Set up earlier this year, the Africa Medical Equipment Facility (AMEF) is a risk-sharing facility in which IFC supports local banks in Africa in providing loans to small and medium-sized healthcare businesses to buy essential medical equipment. To ensure the banks and private healthcare providers are equipped with the knowledge and skills they need to make optimal use of the facility, IFC created an accompanying advisory program funded by the government of Norway. We spoke with two of its team members, Jose Gnangnon and Bas Rozemuller, to learn more about the specific challenges they believe must be addressed to create better-functioning medical equipment markets in Africa.
Why was it necessary for IFC to add an advisory arm to this facility?
JG: Banks in Africa typically provide loans to companies operating in sectors like trade and manufacturing but not so much in healthcare. This is because the type of financing that healthcare businesses need has a tenor of between three and seven years whereas banks usually offer their clients shorter-term loans, up to a year. We created this advisory program to help banks understand the sector, the eligibility criteria, how to structure products, and how to make optimal use of AMEF.
BR: On the healthcare side, businesses don’t really understand what banks need when they apply for loans and typically don’t have the required paperwork or documentation, while banks don’t fully grasp the opportunities that the healthcare sector offers. We are trying to bring them closer together by building capacity on both sides.
Why are African banks wary of lending money for medical equipment?
JG: It requires a kind of expertise that banks in the region generally don’t have. Also, healthcare’s share of the economy in Africa is still relatively small so it’s not a priority. Up until now, this has been an underserved, underfinanced part of the economy. But if we want to develop private markets, we need to focus on this sector as there is a lot of opportunity. For example, General Electric only had one MRI machine in 2011 in Cote d’Ivoire, while in 2020 they had 11 and still the needs are not met.
BR: There are basically two issues: banks don’t really know the healthcare sector well in Africa and once they get to know it, they consider it a risky sector. The AMEF advisory team is working on both fronts.
What are the biggest mistakes healthcare businesses make when purchasing equipment?
BR: A common one is overestimating the number of patients they will get. We are trying to help small and medium-sized private healthcare businesses make a better estimate of patient flows for instance. Another mistake which often occurs is that doctors who are deciding on purchases like to pick the fanciest equipment—the Ferraris rather than the Toyotas. But very often they don’t need all the specifications that the more high-end models have.
JG: Healthcare providers will often fail to factor in indirect costs—machine maintenance, replenishing supplies, making repairs, updates, and upgrades—when deciding on a purchase. We provide them with a comprehensive view and tools to understand those hidden costs.
What kinds of training and advice are you giving?
JG: Firstly, we are trying to help the banks better understand the AMEF program itself. For NSIA bank in Cote d’Ivoire, for example, they have about 80 branches in their network. We are training their frontline teams on eligibility criteria: the definition of ‘healthcare SME’, how to structure the loans, when to start originating them and when to stop, the definition of a defaulted loan and how to call on an IFC guarantee when a loan defaults. We also provide training on how to report loans to IFC so we can support them when needed.
BR: We help banks better understand the risks so that when a loan application comes in, they can assess if, for instance, the projected patient population is accurate or not, and if there is the right, properly trained medical staff who can operate the equipment. On the healthcare business side, we walk them through the commonly made mistakes so they can develop better loan applications when purchasing medical equipment that meets actual clinical needs. But submitting a better loan application is not enough, so we also train the healthcare providers on how to put in place a financial management system that enables them to predict cash flows, so they don’t default on a loan after a year or two.
How will we know if AMEF has succeeded?
JG: Firstly, we want to have more banks in more countries participating in the facility. We also want banks to become autonomous in terms of acquiring healthcare sector expertise and retaining it internally. And we want them to prioritize healthcare business the way they do for other sectors like trade and tourism. We may eventually bring governments on board too, working with our World Bank Group colleagues, for example to limit the time it takes for medical equipment to clear customs.
BR: The measure of success will be having healthcare businesses buy and maintain the medical equipment they need that gives them the cash flows they need to pay back the banks. And that they offer their services at prices that patients can afford. We will add more original equipment manufacturers to the facility, which will increase the choice of brands and types of equipment, including more affordable ones. Ultimately, the goal is to create well-functioning health equipment markets where banks and healthcare providers play their roles and patients get served well.
This interview has been edited for length and clarity.
What is AMEF?
Small- and medium-sized healthcare companies in East and West Africa often face difficulties when trying to access financing for the purchase or lease of equipment. Launched by IFC in 2021, the Africa Medical Equipment Facility (AMEF) is designed to bridge the gap between healthcare businesses seeking medical equipment and financial institutions and equipment manufacturers. AMEF is a risk-sharing facility, developed through partner banks (so far NSIA in Cote d’Ivoire and Cooperative Bank in Kenya have joined), who will provide healthcare businesses with necessary financing to acquire advanced equipment from manufacturers that have signed on to the facility (to date, GE and Philips). IFC expects the facility to provide a total of $300 million in financing.
Learn more at www.ifc.org/amef