COVID-19 Impact on the Performance of Healthcare Medium Size Enterprises in Kenya and the Role of Flexible Digital Cash Advances to Absorb Economic Shocks

ABSTRACT

Introduction/ Background: Medical Credit Fund (MCF) works to improve quality and access to financing for small and medium size enterprises in the health sector. Since 2011. This describes how COVID-19 affected health SMEs in Kenya, and the role of MCF's Cash Advance (digital mobile loan) in absorbing the concomitant economic shocks. Methods: The first telephone survey was conducted in mid- 2020 (254 respondents). This was conducted once via telephone (Computer-assisted telephone interviewing;CATI). The second telephone survey was conducted at the end of 2020 (199 respondents). This contained many of the same questions as the first survey and was also conducted via telephone (Computerassisted telephone interviewing;CATI). A weekly online survey was conducted for the duration of 6 months (among a subset of 25 respondents). This contained only ten questions about client numbers, staffing and revenues. It was conducted via an SMS invitation to a mobile phonebased survey tool (Computer-assisted web interviewing;CAWI). Results: Half of the surveyed health SMEs applied for a Cash Advance (CA) loan during the pandemic. Of those health SMEs, the vast majority (44 percent of the sample) also received the CA loan. Only a small minority (4%) of health SMEs that applied for the CA loan had their applications rejected. The approximately three quarters receiving CA during the pandemic also received CA in the twelve months before the pandemic's start in March. Hence, a quarter of the CA health SMEs was a “new” borrower that had not received a CA in the twelve months preceding the pandemic. Impact Health SMEs were not prepared for this economic shock and did not have access to working capital loans from bank, neither did they qualify for government support. MCF provided a fast and flexible solution through its mobile Cash Advance loans, which do not require collateral. Conclusion: Cash Advance disbursement increased from USD 6 million in 2019 to over USD 60 million since the beginning of 2020, with relatively stable repayment rates averaging 95%. With this credit, SMEs were able to purchase PPE, medicines, or equipment, and pay staff or invest in other COVID-19 related measures.