MICROCAPITAL STORY: Freedom From Hunger Experiments With Discounted Health Care to Microcredit Borrowers to Drive Lower Default Rates

Healthy borrowers repay loans. That is the theory underlying Freedom From Hunger’s Microfinance and Health Protection Program. Freedom From Hunger, an international development organization that is funded by a USD 5.6 million grant from the Bill and Melinda Gates Foundation, is taking a creative approach to reducing borrower default rates. The company has found that when loans are not repaid, health care needs are often a principal reason. Borrowers will use loan proceeds to pay for health care needs instead of for investing in their businesses. In 2007, the Microfinance and Health Protection Program began offering borrowers discounted doctor visits, health care savings accounts, affordable medicine, and emergency health care loans in order to combat this problem.

Five microfinance institutions in five different nations participated in the pilot program: Bandhan of India, CARD Bank of the Philippines, Crédito con Educación Rural (CRECER) of Bolivia, Association for the Promotion and the Support to the Development of MicroEntreprises (PADME) of Benin, and Réseau des caisses populaires du Burkina (RCPB) of Burkina Faso. The program began with seven doctors and that number has now grown to 51. Doctors welcome the program because although their services are being offered at a discounted price, they see an increase in the volume of patients. The average health care loan is $300 and borrowers are typically required to attend a health seminar in order to receive the loan. Recently, representatives from microfinance institutions in Bolivia, India, the Philippines, and the West African nations of Benin and Burkina Faso met to compare notes from the program’s first year. Jaime Aristotle Alip, managing director of the Center for Agriculture and Rural Development, a Philippine bank network, said that 15,000 rural families are now getting basic medical care.

Established in 1946, Freedom From Hunger focuses on “innovative self-help programs” to combat hunger and poverty. To achieve this, the company partners with local and independent microfinance institutions that range from rural banks and credit unions to non-profit development organizations. The Microfinance and Health Protection Initiative is only one way that Freedom From Hunger is addressing the needs of the rural poor. The company also has a Credit With Education Program, a Malaria Initiative, and a Reach Initiative which aims to spread the “best practices” in self-help by gathering the most effective programs from around the world and makes them available to local organizations that serve the rural poor.

Freedom from Hunger will continue its health care experiment through 2009, expanding as it sees fit, and share research findings with microfinance institutions worldwide.

By Iyanna Holmes, Research Assistant

Additional Resources:

Bandhan.com

Bill and Melinda Gates Foundation

Center for Agricultural and Rural Development

Freedom From Hunger

Microfinance and Health Protection Program

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