Philippines: Credit for Better Health Care Project

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Lessons

Local government units (LGUs) are important as facilitators of health projects but should not be overburdened with health care investments.

The project suffered severely from an initial overemphasis on LGU-driven subprojects. While as early as 2010 or just a little over a year after loan approval, the Development Bank of the Philippines (DBP), the executing agency, already flagged concerns about LGU lack of uptake and suggested redirecting efforts toward the private sector, the central government began to respond only in February 2013. It took another 6 months for the government to approve the shift from LGU to private sector lending, and nearly another year to get subloans to private hospitals signed. For future LGU-driven health care investments, it will be important to carefully assess LGU actual needs and interest as unforeseen policy changes and their short 3-year political terms generally discourage the LGUs from considering long-term investments.

Private sector providers need motivation to expand their services in poor and remote areas and strive for better quality of care.

Some of the eligibility criteria adopted by the government for private sector subloans created obstacles for small-scale health providers. For example, several obstetricians and professional midwives found it hard to get accreditation for their birthing clinics from the Philippine Health Insurance Corporation (PHIC) because of the complex application process, high cost, and lack of resources to meet PHIC standards. With private sector service providers generally not interested in expanding to poor and remote areas and striving for better health care quality, it would be advisable to reduce the hurdles facing small-scale providers. Building on the schemes already developed by DBP to facilitate lending to small facilities such as medical doctor and dentist clinics will also be helpful.

A bigger role for midwives can enhance the performance of similar future projects in the Philippines.

Had consultations with target groups been done upfront, a bigger role for midwives could have been worked out. While few midwives may have enough collateral and/or land available for building a small facility, they can forge partnerships with other stakeholders to borrow from DBP. An important partner for midwives would be nongovernment organizations and women’s groups, particularly those focusing on sexual and reproductive health, with whom they already have relationships of trust. Innovative solutions could also include using PHIC receivables as collateral.

Political support is crucial to the success of PPPs.

The project originally intended lending to 3–4 PPP subprojects between $100,000 and $2 million. However, as it took quite long for central government authorities to respond to the lack of LGU uptake of the credit facility available for them under the project, there was hardly enough time left for the shift from LGUs to pro-poor private health facilities to lead to any PPP arrangement. This experience showed the importance of political support in enabling the growth of PPPs, and the consequences of the lack of institutional continuity.

Background

In March 2009, the Asian Development Bank (ADB) approved a loan of $50 million to the government-owned Development Bank of the Philippines (DBP) for the Credit for Better Health Project. The project was designed to help the country achieve its health-related Millennium Development Goals (MDGs) by leveraging private participation to increase investments toward these priorities and address the low and inefficient public expenditures in health.

The project’s anticipated impact was improved overall health status, especially in relation to reducing child mortality (MDG 4) and improving maternal health (MDG 5). Its intended outcome was increased use of basic health care and referral services generally by the poor and particularly by women and children in the project sites. Its planned outputs were (i) upgraded local government unit (LGU) health services, (ii) more efficient health delivery systems through public–private partnerships and innovative strategies, (iii) improved access to small-scale private providers, and (iv) enhanced capacity for health sector lending.

Aside from the loan, ADB also provided $1 million in technical assistance (TA) to support output 2 and a $400,000 grant from the Gender and Development Cooperation Fund to support output 3 with emphasis on supporting midwives wanting to establish their own birthing clinics. The DBP was to relend the ADB loan at market interest rates through retail and wholesale windows. Wholesale relending, originally allocated about $9.15 million, was targeted at DBP’s accredited financial intermediaries, including microfinance institutions, rural and thrift banks, cooperatives, and nongovernment organizations. Retail lending for collateralized subprojects from $100,000 to $5 million was meant for LGUs, larger private ventures such as health maintenance organizations and foundations, and eligible small-scale sub-borrowers.

The project targeted 96 subprojects nationwide through (i) retail loans to 72 LGUs under output 1 and 4 private sector providers under output 2, and (ii) wholesale loans to DBP-accredited financial intermediaries for onlending to 20 small-scale providers under output 3. By loan closing, no LGU used the credit facility under output 1; 7 subloans, all for the construction and/or expansion of hospitals or medical arts buildings and equipment provision, were approved for a total of $25.6 million under output 2; and as none of the DBP’s accredited financial intermediaries borrowed from the project, the DBP provided retail loans to 4 small-scale providers, all in Mindanao, under output 3.

Significant design deficiencies and unforeseen changes in the lending environment seriously affected the delivery of output targets. The project consequently only partially achieved its intended outcome. Data collected from the project hospitals indicated a rise in the number of in- and out-patients. Clearly, overall supply improved; but whether these investments specifically benefitted the poor cannot be established. Sex- and age-disaggregated data were also not available to facilitate a reliable assessment of the benefits provided by the project to women and children.

ADB’s Southeast Asia Department rated the project less than successful. The DBP was the executing agency. The Philippines Health Insurance Corporation and the Department of Health’s Bureau of International Health Cooperation were the implementing agencies for the TA.

Project Information

Project Name:

Credit for Better Health Care Project

Report Date:

June, 2017

Main Sector:

Health

Country:

Philippines

Project Number:

41664-013

Project/Modality: