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Investing in emerging markets is increasingly recognised as a powerful catalyst for sustainable development, driving economic growth while addressing critical social and environmental challenges. Healthcare, long seen as a sector that demands significant effort due to systemic constraints in these markets, presents unique opportunities for growth and impact when approached with innovative strategies. By supporting healthcare businesses’ efforts to harness technology to create digitally enabled health ecosystems, leverage platform strategies for efficiency and scale, and utilise innovative financing solutions to expand accessibility, investors can unlock both economic returns and significant societal benefits in emerging economies.

There is ample need for new sources of healthcare funding in these markets. The U.S. allocates 19% of its GDP to healthcare, while Europe spends around 12%. In stark contrast, India and Southeast Asia dedicate only 3-5% of their GDP to health. Africa, despite representing over 18% of the world’s population and over 20% of the global disease burden, spends just 5% of its GDP on healthcare, accounting for around 2% of global health expenditure. 

The COVID-19 pandemic exposed the vulnerabilities of the global healthcare infrastructure, and the consequences of chronic underfunding in these regions. This ongoing disparity underscores the urgent need for investors to prioritise healthcare investments, not only to drive sustainable development but also to address critical gaps in essential health services.

Harnessing Technology to Create Digitally Enabled Health Ecosystems

Unlocking the potential of healthcare investments requires governments, insurers, providers and consumers to reimagine healthcare delivery and management. Technology serves as the bedrock for making significant progress in the healthcare industry across emerging markets. For instance, according to McKinsey, health systems in the key African markets of Kenya, Nigeria and South Africa could realise up to 15% efficiency gains by 2030 from the adoption of digital tools. But to tap into these gains, healthcare systems will need to transition from a reliance on traditional infrastructure-focused strategies to a more holistic approach — one that places the patient at the centre and harnesses technology to reduce care costs and bring services closer to the point of need.

Africa has much to gain from the lessons of Asia, where digital health has impacted over a billion lives and is expected to create up to $100 billion in value by 2025, a significant increase from $37 billion in 2020. In contrast, Africa’s digital health market is projected to reach only $5.58 billion in 2025. While replicating Asia’s outcomes isn’t entirely feasible due to economic differences, Africa can still adapt elements of Asia’s approach, such as leveraging low-cost innovation, cultivating public-private collaboration, and designing mobile-first delivery models in a way that’s responsive to local realities. To bridge this gap, African health ecosystems must also integrate both digital and physical services, coordinating with various partners — including traditional healthcare providers and health tech companies. Such integration can ensure a comprehensive care continuum, broadening patients’ access to primary care, enabling providers to better manage and monitor diseases, improving health and wellness, and facilitating swift access to acute care.

We are witnessing this integration in the digitisation of traditional care models in many emerging markets. Traditional private hospital providers are implementing digital interfaces to offer telemedicine and homecare solutions, while enhancing patient engagement throughout their care journey. Technology companies like Helium Health have developed electronic health record platforms designed to simplify the process of patient record-keeping and hospital management. Halodoc, in Indonesia, has scaled its health-tech platform by streamlining telemedicine, medication delivery and diagnostics, and by connecting users with doctors, pharmacies, labs and insurers through a single interface. Additionally, Akido Labs’ Scope AI demonstrates the potential of AI to revolutionize healthcare delivery by acting as a real-time clinical assistant — guiding caregivers through patient visits, capturing structured data, and generating preliminary diagnoses and treatment plans. This approach can enhance both efficiency and quality of care, with potential use cases in emerging markets where clinical capacity is limited and access to physicians is constrained.

Platform Strategies for Efficiency and Growth

A key challenge plaguing the healthcare industry in many emerging markets is the fragmentation and inefficiency of sub-scale care providers. Traditionally seen as the responsibility of governments or non-profit organisations, the healthcare sector in these regions is witnessing a significant rise in involvement from these small-to-medium sized private sector providers. From Nigeria to Indonesia, many of these smaller players are consolidating to become large private healthcare groups, and these are increasingly consolidating market share due to greater efficiency and economies of scale. One example of this is the Evercare Group, with its platform of hospitals, clinics and diagnostic centres across South Asia and Africa, including India, Pakistan, Bangladesh, Kenya and Nigeria. 

Platform hospital models showcase the value of scaling strategies, since larger provider networks are able to drive efficiencies through the centralisation of key functions such as procurement, inventory management, talent acquisition and technology systems. These models have also created skills corridors, which facilitate the exchange of resources and human capital across regions. This approach helps address critical shortages in one market while leveraging strengths in another. This is essential for developing a pipeline of advanced skills, which can partially mitigate the talent exodus that has historically weakened emerging market health ecosystems. In addition, these platforms accelerate progress towards creating regional and national medical hubs, as well as tapping into pharmaceutical markets in order to produce and distribute generic drugs that will reduce dependence on overseas countries for medical treatment. 

As healthcare ecosystems mature, we can expect an increased migration of care from high-cost regions with long waitlists to emerging markets, effectively reversing the traditional narrative of medical tourism. India, for instance, has become one of the world’s most cost-effective healthcare destinations, with medical tourism contributing 6.9% to its tourism industry. The cost of procedures like hip or knee replacements in India is about $3,500 – 9,000 — just one-seventh of the cost in the U.S. and other high-cost regions. Similarly, hospitals in Lagos and Nairobi are actively attracting patients from Europe who seek to avoid long wait times for surgeries and dental treatments. This trend mirrors the success of emerging markets in Southeast Asia, where countries like Thailand, Malaysia and Singapore have become key players in medical tourism.

Innovative Healthcare Financing Solutions to Expand Accessibility and Drive Impact

Healthcare in emerging markets often relies heavily on out-of-pocket payments, presenting a significant challenge for both investors and governments. According to WHO data, out-of-pocket payments account for 76% of healthcare expenses in Nigeria, compared to 58% in Pakistan, 45.98% in India and just 11.1% in the U.S. To address these disparities, countries are implementing ambitious programs to drive broader insurance coverage. For example, Indonesia’s Jaminan Kesehatan Nasional insurance program has achieved coverage for 93% of the population in less than a decade since its launch in 2014. Similarly, India’s Ayushman Bharat program aims to cover the bottom 40% of its population. 

Despite their targets for comprehensive universal healthcare, governments must also grapple with the challenge of containing costs, which necessitates the effective engagement of the private sector. For instance in Indonesia, the combination of private and public insurance options ensures broad coverage, creating a diverse and robust healthcare landscape. Increasing health insurance penetration requires collaborative efforts between public and private stakeholders, focusing on policy development, increased funding, public advocacy to raise awareness, and stakeholder engagement.

Meanwhile, private sector hospital chains are improving services, offering greater affordability, and driving innovation in health insurance and financing products tailored to meet the needs of targeted segments. For example, Reliance Health in Nigeria secured $40 million in funding in 2022, led by General Atlantic — one of the largest Series B investment rounds in the African health tech sector — which is being used to expand integrated healthcare services. Buy now, pay later models have also emerged as potential solutions to provide credit to last-mile users, as with M-TIBA in Kenya, which allows patients to receive treatment and then repay the loan in instalments, enabling them to receive care while also enhancing overall financial inclusion. 

Artificial intelligence is also playing a role in expanding coverage. One of the most significant advantages of the AI era, particularly in the health insurance industry, is its ability to create personalized insurance plans. Traditionally, insurance policies have grouped customers into broad categories based on age, gender and pre-existing conditions. In contrast, AI enables providers to design health insurance policies tailored specifically to every individual and price them in a way that is accessible to everyone, as exemplified by companies like BIMA, which operates across Africa, Asia and Latin America.

A Growing Opportunity for Healthcare Businesses

Healthcare expenditure in emerging economies is expected to grow significantly, eventually catching up with that of developed nations. As their income levels rise, these markets are experiencing an increasing demand for improved healthcare services and financing products that make care more accessible. This presents a substantial opportunity for healthcare and insurance businesses, as the sector remains under-penetrated.

Achieving the health-related Sustainable Development Goals hinges on the development of innovative and adaptable healthcare delivery models that can cater to the rapidly growing populations in these regions. By prioritising structured, long-term scalable investments and embracing technology-driven solutions, stakeholders can unlock the full potential of the healthcare sector, responding effectively to these changing dynamics. The expanding middle class, propelled by economic growth, will further drive demand for higher quality healthcare services, creating a fertile ground for investment and innovation.

Temi Marcella is a globally recognized investor, operator and board director.

Photo credit: Marek Studzinski