While finance and health may at first glance seem like two distant points on the development spectrum, in recent years some microfinance and health practitioners have increasingly begun to look upon each other more as partners with complementary solutions to each other’s challenges. After all, one of the main causes of default on microcredit loans remains the ill health of borrowers and their families. In addition, one significant barrier to the improvement of health indicators in developing countries remains their health systems’ inability to reach the poor—often because conventional services are prohibitively expensive and/or are too far from rural communities.
Many have also questioned whether microfinance is capable of producing the positive client-level consequences that its pioneers claimed would be natural side effects of providing loans to women. Mainly that, with additional profits from the growth of their small businesses, women would be able to spend more on their children’s health needs and education (Lundberg et al. 1997, Cheston and Kuhn 2002, Meinzen-Dick et al. 2011). The first randomized evaluation of introducing microcredit, conducted in 2005 in the slums of Hyderabad, India, found no discernible effects on health expenditure. Households in treatment areas spent no more on medical and sanitary products than did comparison households, and households that received microcredit were no less likely to report a child with a major illness in the last year (Banerjee et al. 2009).
It’s a fair point, then, that microcredit alone may be insufficient to guarantee a positive impact on health—after all, money does not equal knowledge. That is why since 2006, Freedom from Hunger and the Microcredit Summit Campaign have been working together to prove that an integrated approach—microfinance institutions (MFIs) offering both types of services and/or collaborating with health service providers—could be a means to achieve that positive impact on health. In a recently released report, State of the Integrated Field of Health and Microfinance in India: Harnessing the Strengths of Two Sectors to Improve Health and Alleviate Poverty, Freedom from Hunger, the Microcredit Summit Campaign, and the Indian Institute of Public Health, Gandhinagar highlight that, according to a 2009 survey, 25% of India’s 134 MFIs had made some type of health service available to clients. Additional data from 19 MFIs and self-help promoting institutions (SHPIs) implementing integrated health and microfinance services programs offer strategic insights and creative methods that practitioners have used to address the health needs of their clients.
According to the report, maternal health and childhood illnesses are two of the MFIs’ and SHPIs’ highest priorities, followed closely by malnutrition, HIV/AIDS, and hygiene/sanitation. Health education is by far the most commonly used intervention, though it can take various forms. Ekjut, for example, an NGO based in Jharkand and Odisha, uses games, puppet shows, and story-telling during self-help group meetings with local women to help them prioritize their health, self-diagnose, and implement treatments. A randomized control study found that Ekjut’s methods were successful in decreasing neonatal mortality by 32%, maternal mortality by 20%, and postnatal depression by 57%. Other innovative methods include “telemedicine centers” located at the MFI’s branch offices where clients can consult with a doctor through videoconferencing; community “medicine points” operated out of village health volunteers’ homes, which make generic medicines available to clients at below-market rates; and loans for in-home water filters and insecticide-treated bed nets. Other interventions include health savings and insurance and linkages with health providers at a lower cost.
Nearly every MFI and SHPI surveyed provides a combination of these services (for example, health education + health camps + health savings) rather than just one or another, and rigorous cost-benefit analyses conducted by Freedom from Hunger found an average estimated cost of less than US$2 per client per year. There was also evidence of benefits to institutions in the form of improved staff morale (they see themselves as more than just bankers) and strengthened client loyalty.
Given the relative low cost and potential for success, why aren’t more MFIs offering integrated finance and health services? A major reason is an understandable fear of added costs and risk to the MFI/SHPI. The report’s most important message is a call for greater funding to encourage MFIs/SHPIs and healthcare providers to work together, invest in innovative program designs, and monitor their impact. More widespread adoption of this strategy can greatly enhance the benefits of both services to individuals who need them most.
– Ana de Paiva
Banerjee et al. (2009). The miracle of microfinance? Evidence from a randomized evaluation. Found at: http://www.povertyactionlab.org/publication/miracle-microfinance-evidence-randomized-evaluation
Lundberg, S., R. Pollak, and T. Wales. (1997). “Do Husbands and Wives Pool Their Resources? Evidence from the United Kingdom Child Benefit.” Journal of Human Resources, 32, pp. 463-480.
Cheston, Susy and Lisa Kuhn. (2002). Empowering Women through Microfinance. New York: UNIFEM. Also found at: http://www.microcreditsummit.org/papers/empowerment.pdf .
Ruth Meinzen-Dick et al. (2011). “Gender: A Key Dimension Linking Agricultural Programs to Improved Nutrition and Health”, 2020 Conference Brief 9. IFPRI.