NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, December 15, 2017

Children born into poverty are almost twice as likely to die before the age of five as those from wealthier families. Access to health care can prevent many of these and other deaths, and features prominently in the Sustainable Development Goal for health. But health care can be costly. So what role can financial services play in improving access to life-saving services, and what’s holding them back from having a bigger impact?

There are some obvious opportunities for financial services to play a role in achieving universal health coverage. Savings accounts can help people plan for health expenses, access to credit can mean the difference between getting needed care and not, and insurance can help mitigate against health shocks that too often push people deeper into poverty. Offering these products to low-income customers is traditionally risky and expensive, but that picture is quickly changing with the growth of digital financial services (DFS), which leverage digital channels to reach more remote customers at lower cost.

DFS can contribute to the goal of universal coverage in a number of ways beyond helping households afford care. Health care systems are complex webs of patients, public- and private-sector providers, insurers, pharmacies, donors, financial service providers and more. Financial transactions between these actors typically take place in cash or though bank transfers. Cash transactions are expensive, risky, subject to theft and leakage, and hard to track. Payments through bank accounts often require health workers to travel significant distances to cash paychecks due limited reach of bank branches. Introducing DFS can alleviate these pain points. Research by the USAID-funded Health Finance & Governance (HFG) project reveals that digital finance offers promising solutions to not only reduce risk and improve accountability of funds, but also contribute to health care coverage and efficiency of service delivery.

Photo courtesy of CommScope.