Anthonia Obokoh
Medical Credit Fund (MCF), the only debt fund fully dedicated to the African health sector, has announced the completion of a EUR 32.5 million fundraise of its second fund (MCF II).
This financing round will expand the Fund’s presence and support to healthcare providers in sub-Saharan Africa, with a focus on primary healthcare services including malaria prevention and treatment and maternal and childcare. The round also caters for expanding its fully digital loan product called ‘Cash Advance’, which grew exponentially in the past two years.
The funding round was anchored by the Dutch Ministry of Foreign Affairs, which provided the first equity injection of EUR 7.5 million in January this year, to cater to the demand for loans during the height of the COVID-19 crisis. Also participating in this funding round are CDC Group, EUR 10 million, FMO, EUR 7.5 million, Swedfund, EUR 5 million, and Philips, EUR 2.5 million.
In addition, MCF will benefit from a guarantee facility by the U.S. International Development Finance Corporation (DFC), which was initiated by the Health Finance Coalition (HFC) with support of the U.S. President’s Malaria Initiative (PMI) and USAID’s Center for Innovation & Impact (CII). Through blended finance, MCF uses catalytic capital from both public and private sources and is targeting to grow to EUR 80 million in the next few years.
MCF II qualifies under the 2X Challenge as its funding will enhance access to capital for gender-smart healthcare businesses and help to increase health services for female patients.
The 2X Challenge is a commitment by the development finance institutions (DFIs) of the G7 to mobilize capital to support businesses that provide women in emerging economies with access to leadership opportunities, quality employment, and products and services that enhance their economic participation and inclusion.
Since its foundation, Medical Credit Fund has provided over 6,500 loans to healthcare providers in Africa, worth over EUR 120 million, with a 96% repayment rate. It has reached 1,800 health small and medium-sized enterprises (SMEs) in Kenya, Ghana, Nigeria, Tanzania, and Uganda. Loans are combined with support for business and quality improvement using the PharmAccess – SafeCare standards and methodology, through which 80% of the clients are able to improve their services.
MCF will deploy the funding to further scale its impact across sub-Saharan Africa with a focus on advancing its digital loan products. Only 5 years after introducing ‘Cash Advance’, 80% of MCF’s disbursements now go through digital loans. Cash Advance does not require collateral: the provider’s history of mobile money receipts serves as the basis for the loan.
The digital revenues are used directly to pay back the loan. Kenyan clients say to appreciate the flexible repayment and the speed and ease of the process, as all is done through their mobile phones.
Arjan Poels, Managing Director of MCF commented on today’s news: ‘‘I am very grateful for the support we received from our investors, especially the Dutch Ministry of Foreign Affairs. The funds will help to bridge the financing gap for small and medium-sized health businesses, allowing entrepreneurs to finance construction work, purchase equipment, and prevent medicine stock-outs. Mitigating the chronic underfunding of the sector means more patients can receive better healthcare.’’
Clarisa De Franco, Managing Director & Head of Private Equity Funds, CDC Group, said affordable, reliable and quality health care has never been more crucial than it is today. This is why CDC is thrilled to be deepening its partnership with MCF, an impact-led fund manager with a track record of supporting the primary healthcare sector in Africa.
“Our commitment to MCF II will enable the Fund to increase its flexible finance offers to an estimate of over 2,500 healthcare SMEs, bolstering their ability to meet the increased demand for quality healthcare and to serve approximately 10 million patients by 2030. Strengthening Africa’s healthcare system is an immediate priority that demands dedicated healthcare financing to help close the funding gap in the market.
“CDC’s commitment alongside partner investors will serve the dual purpose of boosting the growth of Africa’s healthcare sector and it will act as a positive signal to the market, attracting even greater investments to scale inclusive quality healthcare for millions of people across Africa,” said De Franco.
Marnix Monsfort, Director Financial Institutions at FMO added: “We’re pleased to have contributed to this one-of-a-kind Fund targeting healthcare SMEs through our Building Prospects and MASSIF funds in the form of a subordinated debt facility. As the Fund is aimed at reducing inequalities in several of our core markets, with a strong gender focus, we believe the Fund is uniquely positioned to play a leading role in the healthcare space and are proud to have been one of the investors for the launch of the second Fund.”