadors went on a joint site visit to Rhona Medical Center, a medium-sized health clinic in Kampala. Site visits by the U.S. ambassador are not uncommon in Uganda where the health sector makes up the lion’s share of the aid budget. But this joint visit was unusual because it was to a private health facility that a year ago had received a loan co-guaranteed by USAID and the Swedish International Development Agency (SIDA).

Uganda’s adoption of the Anti-Homosexuality Act in February this year and the Ugandan president’s dismissal of the value of the U.S. Government’s development assistance to the country has prompted a review of our 50-year-long efforts in Uganda. In his February 24 speech, after signing the anti-homosexuality bill into law, Uganda’s President Yoweri Museveni stressed, “Uganda is a rich country that does not need aid, because aid is in itself a problem…”

Indeed, Uganda has made much smaller gains in key health indicators than its neighbors despite receiving larger aid inflows per capita, amounting to three quarters of all public health spending. I have spent some of my last three years at post pondering how we might be effective in improving the health of Ugandans when, despite the critical support provided by USAID and our implementing partners, the government fails to adequately enforce accountability and performance in the public health system. Uganda has had nominally free health care since 2001, yet a recent World Bank survey found that 51 percent of public sector health workers were absent from their posts and drug stock-outs also remain a problem.

An obvious answer to me was to invest in the emerging private sector, rather than continuing to unsustainably prop-up the public system. While USAID continues to support the public sector to ensure that the poorest Ugandans continue to access vital health care services, we can also ensure that people have additional health service options outside of the public sector, even when those options require payment. By distributing our aid across the public and private sectors, we hoped to continue to reach the poorest Ugandans while also helping increase the quality of health services through private sector development.

A nurse works in southwest Uganda’s Kabwohe Clinical Research Center, a facility that received a $35,000 loan guaranteed through USAID’s Development Credit Authority, and was able to hire more staff and provide life saving AIDS treatment to 4600 patients as a result. / USAID, Morgana Wingard

Over the last three years, with invaluable support from USAID’s Development Credit Authority, USAID/Uganda has built a portfolio of risk-sharing guarantees with local banks to open $10 million in private lending for Uganda’s health sector, at a cost of only $315,000 to USAID. The financing was made available for everything in the health sector from small drug shops to hospitals in Kampala, with an emphasis on facilities that serve rural areas – a segment that banks previously considered too high-risk to qualify for commercial loans.

Thanks to the risk-mitigating guarantees, private clinics can now access commercial loans to purchase medical equipment and expand their facilities to serve more clients. The results so far are impressive – Centenary Bank has utilized 50 percent of a five-year guarantee in a little over a year, reflecting the pent-up demand for credit. One of its loans – of around $25,000 – went to Rhona Medical Center and was used to purchase a dental x-ray, a scanning machine, a clinical chemistry machine, a hematology analyzer and six desktop computers.

Accompanying the U.S. and Swedish ambassadors on this site visit, Rhona’s director, Dr. Edward Bemera, shared with us that the clinic was able to get much better terms on its loan thanks to the USAID guarantee facility.

Along with the new medical equipment, he used his loan to hire additional nurses and to make renovations to the facility. As a result, the Medical Center’s revenues more than doubled, and the number of clients receiving better services quadrupled.

Dr. Bemera explains to Amb. DeLisi, Amb. Andersson and the rest of the team about how he used the USAID-backed loan to scale up activities at his clinic. / USAID, Roberta Rossi

The contribution of the private health sector will grow significantly in years to come as banks realize that this segment is credit-worthy. This is evidenced by the fact that there have been no defaults to date under the guarantee. Increased competition will gradually reduce prices for patients, making private health care more affordable and of better quality.

USAID/Uganda has embraced the value of this private partnerships approach in other areas of our work. For example, since girls’ secondary enrollment is a strong predictor of improved maternal and child health outcomes, we are about to launch a new loan guarantee for girls’ school fee loans, that will be managed as part of our Orphans and Vulnerable Children program.

For me, to be given the opportunity to champion innovative approaches to development, and to see those translated into tangible results is a dream come true.