At least half of the world’s population lacks access to basic health services, and the cost of health care pushes nearly 100 million people into extreme poverty every year. The importance of the way scarce resources are distributed should be taken into account; Furthermore, there are good reasons to believe that financing could play a crucial role in addressing this challenge. More than 60 countries have implemented national financial inclusion policies, and those conducting academic research are interested in understanding their impact.
Until recently, there was no evidence that funding was capable of enabling significant changes in healthcare. No effects were found in randomized controlled trials in which households were offered financial products such as savings accounts, loans and health insurance. However, these studies did not examine important long-term, large-scale aspects of banking, nor did they consider financial products and services offered to businesses and healthcare providers.
In one study, I analyzed an experiment that examined how banking presence in India had improved financial inclusion and other impacts over a ten-year period. Contrary to previous research, I found that it had led to significant improvements in household health. In 2005, the Reserve Bank of India (RBI) introduced an incentive policy for banks to open new branches in underserved districts across the country. After five years, the number of bank branches in these districts had increased by 19%. More relevant, two nationally representative surveys conducted at the household level showed that the population’s health was better than residents of similar counties where the measure was not implemented.
A stronger banking presence could help achieve some of the United Nations Sustainable Development Goals worldwide
The India Human Development Survey (IHDS), conducted six years after the RBI directive came into force, found that households in districts with higher banking presence were 36% less likely to suffer from non-chronic diseases such as fever or diarrhea. Likewise, the Population and Health Survey ten years after the policy was implemented showed higher vaccination rates and lower risks associated with pregnancy in these districts. Decreasing morbidity rates also improved health-related economic outcomes: The IHDS survey found that household members were less likely to miss school and work due to illness and incurred significantly lower medical costs.
There are three mechanisms that likely played a role in improving health outcomes. First, banks provided loans to local businesses, allowing households to earn more and invest more in health. Second, the data suggest that household members used financial services directly. They set up savings accounts and, more importantly, were also able to purchase health insurance. In India, as in more than half of the developing world, local banks sell health insurance policies to their customers and act as intermediaries for insurance companies in major cities. This is very different from what happens in most developed countries, where health insurance is only purchased directly from insurance companies or through government programs.
Finally, healthcare providers also resorted to loans. Eight years after the RBI measure was introduced, the number of hospitals operating in aided districts had increased by 140% and providers were more likely to report institutional loans as their main source of funding. Local households also reported fewer problems accessing healthcare. Policymakers have taken seriously the importance of expanding loans for healthcare providers: In May 2021, during the Covid-19 crisis, the RBI provided healthcare loans worth $6.78 billion (approximately €6.4 billion) available. Easy access for the sector.
A stronger banking presence could also help achieve some of the United Nations’ Sustainable Development Goals worldwide. Given the link between better access to bank branches and reduced school absenteeism due to illness, education is an area of policy making that could easily go hand in hand with financial inclusion efforts. Allowing households to invest more in education and providing loans to establish new schools and training programs could lead to better educational outcomes.
The success of the RBI policy bodes well for policymakers in developing countries seeking to improve health outcomes. Further research is also needed into how similar interventions might impact demand and supply in other sectors. Policy incentives to increase the number of bank branches in underserved areas could ultimately have several positive community impacts beyond those with better health indicators.
Believe Cramer She is an associate professor at the London School of Economics and studies household finances in developing countries. Translation from English: Rocío L. Barrientos.
Copyright: Project Syndicate, 2023.
You can follow Future planet In XFacebook, Instagram and TikTok and subscribe to our newsletter here.