UNIVERSITY OF GHANA COLLEGE OF HUMANITIES HEALTH FINANCING IN GHANA: THE ROLE OF MICROFINANCE INSTITUTIONS IN REDUCING HEALTH RISKS BY THERESA ENYONAM ADZO DOKE (10329661) THIS THESIS IS SUBMITTED TO THE UNIVERSITY OF GHANA, LEGON IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF DOCTOR OF PHILOSOPHY IN DEVELOPMENT STUDIES DEGREE INSTITUTE OF STATISTICAL SOCIAL AND ECONOMIC RESEARCH(ISSER) SEPTEMBER, 2021 University of Ghana http://ugspace.ug.edu.gh i DECLARATION I, Theresa Enyonam Adzo Doke, hereby declare that this thesis titled “Health Financing in Ghana: The role of Microfinance Institutions in reducing health risks” is the result of independent work carried out under the supervision of Professor Felix Ankamah Asante and Dr. Ama Pokuaa Fenny, at the Institute of Statistical, Social and Economic Research (ISSER), University of Ghana. No part of this work has ever been presented either in part or whole to any other academic institution for the award of a degree or to a journal for publication. All refences cited have been duly acknowledged. ………………………………..... …………………………… THERESA ENYONAM ADZO DOKE. DATE (CANDIDATE) PROFESSOR FELIX ANKAMAH ASANTE DATE (PRINCIPAL SUPERVISOR) 24/02/2023 …………………………… DR. AMA POKUAA FENNY DATE (CO-SUPERVISOR) University of Ghana http://ugspace.ug.edu.gh ii DEDICATION To my husband, Dr. Boye Mensah Kwao Koney and children, Naa Adjeley Aseye Koney and Boye-Mensah Nutikorkoe Koney, for the endless sacrifices they made on this journey. University of Ghana http://ugspace.ug.edu.gh iii ACKNOWLEDGEMENT I would like to thank the Lord, God almighty for his unending grace. I owe a debt of gratitude to my supervisors, Prof. Felix Ankomah Asante and Dr. Ama Pokuaa Fenny for their commitment and dedication to the successful completion of this work. I would like to thank the Institute of Statistical, Social and Economic Research and the German Exchange Services (DAAD) for the scholarship opportunity that enabled me undertake this study. I am grateful to Michelle Schaan of USAID, Dr. Chris Atim of the World Bank, Mr. Samuel Okan Adjetey (GAMC) and Mr. Zakaria Sulemanu (OXFAM) for their immense help and contribution to this work. I am grateful for a number of friends and colleagues who continued to encourage me to persevere and to complete this work. Finally, I would like to acknowledge with gratitude, Mr. Louise Hodey, for his input and comments and most especially for being a wonderful human being. University of Ghana http://ugspace.ug.edu.gh iv ABSTRACT The focus of the Sustainable Development Goal 3 (SDG 3) is to ensure healthy lives and wellbeing of all people. This global call for Universal Health Coverage (UHC) is anchored in the ability to provide a health financing system that is efficient, effective and equitable. Ghana, like several other countries recognizing the gap in access to healthcare, instituted the National Health Insurance Scheme (NHIS) as a way to mitigate the negative impact of out-of- pocket payments. However, cost of services and premium continue to pose challenges to enrolment and retention on the NHIS. Unlike Microfinance, health insurance has not found innovative ways of substantially bringing down the cost of services to levels that the poor can afford. Though the ability of Microfinance Institutions (MFIs) to reach people in the informal sector is not in doubt, questions have been raised about the efficiency of Microfinance institutions and its relationship with their ability to reach the poorer segments of the population. Using a mixed methods approach, the study sought to examine the role of MFIs in Ghana’s health financing structure, conduct a cost-efficiency analysis of microfinance institutions in their current operations and also examine the factors that influence the participation of households in paying for health insurance through MFIs. The study found that some MFIs, recognizing of the effects of poor health on the economic performance of their clients, have found innovative ways of offering health related savings and loans products. These products are however provided on the blind side of the regulator. Significant inefficiencies were identified in the MFI sector with an average cost efficiency of 50%, and with, wide variations observed between the least efficient (Central) and the most efficient (Eastern) regions. The average loan per savings indicated that MFIs lend about two times a client’s savings. This indicates that though MFIs are striving for efficiency, they still University of Ghana http://ugspace.ug.edu.gh v concentrate on serving poorer clients. The average WTP is GHȻ40.00. It is relatively higher in the urban districts (La-Dadekotopon- GHȻ45; Tamale Metro- GHȻ40) as compared to the rural districts (Shai-Osudoku- GHȻ35; West Mamprusi- GHȻ27.5). Subjective norms, ethnicity, age, household size, source of treatment, last episode of illness in the household and wealth are the significant determinants of willingness to pay for health insurance through MFIs. The study recommends that to use Microfinance institutions as a platform to reach the informal sector, there is the need for a strong policy and regulatory framework. Also, Bank of Ghana must intensify its regulation and monitoring of the Microfinance sector in order to streamline their activities. MFIs themselves must strive to improve their efficiency by managing their asset base well and maintaining portfolio quality in order to reduce inefficiency which will lead to their sustainability. Premiums must be actuarially determined with the characteristics of the segments of the population in mind to ensure that people pay premiums that resonate with their economic status. University of Ghana http://ugspace.ug.edu.gh vi TABLE OF CONTENTS DECLARATION....................................................................................................................... i DEDICATION.......................................................................................................................... ii ACKNOWLEDGEMENT ......................................................................................................iii ABSTRACT ............................................................................................................................. iv TABLE OF CONTENTS ....................................................................................................... vi LIST OF TABLES .................................................................................................................. xi LIST OF FIGURES ............................................................................................................... xii LIST OF ABBREVIATIONS ..............................................................................................xiii CHAPTER ONE ...................................................................................................................... 1 INTRODUCTION.................................................................................................................... 1 1.1 Background ...................................................................................................................... 1 1.2 Problem Statement ........................................................................................................... 7 1.3 Research Questions and Objectives ............................................................................... 12 1.3.1 Objectives ............................................................................................................... 13 1.4 The relevance of the Study ............................................................................................ 13 1.5 Organization of the Study .............................................................................................. 14 CHAPTER TWO ................................................................................................................... 15 LITERATURE REVIEW, THEORETICAL AND CONCEPTUAL FRAMEWORK .. 15 2.1 Introduction .................................................................................................................... 15 2.2 Definition of key concepts ............................................................................................. 16 2.3 Theoretical Review ........................................................................................................ 17 2.3.1 Public Choice Theory ............................................................................................. 18 2.3.2 Expected Utility Theory .......................................................................................... 19 2.3.3 The Theory of Planned Behavior (TPB) ................................................................. 21 2.3.4 The concept of Economic efficiency in Microfinance ............................................ 22 2.4 Overview of the health sector in Ghana ......................................................................... 24 2.4.1 Health Financing Mechanisms ................................................................................ 26 2.4.2 Overview of Ghana’s Health financing Reforms.................................................... 31 2.4.3 Ghana’s Health spending ........................................................................................ 34 2.5 Insurance Uptake in Africa and the importance of Health Insurance ............................ 35 2.5.1 Determinants of Willingness to Participate and Pay for Health Insurance ............. 37 University of Ghana http://ugspace.ug.edu.gh vii 2.5.2 Determinants of Household’s behavioral intention towards health insurance ........ 43 2.6 Conceptual Framework .................................................................................................. 46 2.7 Microfinance as an alternative health-financing avenue for the poor ............................ 48 2.7.1 Changes in the MFI sector and its impact on calls for efficiency ........................... 52 2.7.2 Determinants of Cost efficiency in Microfinance ................................................... 55 CHAPTER THREE ............................................................................................................... 59 STUDY AREA AND METHODOLOGY ............................................................................ 59 3.1 Introduction .................................................................................................................... 59 3.2 The Study Areas ............................................................................................................. 59 3.3 Profile of La-Dadekotopon ............................................................................................ 61 3.3.1 Population ............................................................................................................... 61 3.3.2 Social Organization ................................................................................................. 62 3.3.3 Economic Activities ................................................................................................ 62 3.3.4 Health care .............................................................................................................. 63 3.4 Profile of Shai-Osudoku District ................................................................................... 64 3.4.1 Population ............................................................................................................... 64 3.4.2 Social Organization ................................................................................................. 64 3.4.3 Economic Activities ................................................................................................ 65 3.4.4 Healthcare ............................................................................................................... 65 3.5 Profile of Tamale Metropolitan ..................................................................................... 66 3.5.1 Population ............................................................................................................... 67 3.5.2 Social Organization ................................................................................................. 67 3.5.3 Economic Activities ................................................................................................ 68 3.5.4 Health care .............................................................................................................. 68 3.6 Profile of West Mamprusi district.................................................................................. 69 3.6.1 Population ............................................................................................................... 70 3.6.2 Social Organisation ................................................................................................. 70 3.6.3 Economic activities ................................................................................................. 70 3.6.4 Health care .............................................................................................................. 71 3.7 Research Design............................................................................................................. 72 3.7.1 Sampling and Sample Size...................................................................................... 73 3.8 Data Collection Methods ............................................................................................... 77 3.9 Method of Data Analysis ............................................................................................... 80 University of Ghana http://ugspace.ug.edu.gh viii 3.9.1 The role of MFIs in the health financing ................................................................ 80 3.9.2 Determinants of households’ willingness to participate and pay for health insurance through MFI’s .................................................................................................. 80 3.9.3 Choice and Description of variables ....................................................................... 83 3.9.4 Cost efficiency analysis .......................................................................................... 85 3.10 Data Limitations........................................................................................................... 86 CHAPTER FOUR .................................................................................................................. 88 COST EFFCIENCY ANALYSIS OF PROVIDING HEALTH INSURANCE THROUGH MFI’S ................................................................................................................ 88 4.1 Introduction .................................................................................................................... 88 4.2 Profile of respondent MFIs ............................................................................................ 88 4.3 Cost efficiency of Microfinance institutions.................................................................. 90 4.4 Drivers of inefficiency ................................................................................................... 91 4.5 Discussions .................................................................................................................... 92 4.6 Conclusion ..................................................................................................................... 95 CHAPTER FIVE ................................................................................................................... 96 WILLINGNESS TO PAY AND PARTICIPATE IN HEALTH INSURANCE THROUGH MFI’S ................................................................................................................ 96 5.1 Introduction .................................................................................................................... 96 5.2 Background characteristics of respondents .................................................................... 96 5.3. Amount households are willing to pay by place of residence and District ................. 103 5.4 Determinants of households Willingness to participate and pay for health insurance 104 5.4.1 Determinants of household willingness to participate .......................................... 104 5.4.2 Determinants of household WTP for health insurance through MFI’s ................. 109 5.5 Households Health insurance Intention and Behavior ................................................. 113 5.6 Discussion .................................................................................................................... 117 5.6.1 Perception of health status, health service and other insurance related determinants ........................................................................................................................................ 117 5.6.2 Determinants of willingness to Pay ...................................................................... 118 5.6.3 Determinates of behavioral intention towards health insurance ........................... 123 5.7 Conclusion ................................................................................................................... 127 University of Ghana http://ugspace.ug.edu.gh ix CHAPTER SIX .................................................................................................................... 128 THE ROLE THAT MICROFINANCE INSTITUTIONS CAN PLAY IN HEALTH FINANCING ........................................................................................................................ 128 6.1 Introduction .................................................................................................................. 128 6.2 Actors in Ghana’s health financing space .................................................................... 128 6.2.1 The Government of Ghana.................................................................................... 129 6.2.1.1 Challenges Government faces in the health financing space ......................... 130 6.2.1.2 Efforts by Government to address challenges in the financing health space . 132 6.2.2 Development Partners ........................................................................................... 133 6.2.2.1 Challenges DPs face in the health financing space ........................................ 134 6.2.3 Non-State Actors ................................................................................................... 136 6.2.3.1 Civil Society Organizations and Non-governmental Organizations .............. 136 How CSOs draw attention to their concerns .............................................................. 138 6.2.3.2 Private Health Sector ..................................................................................... 141 6.2.3.3 Households ..................................................................................................... 143 6.3 Appraisal of MFI’s offering health insurance .............................................................. 144 6.4 How Microfinance Institutions can fit into the health financing structure .................. 146 Authorities regulating the MFI sector and the role they can play...................................... 146 6.5 Success factors to collaboration between government and MFIs in health financing . 149 6.5.1 Clearly spelt out policy and terms of reference .................................................... 149 6.5.2 Advocacy/Awareness creation .............................................................................. 149 6.5.3 Stakeholder engagement ....................................................................................... 150 6.5.4 Regulation enforcement ........................................................................................ 150 6.5.5 Technology ........................................................................................................... 151 6.5.6 Trust ...................................................................................................................... 152 6.5.7 Location ................................................................................................................ 153 6.5.8 Price ...................................................................................................................... 153 6.6 Discussions .................................................................................................................. 154 6.7 Conclusion ................................................................................................................... 159 CHAPTER SEVEN .............................................................................................................. 161 SUMMARY, CONCLUSION AND RECOMMENDATIONS........................................ 161 7.1 Introduction .................................................................................................................. 161 7.2 Summary of Key findings ............................................................................................ 161 University of Ghana http://ugspace.ug.edu.gh x 7.2.1 Cost efficiency of MFIs ........................................................................................ 162 7.2.2 Determinants of willingness to participate and pay for health insurance through MFIs ............................................................................................................................... 162 7.2.3 The role of MFIs in the health financing structure ............................................... 164 7.3 Conclusion ................................................................................................................... 166 7.4 Recommendations ........................................................................................................ 167 7.5 Suggestions for further research .................................................................................. 168 REFERENCES ..................................................................................................................... 169 APPENDICES ...................................................................................................................... 195 Appendix 1: Interview guide for stakeholders ................................................................... 195 Appendix 2: Focus Group Discussion Guide..................................................................... 200 Appendix 3: Household Questionnaire .............................................................................. 201 Appendix 4: MFI Questionnaire ........................................................................................ 219 University of Ghana http://ugspace.ug.edu.gh xi LIST OF TABLES Table 3.1: List of Regions, districts, and communities selected and number of selected Households ............................................................................................................................... 75 Table 3.2: Description of Variables to determine behavioral intention and willingness to pay .................................................................................................................................................. 83 Table 4.1: Characteristics of MFI’s ......................................................................................... 89 Table 4.2: Maximum likelihood estimates of the Cost function .............................................. 90 Table 4.3: Cost efficiency level by region ............................................................................... 91 Table 4.4: Loans per savings Ratio .......................................................................................... 91 Table 4.5: Determinants of inefficiency .................................................................................. 92 Table 5.1: Demographic characteristics of respondents .......................................................... 99 Table 5.2: Descriptive statistics for health behavior .............................................................. 102 Table 5.3: Willingness to pay by district ............................................................................... 103 Table 5.4: Amount Households are willing to pay by district and place of residence .......... 104 Table 5.5: Binary Logistic Regression on Factors that Influence participation .................... 106 Table 5.6: Tobit regression estimates for Willingness to Pay by region and combined ........ 110 Table 5.7: Households health insurance Intention and behavior by District ......................... 114 University of Ghana http://ugspace.ug.edu.gh xii LIST OF FIGURES Figure 2.1: Determinants of Willingness to Pay for health insurance through MFIs and their effect on improved health financing. ....................................................................................... 46 Figure 3.1: Map of La-Dadekotopon Municipality.................................................................. 63 Figure 3.2: District Map of Shai-Osudoku .............................................................................. 66 Figure 3.3: Map of Tamale Metropolitan Assembly ............................................................... 69 Figure 3.4: Map of West-Mamprusi District ........................................................................... 72 University of Ghana http://ugspace.ug.edu.gh xiii LIST OF ABBREVIATIONS ACCION AS ATM ALB ABORROWERS Americans For Community Co-operation In Other Nations Asset size Automated Teller Machine Average Loan Balance Number of Active Borrowers CHPS CGAP CPB CSO Community-based Health Planning Services Consultative Group to Asist the Poorest Cost Per Borrower Civil Society Organization DEA Data Envelopment Analysis EUT ERP Expected Utility Theory Economic Recovery Programme GAMC GDP GHS GIFMIS GSS GOG GLP Ghana Association of Microfinance Companies Gross Domestic Product Ghana Health Service Government Integrated Financial Management Information System Ghana Statistical Service Government of Ghana Gross Loan Portfolio HF HI HIV Health Financing Health Insurance Human Immunodeficiency Virus IGF ILO Internally Generated Funds International Labour Organisation University of Ghana http://ugspace.ug.edu.gh xiv IMF International Monetary Fund JICA Japan International Co-operation Agency LaDMA LMICs La-Dadekotopon Metropolitan Assembly Low and Middle-Income Countries MDG’s MOH Millennium Development Goals Ministry of Health NHIA NHIS NHS NGO National Health Insurance Authority National Health Insurance Scheme National Health Service Non-governmental Organization OXFAM Oxford Committee for Famine Relief PAR POS Portfolio at risk Point of Sale SDG SEWA SFA SHI SAVINGS Sustainable Development Goals Self Employed Women’s Association Stochastic Frontier Approach Social Health Insurance Savings Portfolio TC TPB Total Cost Theory of Planned Behavior UHC USAID Universal Health Coverage United States Agency for International Development WTP WHO Willingness to Pay World Health Organization University of Ghana http://ugspace.ug.edu.gh 1 CHAPTER ONE INTRODUCTION 1.1 Background The world over, the health status of people has improved tremendously because of improvements in the provision of healthcare since the 1950’s (Allen, 2019). This increase has been facilitated especially by globalization, promoting the circulation of health technologies all over the world (Dilger & Mattes, 2018). All the major indicators to measure global health such as life expectancy, maternal mortality and child mortality have seen major improvements (WHO, 2020). The World Health Statistics (2020) and Population Reference Bureau (2021) report that, globally life expectancy, has increased from 66.5 years in 2000 to 73 years in 2018, while out of the twenty-nine health related indicators reported under the SDG, twenty-four have seen improvements (PRB, 2021 and WHO, 2020). However, Low and Middle-Income countries (LMICs) continue to lag behind in adequately providing for the health care needs of their citizens, and large disparities in overall health outcomes continue to be observed between developed and developing countries (WHO, 2020). Consequently, health care provision remains a core developmental issue on the agenda of many international development institutions like the World Health Organization, United Nations, World Bank, the Commonwealth among others (Kumar, 2013). International initiatives such as the Millennium Development Goals (MDG’s) had three of its targets focusing on health care whiles its succeeding Sustainable Development Goals (SDGS) is designed to consolidate the health-related gains that were made under the MDGs with universal health coverage as a main target (Kumar et al., 2016). Health financing is identified as a very important if not the most important component in meeting all health-related goals (WHO, 2005). This realization, coupled with the dominance of user charges and the University of Ghana http://ugspace.ug.edu.gh 2 widespread nature of voluntary community health insurance schemes from the 1970’s and 80’s moved health financing up on the agenda of health policy discourse once again (McIntyre, 2007). The “Sustainable health financing, universal coverage and social health insurance’’ resolution passed in May, 2005 by WHO member states and the Abuja Declaration are just a few of the many interventions, that have been proposed to encourage member states to put in place health financing systems that will ensure that their citizens have and can afford the best health care without pushing themselves into financial difficulties (WHO, 2010). These initiatives among others have increased the number of resources going into the financing of health care. Globally, about US$8.3 trillion was spent on health in 2018 (Vrijburg & Hernandez-Pena, 2020) and this is projected to increase to US$20 trillion by 2040 (Dieleman et al., 2018). The different sources of finance, that is, public, private, aid, all provide a complex financing space, which has several implications on “who pays for what, who gets served and what kind of service is enjoyed’’ (McIntyre, 2007). No single path of financing has been found to be the magic bullet because the different historical, social, cultural and economic context of countries affects the outcome of the various financing strategies (Gottret & Scheiber, 2006). Though much of the issues that have been raised on health systems can be traced to health system financing, most developed countries have managed to finance the health care needs of their populations through Social Health Insurance (Thompson, Foubister & Mossialos, 2009). The challenge that still remains for them is how to control health care cost (Thompson et al., 2009 and Pencheon, 2013). Developing countries on the other hand, are still battling with how to provide basic healthcare services for all citizens and at the same time control high health care expenditure (Saleh, 2013). This makes the ability to collect enough revenue and financial sustainability issues very prominent among the challenges developing countries face in providing health care (WHO, 2010). University of Ghana http://ugspace.ug.edu.gh 3 The disease burden of Africa continues to be higher than that of other regions of the world (Gouda et al., 2019) and yet, Africa, contributes only 1% of health spending globally (Vrijburg & Hernandez-Pena, 2020). The share of GDP expenditure on health in Low- and Middle-Income Countries (LMICs) in 2018 was 5.41% (WHO, 2020) on average with most countries not achieving the Abuja Target of 15% (Burke & Sridhar, 2013). Government share in total health expenditure continues to dominate in most developing countries with the private sector not playing much of a big role in financing health. On average, about 33.15% of the expenditure on health comes from the governments in LMICs (WHO, 2020). Out of pocket expenditure at the point of service on average, accounts for about 36.65% of the household expenditure on health in LMICs (WHO, 2020). This shows that out-of-pocket expenditure remains high with the tendency to push poor households into future impoverishment through catastrophic payments. The inability of most of the poor to pay out of pocket at the point of service, puts the focus back on community and social health insurance schemes, as a good health financing strategy, to counter the negative effects of out- of-pocket payments and to improve health care access and outcome for all (Spaan et al., 2012; Lagomarsino et al., 2012). Social Health Insurance and Community Health Insurance schemes are prepayment mechanisms that provide a more equitable access to health care and financial risk protection than other mechanisms like private health insurance (Mathauer et al., 2008 as cited in Fenny et al., 2018). However, success with social health insurance schemes in developing countries has been mixed (Han, 2012). Ghana like other countries in the Sub-Saharan region has gone through several health financing policies and mechanisms. Health care was free from independence, then to the payment of some fees from the 1970’s. These fees were negligible in comparison to the cash and carry system introduced in the late 1990’s. The Government of Ghana in 2003 finally University of Ghana http://ugspace.ug.edu.gh 4 settled on social health insurance as the surest way to achieve universal health care for all its citizens (Adisah-Attah, 2017; Addae-Korankye, 2013; Adamba, 2011). The health sector is financed mainly through government budgetary allocations, taxes, deductions from the Social Security and National Insurance Trust (SSNIT) contribution of formal sector workers and donor funds (Adisah-Atta, 2017). While several challenges have been identified with the health system in Ghana, inadequate financing remains the most consistent challenge facing the country (Adisah-Atta, 2017). Low household incomes and inadequate resource mobilization capacity accounts for some of these challenges (Adisah-Atta, 2017). Though the government remains the main financier, dedicating about 7% of total government spending to health in 2017, it is still below the Abuja target of 15% (WHO, 2018). This coupled with the decline in donor funding means that resources in the health sector are dwindling, threatening the sustainability of the NHIS (Adisah-Atta, 2017). Though Ghana has been touted as a success story when it comes to social health insurance in Africa, universal coverage has still not been achieved and the increasing population is likely to worsen the already fragile health system (Christmals & Aidam, 2020; Zhang et al., 2019: Van der Wielen, 2018). The Ghana Statistical Service (2013) estimates that Ghana’s population will reach 33.4 million by 2025 from its 2010 figure of 24.2 million. This increase in population and change in population structure has implications for the epidemiological transition of the country. The proportion of persons below 15 years constitute forty percent of the population whiles those in the 15 to 59 years group constitute over fifty percent of the population with the aged constituting about 8% of the total population (GSS, 2012). The percentage of the aged is expected to increase from 6.1% in 2010 to 8.6% by 2030 (Kpessah- Whyte, 2018). The disease burden is expected to shift with non-communicable diseases accounting for 43% of all deaths in Ghana (WHO, 2020; Ghana NCD Alliance, 2019). Due to the fact that non-communicable diseases are more expensive to treat, the current financing University of Ghana http://ugspace.ug.edu.gh 5 mechanisms will be put under pressure to increase resource mobilization in order to meet the health demands of a larger and older population (WHO, 2020; Van der Wielen, 2018; Adisah-Atta, 2017). The challenges associated with health financing in Ghana means that a large majority of the poor and the informal sector for that matter, still do not have access to appropriate health care when they need it (Fenny, Yates & Thompson, 2018; Kotoh & Van der Geest, 2016). For instance, Alhassan, Nketiah-Amponsah and Arhinful (2016) and Andoh-Adjei et al (2018) have reported poor quality of services and cost sharing as some of the challenges that have arisen as a result of the untimely release of funds to health care providers under NHIS, contributing to the financial challenges people face in accessing health care. One of the notable challenges facing the NHIS in its ability to manage its resources is cost escalation as a result of both demand and supply side moral hazard (Andoh-Adjei et al, 2019). At its inception, the NHIS reimbursed accredited facilities through the fees-for-service payment system. This led to an escalation of claims expenditure which led to the initiation of provider payment reforms in 2008 and the adoption of the Ghana Diagnostic-Related Groupings (G-DRG) (Andoh-Adjei et al, 2019). The G-DRG notwithstanding, out-patient utilization and claims continued to increase (NHIA, 2013). The NHIA after careful consideration decided to include capitation as the payment mode for outpatient services. Capitation was introduced to slow down escalating claims expenditure (NHIA, 2013) The solution to increasing health financing seems to lie in either increasing the investment in the health sector by cutting resources to other sectors like education, water among others or increasing taxes or health care user fees (Adisah-Atta, 2017; Deaton & Tortora, 2015). These solutions may however, be unpopular, and so recent debates have encouraged health policy analysts to go beyond the user-fee subsidized-premium debates to look for more innovative University of Ghana http://ugspace.ug.edu.gh 6 ways of mobilizing resources in order to provide quality health for all (MOH, 2015). Mobile money adoption and microfinance schemes are some of the avenues advocates claim can help to reach and include excluded populations (Leatherman et al., 2012). Microfinance seems to be a good option in Sub-Saharan Africa, especially, where the informal sector is concerned (Aron, 2015). This is because unlike Microfinance, health insurance has not found innovative ways of substantially bringing down the cost of services to levels that the poor can afford. Microfinance Institutions have traditionally assisted the economically active poor by providing financial-services, primarily credit, to help their income generating activities (Reinsch, Dunford & Metcalf, 2011). Micro-loans have supported millions of poor households in pursuing opportunities that would have otherwise been out of their reach (Churchill & McCord, 2012). According to Reed (2015), MFIs reach as many as 204 million clients worldwide. The vast social network MFIs have, their expertise in providing small loans and savings as well as their mission to ensure the financial sustainability of households puts them in a good position to facilitate health financing (Leatherman et al., 2012). This may help remove some of the challenges in seeking treatment and help to reduce the health shocks that jeopardize the already fragile economic status of poor people (Leatherman et al., 2012). Some MFIs have seen the need to respond to the effect of ill-health on the performance of their clients by providing health interventions such as health education, localized micro health insurance schemes with their services, without going out of their business and professional scope (Reinsch et al, 2011). Leatherman and Metcalfe (2012) found that where MFIs provided micro health insurance packages, it led to an increase in the use of health services. Notable examples of MFIs that have successfully provided financial products for health to their clients include Bank Rakyat University of Ghana http://ugspace.ug.edu.gh 7 Indonesia, Self Employed Women’s Association (SEWA), and GRAMEEN (Banerjee, Duflo & Hornbeck; 2014; Meghan, 2010). Due to economies of scale and increased outreach, MFI interventions tend to be cost effective (Lorenzetti et al., 2017). Reinsch et al (2011) in analyzing the cost benefits of five MFIs offering integrated programmes like microfinance and health insurance in 2009 found that, the average marginal cost was only US$0.29 per client and the average total net cost was only US$1.59 per annum per client served. This low cost was attributed to the already existing vast distributional reach of MFIs. A health financing system where people can borrow and save for health insurance, therefore, may lead to an increase in enrollment and revenue for the health sector and may present a more sustainable source of income. This is especially true in Ghana’s case where everyone is mandated to sign on to the NHIS but only about 3% of the resources for the NHIS comes from the payment of premium (Wang et al., 2017). 1.2 Problem Statement Ghana, like several other developing countries is challenged with how to effectively provide the right health financing option to its citizens. Efforts have been made since independence to finance and provide quality health care to citizens through the promulgation of several policies and acts. In 1971, the Hospital Fees Act was instituted but the fees were so low that it was negligible (MOH, 2015). During the period of economic recovery, the Hospital fees regulation was passed in 1985 which led to full cost recovery in 1992, popularly known as the cash and carry system (MOH, 2015). The social challenges associated with the cash and carry system led to the adoption of a social health insurance scheme. The National Health Insurance Scheme was implemented in 2003, the main goal of which was to remove the financial challenges that people faced in accessing healthcare in Ghana (NHIA, 2003). Exempt categories were created under the scheme in order to identify University of Ghana http://ugspace.ug.edu.gh 8 vulnerable groups and free them from paying premium. Subsequently, a free maternal health policy was implemented under the NHIS in 2008, to allow pregnant women to be covered under the scheme through pregnancy, delivery and three months post-partum (Twum et al, 2018). Aryeetey et al (2016) and Alhassan, Nketia-Amponsah and Arhinful (2016) report an increase in outpatient and in-patient services as a result of the NHIS. Dzakpasu et al (2012) also reported an increase in skilled attendance at birth in the Brong Ahafo region as a result of the free maternal care under NHIS. Indicating an increase in the use of biomedical services as a result of the NHIS. Notwithstanding all these efforts to improve health care by increasing access, coverage and improve the targeting of vulnerable groups, only about 38% of Ghanaians were enrolled on the NHIS in 2014, even though, about 80% of the Ghanaian population has ever enrolled on the scheme (Andoh-Adjei et al, 2018; Wang et al, 2017). Though the use of mainly tax funds under the NHIS ensures that health financing keeps up with economic growth, the revenue does not increase as coverage increases (Wang et al, 2017). Also, the scheme does not bring in enough resources through premiums, threatening the sustainability of the scheme (MOH, 2015). About 38.89% of all health spending in 2018 was from public sources with the private sector and out of pocket making up the rest (WHO, 2020). Financing of health in Ghana has seen a steady increase over the last few years though not in absolute terms indicating that as a percentage of GDP, health spending is losing out. Health expenditure as a share of GDP in 2014 was 3.6% and increased to 5.9% in 2015 whiles health expenditure as a share of general government expenditure was 7.1% (World Bank, 2017; World Bank, 2018). Though Ghana is doing fairly well when compared to other countries in the sub-region, the Abuja target of 15% has still not been achieved (MOH, 2015). The private sector does not hold much promise since much of the revenue from the sector remains out of University of Ghana http://ugspace.ug.edu.gh 9 pocket with only 10% of the revenue in that sector coming from household premiums (MOH, 2015). As a result of Ghana’s status as a lower middle-income country, changing financing structure and new actors on the health financing scene, donor funds have greatly reduced making the NHIS the main financier of public health care even though it is highly subsidized (MOH, 2015). Premiums paid by households, which is supposed to form a substantial percentage of the fund, is low. Workers from the informal sector, make up about 93% of the active labor force in Ghana (GSS, 2012), but only form about 29% of NHIS membership. Out of the 34% of the population on NHIS, only about 10% pay contributions to the scheme with more than 60% under exemption (Alhassan et al, 2016; Burke & Sridhar, 2013). Though the premiums for this sector are low ranging between GHS 7.2 to GHS 48, the fees people pay as premium to get their NHIS cards only covers about 5% of the cost of NHIS services (Kotoh, Aryeetey & Geest, 2018). Also, though the NHIS is highly subsidized, some poor people abandon their membership because of the inability to make the annual lump sum premium payments (Kotoh et al, 2018; Fenny et al., 2016; Kusi et al., 2015; Amporfu, 2013). As a result, the NHIS only covers about 2% of the Ghanaian population considered poor (Fenny, Yates & Thompson, 2018). This shows that the larger section of those considered poor are paying out of pocket for health care. This leads to a culture where people just refuse to patronise formal health care services, to free them from both the direct and indirect cost of using such services (Meghan, 2010). Out of pocket payment stood at 37.69% of total health expenditure in 2018 despite the NHIS (World Bank, 2020). This is above the 20% recommended by the WHO (WHO, 2010). The health system is unable to generate enough resources to meet expenditure needs, which leads University of Ghana http://ugspace.ug.edu.gh 10 to challenges with payments and reimbursements. Delayed payments for services rendered by health institutions leads to some health centers refraining from joining the NHIS, providing substandard services or holding back services to NHIS card holders (Sodzi-Tettey et al., 2012; Awoonor-Williams et al., 2016). As a result, some people may be card holders but still unable to access care because of geography or other related limitations and this also increases out of pocket payments at the point of service (WHO, 2012). All these show that health insurance in general and the NHIS in particular has not been brought down to levels that people found in the lowest socio-economic quintiles (poor) can afford and be willing to pay without facing financial challenges (Kusi et al, 2015). This also indicates that cost of services and premium continue to pose challenges to enrolment and retention (Amporfu, 2013; Jehu-Appiah et al., 2011) and has not been brought down to levels that poor people can pay unlike Microfinance. Low enrolment, retention and revenue mobilization makes the health financing structure of the NHIS unsustainable in its current form (Alhassan et al, 2016). Several attempts have been made by the MOH and NHIA to increase revenue collection through outreach programmes such as visiting churches, markets and rural areas to register people and the introduction of a mobile app for the renewal of subscription on the NHIS. The introduction of the Government Integrated Financial Management System (GIFMIS), in 2010 by government was also aimed at ensuring financial efficiency and accountability by reducing the leakages and financial mismanagement. In spite of all these proven efforts to improve revenue mobilization for the health sector, resources for the sector are still inadequate making the operational and financial sustainability of the NHIS in particular a major concern (Alhassan et al, 2016). Calls have been made for a more innovative approach to increasing revenue especially from the informal sector (WHO, 2010). University of Ghana http://ugspace.ug.edu.gh 11 Microfinance institutions have successfully broken the barriers associated with reaching under-served populations by allowing people in the informal sector especially, to save and borrow smaller amounts of money at their own convenience (Lorenzetti et al, 2017). Theory predicts that getting access to credit and savings facilities by the poor helps them pull themselves out of poverty (Marmot et al, 2008). Access to financial services allows households to smooth consumption and reduce the impact of sudden income related issues like ill health (Beck, 2015). Microfinance serves as a platform that has become important in the ability of poor households to withstand financial shocks (Freedom from Hunger, 2014). The different models used by MFIs to deliver their products ensure a constant engagement with clients whether individually or through groups. The doorstep methodology they use gives them access to not only the informal sector, but also very rural areas in the country. The Microfinance model should therefore theoretically facilitate access to health care among poorer populations (Mtamakaya et al, 2018). Micro-finance institutions have facilitated health financing by offering emergency health loans, health savings products and microinsurance (Megan, 2010). Though MFIs have typically provided savings and credit facilities, they have expanded their scope to include health education, health insurance and linkages to other services (Ruducha & Jadhav, 2018). Recent studies have cited the positive effects of MFIs on the health indicators such as women’s health, child mortality, HIV-related issues and general health knowledge (Kennedy et al, 2014; Arrivillaga & Salcedo, 2014; Malley & Berk, 2014). However, the integration of health-related services in Microfinance operations has been limited. One reason for this limitation is the ability of MFIs to operate efficiently (Leatherman, et al, 2012). Though MFIs have a dual objective (social and financial), recent transformation in the sector is pushing MFIs towards the achievement of financial efficiency University of Ghana http://ugspace.ug.edu.gh 12 as a requirement to stay sustainable. As a result, questions have been raised about the efficiency of Microfinance institutions and their ability to reach more people in the poorer segments of the population (Hermes et al, 2011). Though empirical studies have been mixed on the possible trade-off between efficiency and outreach, most of them point to the fact that the drive towards efficiency reduces the ability to reach poorer people because it is more expensive to serve them (Bharti & Malik, 2022; Gupta, 2014; Cull et al, 2011). This study addresses the challenge of revenue mobilization under the NHIS through premiums by focusing on the current structure of the NHIS and its ability to partner with MFIs to increase revenue mobilization from the informal sector, the role that MFIs are already playing in health financing and the willingness of the people to participate and pay for health insurance through MFIs and the implications on revenue mobilization and consequently the sustainability of the NHIS. The study contributes to the health financing and microfinance literature in two ways: first it gives evidence of how an innovative model like the microfinance platform can be used to improve health financing. Secondly, it also adds to the debate on the efficiency of MFIs and its effect on outreach. 1.3 Research Questions and Objectives In light of the foregoing, the research questions to be answered by this study is: ➢ What role can MFI’s play to increase health financing in order to reduce health risk in Ghana? ➢ What is the efficiency level of MFIs? ➢ What are the factors influencing household’s willingness to participate and pay for health insurance. University of Ghana http://ugspace.ug.edu.gh 13 1.3.1 Objectives The main objective of this study is to examine the role that MFIs can play in reducing health risk in Ghana. Specifically: ➢ To conduct a cost efficiency analysis of Micro-finance institutions in their current operations. ➢ To examine the factors that influence the participation of households in paying for health insurance through MFIs. ➢ To examine the role of MFIs are playing in the health financing structure in Ghana. 1.4 The relevance of the Study Many studies have been done on health financing in Ghana though much of that is concentrated on the sources and dynamics of funding and the nature of the structure of financing. Studies that have been done on the Social Health Financing framework (the NHIS) have also mostly concentrated on issues of policy and practice, the challenges and successes of the scheme. Though innovative techniques of improving health financing have been advocated, not much has been done on how some of these strategies will actually work. This gap in literature is especially evident in West Africa when compared to Eastern African countries like Kenya where studies have been done on the effects of microfinance interventions on health insurance uptake and outcome. This study will therefore add to the limited number of studies that are directed at understanding how an innovative strategy like the Microfinance platform can be used to improve health financing. The study is novel in the Ghanaian context in that, no study has been done on the use of MFIs as a strategic partner in offering NHIS to people in the informal sector. Also, no study has looked at the cost-efficiency of MFIs in Ghana using a cross-sectional data. This study will also contribute to the formulation and implementation of policy on improving access to and University of Ghana http://ugspace.ug.edu.gh 14 cost of the NHIS in Ghana by helping local authorities in designing and implementing a health financing policy that is relevant to our context as they work towards the Sustainable Development Goals on health. A Microfinance incorporated NHIS design will help policy makers to reach the informal sector, improve revenue collection from that sector in the form of premium and increase their access to healthcare. 1.5 Organization of the Study The study is organized in seven chapters. Chapter one gives a background to the study. The second chapter gives the theoretical background of the study and reviews literature on relevant areas such as the determinants of health insurance uptake globally and specifically in Ghana. It also situates Microfinance as an alternative way of reaching the informal sector for improved health financing. It looks at the debates on a possible trade-off between financial sustainability and social outreach. This chapter concludes with a conceptual framework that summarizes the theoretical and empirical reviews. Chapter three outlines the regional and district profiles of the study site(s). It also documents the methodology employed in the study. This includes the sampling, methods of data collection and the instruments to be employed. Chapter four presents a cost efficiency analysis of a cross-section of MFIs in their operations and its implications. Chapter five identifies the determinants of health insurance uptake and the willingness to pay for an MFI facilitated health insurance. In chapter five, the role of MFIs in the health financing structure from actors in the sector is examined and discussed. The last chapter summarizes the major findings, draws conclusions, gives policy recommendations and suggests areas for further research. University of Ghana http://ugspace.ug.edu.gh 15 CHAPTER TWO LITERATURE REVIEW, THEORETICAL AND CONCEPTUAL FRAMEWORK 2.1 Introduction The chapter explores the theoretical and empirical literature on health financing in Ghana, the determinants of willingness to pay for health insurance and the role of microfinance institutions in bridging the social inequality gap in access to healthcare. The chapter commences with the definition of the major concepts used in the study. Four theories that can help situate the debates on the role that MFI’s can play in health financing and the factors that determine WTP are presented. These are, the public choice theory, expected utility theory, theory of planned behavior and the concept of efficiency in Microfinance. The chapter then goes on to provide a background of the Ghanaian situation by giving an overview of the health sector in Ghana. The various health financing options available to countries is described. The historical development of health financing in Ghana is given to situate the health financing reform journey of Ghana since independence. The chapter goes on to review works on insurance uptake in general and the factors that determine people’s willingness to participate and pay for health insurance. Whiles it is unarguably an established source of funding; several factors may affect the decision to participate and pay for it, thereby affecting its viability as a funding option. The chapter then looks at the body of works that show the changing role of microfinance institutions and the linkages between the microfinance sector and the financing of health care. It looks at arguments around the sustainability of Microfinance institutions and the achievement of their social outreach goals, the possibility of a trade-off and what influences the efficiency of MFI’s. A conceptual framework is presented at the end of the chapter to give a figurative University of Ghana http://ugspace.ug.edu.gh 16 presentation of the relevant theories, concepts and variables in the study and how they relate to each other. 2.2 Definition of key concepts Health financing (HF) is the “function of a health system concerned with the mobilization, accumulation and allocation of money to cover the health needs of the people, individually and collectively, in the health system”; the purpose “is to make funding available, as well as to set the right financial incentives to providers, to ensure that all individuals have access to effective public health and personal health care” (WHO 2000). This definition was further expanded in 2007 to include the effect on poor populations: “A good health financing system raises adequate funds for health, in ways that ensure people can use needed services, and are protected from financial catastrophe or impoverishment associated with having to pay for them. It provides incentives for providers and users to be efficient” (WHO, 2005). Health Insurance (HI) is insurance “coverage that provides for the payments of health benefits as a result of sickness or injury. It includes insurance for losses from accident, medical expenses, disability, or accidental death and dismemberment” (Pitacco, 2014). Social Health Insurance (SHI), is a form of health finance that manages the health care of people by pooling the risk of people as well as the contributions of populations, businesses and the government on the other hand (WHO, 2010). Micro-finance, according to ACCION International (2018). is “banking and/or financial services targeted to low- and moderate-income businesses or households, including the provision of credit”. Bhanot et al (2012) also defines it as the process through which vulnerable groups are given access to affordable financial services. In other words, it is “financial services for poor people, who often lack access to tools most of us take for granted University of Ghana http://ugspace.ug.edu.gh 17 – a debit card, a savings account, basic insurance or even a nearby bank branch” (Abaluk, 2012). Willingness to Pay (WTP) is the maximum price at which a consumer is willing to pay for a particular good or service. This means that no matter the price of the good or service and where it is coming from the consumer is not willing to pay above the stated price (Wolf et al, 2020). Cost-efficiency is the minimum cost incurred by a firm in the production of a certain level of output given a certain input price (Abdulai and Tewari, 2016). Financial Sustainability is the ability of an MFI to generate enough income to cover all its expenses and have something left to generate its growth without dependance on subsidies (Ayayi and Sene, 2010) Social Outreach is the depth and breadth of the range of services provided by a microfinance institution (Rao and Fatimo, 2014). The depth refers to the poverty levels of clients whiles the breadth takes account of the scale of an MFI’s operations. 2.3 Theoretical Review Several social and economic theories explain the decision to provide or subscribe to a health insurance cover and the factors that determine willingness to pay for a particular type of health insurance. However, for the purpose of this study, four will be utilized. The public choice theory focuses on the ability of the state to collaborate with the private sector and in this case the Microfinance sector to provide a social health insurance scheme whiles the expected utility theory and the theory of planned behavior focuses on the determinants of WTP for health insurance. The concept of efficiency in Microfinance provides the context in University of Ghana http://ugspace.ug.edu.gh 18 which MFIs can be expected to play a facilitating role in health financing without moving out of their core business. 2.3.1 Public Choice Theory The work of government is to manage communal properties or public goods in a manner that will benefit everyone through the formulation of public policies. Samuelson (1954) defines a public good as any good “which all enjoy in common in the sense that each individual’s consumption of such goods leads to no subtraction from any other individuals’ consumption”. In other words, the use of the good does not exclude others from also using it. Public choice policy hinges on the premise that actors in the political space, be it the government, voters, politicians, bureaucrats are not free from bias in their work for the public good, but that aside their interest in the collective welfare; they have their own self-interest as the major motivating factor (Wiseman, 1990). This self-interest could be the influence of powerful interest groups. In the provision of social health insurance therefore, governments may be interested in meeting the healthcare needs of the population however, other interests like that of actors like the donor community could influence how this policy is implemented. Another premise of the public good theory is that the contributions of other actors to the provision of a public good is allowed and actors are willing to cooperate (Liebe et al., 2011). This willingness to co-operate is hinged on ideas of fairness, reciprocity and the kind of actors in that space (Ostrom, 2000). According to Ostrom, some of these actors are “conditional actors” who adjust their behavior and contributions based on how others in the space behave. Tied in to this willingness to contribute is also the concept of trust. Ostrom (2000) posits that those who trust others to contribute to the provision of a public good or service tend to think that they are not the only ones contributing and so much more willing to contribute. University of Ghana http://ugspace.ug.edu.gh 19 Social health insurance, being a public good, is financed from the public purse, however, it must not be assumed that the government’s only interest is to ensure financial health protection of its citizens, but there may be other compelling reasons, which may alter the implementation of social health insurance as a strategy. Being a public good does not mean that only government must implement it, private service providers can also be contracted or used as a platform to deliver it to the populace (Anomaly, 2015). Other actors are willing to cooperate once they trust the motives of government and see their contribution as a social responsibility to the improvement of the wellbeing of people. In such an instance, regulation and enforcement of protocols are important to the success of the collaboration between the public and private sectors (Riviere-Cinnamond, 2004). Through the Public choice theory, this study examines the role of the various actors in the health financing space and what others in the space think the role of MFI’s can be. It also situates the role the MFIs themselves think they can play and the success factors to such a collaboration. 2.3.2 Expected Utility Theory Neoclassical economic theories have been an important descriptor of human behavior when it comes to decision-making. The Consumer Utility Maximization theory for instance posits that rational consumers who are well informed of market conditions make decisions or choices that maximize their utility subject to the price of the good, their income and preferences (McFadden, 1974). The quantity of goods that a rational consumer buys is influenced by the changes in price of that good and the changes in the available income of the consumer (Begg et al., 2000). As any normal good, health insurance has a positive inelastic relationship with income. The higher the price of premium, the lower the demand and the lower the price of premium as opposed to other alternatives, the higher the demand (Begg et al., 2000). University of Ghana http://ugspace.ug.edu.gh 20 This implies that the rich are likely to insure because they are price insensitive. They place more value on the quality of the services they consume and so will still consume insurance irrespective of the price change unlike poor households. Though this theory forms the basis of most economic theories, it has been criticized by behavioral economists who mostly agree that real people do not always make rational decisions with utility maximization in mind but their decisions are subject to biases and made under conditions of uncertainty, leading to a deviation from the norm (Cameron et al., 1988). Health insurance decision, according to Cameron et al (1988), is therefore based on uncertainties surrounding a consumer’s future health status and the rewards expected from uptake. Behavioral theories that describe decision-making under uncertainties such as Expected Utility better explain insurance uptake decision (Schneider, 2004). The Expected Utility Theory (EUT) was first espoused by Bernoulli (1738) but given more definition and mathematical foundation later by Von Neumann and Morgenstern (1944). The theory states that “the decision maker chooses between risky or uncertain prospects by comparing their expected utility value’’ (Mongin, 1998). The theory assumes that consumers are risk averse and so more likely to take less risky options that also has little impact on their resources. In other words, consumers do not always pay for a good in order to maximize the amount of goods they get in return but rather pay in order to maximize the expected satisfaction and value that good will bring. This is because as at the time of buying an insurance cover, they do not know whether they will be ill in future or not and how much it will cost them at that time to receive treatment. Under this theory, the demand for insurance is based on the decision to pay premium in order to enjoy uncertain benefits and the uncertainty of loss when not insured (Hsaio & Shaw, 2007). The theory makes the assertion that the higher the level of risk aversion the more likely to purchase insurance. Closely related to this theory is the Prospect theory. Despite the ability of the economist to explain University of Ghana http://ugspace.ug.edu.gh 21 what people value with economic theories like the Expected Utility theory, insurance uptake is still very low. As a result, psychologist, have tried to use attitude behavior paradigms like the Theory of Planned Behavior (TPB). The difference between economic theories like Expected Utility and socio-psychological theories like TPB is that, in economic theories, preferences are based on choices made between alternatives while psychologist use attitude to ascertain the desirability of a single action (Liebe et al., 2011). 2.3.3 The Theory of Planned Behavior (TPB) The theory of Planned Behavior is an extension of Ajzen and Fishbein’s (1980 and 1975) theory of reasoned Action. This theory has been used to understand the way people initiate and sustain certain voluntary health behaviors (Ajzen, 1991). The theory posits that there is a strong relationship between one’s intention to engage in an activity or behavior and the actual engagement in that behavior. This intention is further influenced by several psychosocial determinants such as “attitudes” (subjective assessment of the outcome of behavior), “subjective norms” (perceived social pressure to perform the behavior) and “perceived behavioral control” (perception of control over the performance of the behavior). Attitudes, subjective norms and perceived behavioral control are all part of the characteristics of human behavior and has the potential of changing overtime. Despite the extensive use of the TPB in predicting health behavior (Moshi et al., 2020 Nosi et al., 2014, Nosi et al., 2017, Rochelle et al., 2015), little has been done on its applicability to determining health insurance uptake. This is one of the gaps that this study seeks to fill. The use of the variables of this theory in this study is important to help us explain the internal factors, outside socio-economic and demographic factors and how they also influence continuous renewal of voluntary health insurance subscription. University of Ghana http://ugspace.ug.edu.gh 22 2.3.4 The concept of Economic efficiency in Microfinance Microfinance started on the basis of microcredit in the early 1970’s. The concept of Microfinance was first developed at the Microcredit summit of 1997 (Rahman, 2004). In theory, it emerged as an important bridge between the formal banking system and informal money lenders (Weijermars, 2014). This was on the heels of success in Muhammed Yunus’ experiments in Bangladesh in the 1970’s (Thai-Ha, 2020). Muhammed Yunus was the first to institutionalize the Microfinance approach through the establishment of the Grameen Bank in 1976 (Encyclopedia Britannica as cited by Thai-Ha, 2020). Microfinance is expected to transform the lives of people in the informal sector who do not have collateral and are not wealthy enough to be engaged by the formal banking institutions. Microfinance was expected to facilitate the social and financial inclusion of non-wealthy people (Armendariz de Aghion & Morduch, 2010; Milana & Ashta, 2020). By providing access to small loans, Microfinance provides the entrepreneurial poor with the ability to start a business or to expand an existing one thereby helping to lift them out of poverty (Nogueira et al., 2020). In the classical Micro-credit model, four common features could be identified (Armendariz de Aghion & Morduch, 2010). The first is group lending through joint liability of group members. This feature was to reduce issues of adverse selection and moral hazard among clients. It assumed that clients will serve as checks on their colleagues by encouraging the right use of the loan and also facilitate repayment (Al-Azzam et al., 2012 and Atanasio et al., 2011). Secondly, clients were expected to make frequent repayment of loan installment without grace period. It is assumed that such frequent payments will lead to self-discipline which some clients lacked. Thirdly, access to future loans was conditioned on successful and quick payment of the current loan. Lastly, the target was mainly women, who had been traditionally sidelined in the formal banking system. Over the years however, the microfinance industry has evolved from the original concept of just giving small loans to University of Ghana http://ugspace.ug.edu.gh 23 poor entrepreneurs (Thai-Ha, 2020). This revolution also shifted focus from subsidy-driven micro-credit schemes to self-sufficient microfinance institutions (Robinson, 2001). The success of some Microfinance institutions in being profitable and the reduction in donor- financed microfinance led to increased calls for MFIs to be profitable (Milana & Ashta, 2020). As a result, average loan sizes have increased, individual lending has replaced group lending and the competition between MFIs has also increased (Milana & Ashtra, 2020; Ashta, 2016). This increase in commercialization has led to fears that MFIs may not be able to serve the poor who are their primary target (Hermes et al., 2011). There has therefore been pressure on MFIs to achieve efficiency in order to play their dual role of social outreach and financial sustainability. Efficiency in this context is the ability of an MFI to allocate resources in such a way as to produce the maximum output and to reach the underserved populations especially with the much-needed financial service (Balkenol, 2007). Efficiency can be described in a technical or an allocative dimension (Farrell, 1957). In Microfinance, technical efficiency is estimated by studying how well an MFI is able to allocate its resources such as staff, assets and subsidies in order to produce valued services to a large number of clients and especially the poor (Kumar & Sensamar, 2017; Annim, 2010; Balkenhol, 2007). Cost efficiency is defined by Abdulai and Tewari (2016), “the minimum cost incurred by a firm to produce some level of output given input prices”. Being efficient is important because it helps you to keep your cost low whiles freeing up resources for investment that will help the institution to expand (Kumar & Sensamar, 2017). In other words, an efficient MFI it is assumed, is able to concentrate on innovative products and ways of delivering the products to clients. This will reduce the unit cost of production because of economies of scale and will in turn facilitate the ability to reach more clients, especially deprived ones. Though MFIs have a double bottom-line (social and financial goals), it has been debated widely how these two goals affect efficiency. While University of Ghana http://ugspace.ug.edu.gh 24 several studies have discussed how social responsibility goals affects financial efficiency negatively, others, have found evidence that suggest a positive relationship between the two (Bharti & Malik, 2020; Mia et al, 2019; Morduch, 2000; Otero & Rhyne, 1994). 2.4 Overview of the health sector in Ghana Ghana’s health sector is on a mission to achieve universal health coverage. The health sector has seen improvements over the years with increasing economic growth (Adisah-Atta, 2017). This growth is in tandem with growth experienced in the health sectors in other African countries (Saleh, 2013). For instance, maternal mortality declined from 350 per 100,000 in 2013 to 319 in 2015 against 587 per 100,000 live births for Mali (Adua et al., 2017). Ghana is currently in a demographic transition, which has implications for the epidemiological and nutritional wellbeing of the population. The structure of the economy is a young one coupled with increasing life expectancy. World Bank (2011) estimates that by 2030, there will be more 64-year-olds in Ghana than when compared to 2010. Whiles the communicable diseases burden is reducing, Ghana is seeing a rise in non-communicable diseases such as diabetes, cancer and cardio-vascular diseases (Saleh, 2013). The demographics and epidemiology changes being experienced will put pressure on the existent health system and resources (Adisah-Atta, 2017). The Ministry of health is the government organization responsible for the provision and management of the health care needs of Ghanaians. The Ministry is mandated with the formulation of health policy, monitor, evaluate and mobilize resources for the health sector. Prior to the enactment of an Act of parliament, Act 525, the MOH was also responsible for the promotion, prevention, providing curative and rehabilitative health care. However, that function after the enactment of Act 525 has been delegated to the Ghana Health Service and Teaching hospitals, making it the implementer of public sector health care delivery. This Act University of Ghana http://ugspace.ug.edu.gh 25 was to decentralize, strengthen and streamline health care delivery in Ghana. Ghanaians access health care from both public and private providers. The public sector cares for majority of the health needs of the Ghanaian population, whether at the primary, secondary or tertiary level. Making the Government the main health care provider in Ghana, owning about 56.92% of the health facilities in the country (GHS, 2018). The health care system operates on a multiple-leveled, decentralized system. These are the National level, regional and district level, health facility and provider level and the community and patient level (Amoah, Nyamekye & Owusu, 2021). Whiles most African countries have a three-tiered healthcare delivery system, Ghana, operates a four-tiered pyramidal health care system under central national control. The regional hospitals are at the apex of the pyramid, depending on the district hospitals for their patient load. The regional hospitals deliver curative services. The district level provides leadership to the community health centers and health post/health stations. This makes the district level very important in the management of the Public Health Care system (PHC). The health centers at the sub-district level provide both preventive and curative services. The sub-district level provides outpatient services to relieve the district and regional hospitals of all but their most specialized functions. The community and household level are at the base of the pyramid and caters for basic services such as the treatment of minor injuries (Bruce, 2003). The introduction of the Community-based Health Planning and Services (CHPS) compounds has facilitated some interventions at the local level. The PHC principle linking these various levels of care is to try to treat people as close to their homes as possible and treating minor issues at the lower levels in order to allow higher level facilities play their specialized roles (Jahn and De Brouwere, 2001). University of Ghana http://ugspace.ug.edu.gh 26 The Private Health care sector provides about 35% of the health services in the country and is mainly focused on general medicine and the provision of in and out-patient services (Saleh, 2013). The private sector is playing a crucial role of bridging the gap in the provision of health care in Ghana and about 51% of Ghanaians use private health care facilities when ill (Morrison, 2016 as cited in the Ghana National Health Care Quality Strategy, 2016). According to the Ghanahospitals (2020), there are 1,356 private hospitals in Ghana. However, private hospitals are mostly located in urban areas, are more expensive than public institutions and totally absent at the local community level. Kumasi, Accra and Tema are the localities most populated with private health facilities (Pharmaccess, 2016). The main challenge for the Private health care sector has been the quality of care and services offered in these facilities especially for those situated in low-income areas (Adewoyin et al., 2018). Though Ghana’s healthcare system is well developed, it faces several challenges. Notable among the challenges is the standardization, implementation and monitoring of policies. Policies are sometimes well drawn but implementing it and monitoring to ensure that the right things are done is sometimes inadequate (Saleh, 2013). 2.4.1 Health Financing Mechanisms There have been intense debates on the best form of health financing strategy that countries could adopt. The consensus is that, whatever the strategy, it should be sustainable, efficient and effective in caring for the needs of all segments of the population (MOH, 2015). This ability to design, implement and operate a health financing system that sees to all the health needs of all the various segments of the population is the challenge that most countries face (Addae-Korankye, 2013). Health systems aim to impact wellbeing through three main functions whether stated explicitly or implicit in policy documents. These functions are raising revenue, pooling risk and purchasing services (Kutzin, 2001 as cited in Stabile & University of Ghana http://ugspace.ug.edu.gh 27 Thompson, 2014). The decision on who to cover, what services to cover and how much of the cost of service to cover is present in all these functions. There are three models of health insurance financing: the classical social health insurance, Community or Mutual Health insurance and private health insurance. These models take five basic forms. These are: general taxation, social health insurance, voluntary or private health insurance, out-of pocket payments and donor funds (Onwujekwe et al., 2019; Szigeti et al., 2019). Social health insurance is sometimes separated from community-based health insurance but here, it has been put together because they have the same basis except that social health insurance is mandatory in principle. Generally, developing countries have the tendency of depending on a mixture of financing options instead of depending on just one type of financing. The financing options adopted are usually dependent on how effective, efficient and equitable the strategy is and must appeal to the wider population (Addae- Korankye, 2013). General taxes are used to finance health care everywhere irrespective of the major source of funding (Onwujekwe et al., 2019). Health financing through taxation is very common in Europe and forms the main source of finance in several countries (Reeves et al., 2015). Countries such as Finland, Norway, Sweden, Belgium, Bulgaria, Denmark, Italy and the United Kingdom have been known to use general taxation as the main funding source of their health care systems (Addae-Korankye, 2013). These revenues are collected through income tax, value added tax, import and export duties, corporate tax among others. When taxation is adopted as a model, health care services are paid for through the central government. Taxation as a source of financing health care is known to be stable and reliable (Reeves et al., 2015). University of Ghana http://ugspace.ug.edu.gh 28 For instance, Reeves et al (2015) in their estimation of the relationship between tax revenue and its effect on health care found that countries that are able to get much revenue from taxes spend more on healthcare. However, studies have also found that it has the tendency to be affected by public sector budgetary negotiations and government focus (Addae-Korankye, 2013). Stabile and Thompson (2014) therefore suggest that governments separate funds for financing health from other forms of public spending by earmarking funds for the health sector. The financing of health systems through taxes tends to redistribute income where the rich pay more in taxes than the poor. This system is found to be more equitable through income redistribution than Social Health Insurance (Wagstaff, 2010). Social Health Insurance policies are mandatory/voluntary contributions made to a common fund (Doetinchem, Carrin & Evans, 2010). Though the most common form of this type of insurance involves making contributions, there are some variations that are mostly dependent on the collection agents and the role that they play in the system (Stabile & Thompson, 2014). Whiles some countries like Ghana, Hungary contributes to a single common fund, others like France, Austria, and Czech contribute to either independent fund managers or a decentralized national fund system. Countries that have a social financing system usually use general taxation to cover the premiums of non-workers and the exempt (Szigeti et al., 2019). It is the contribution of government to ensure the financial sustainability of the scheme and hence the use of tax revenue (Doetinchem, Carrin & Evans, 2010). Advocates of Social Health insurance insist that this kind of funding is not subject to government interference and the administration and management of it is much more transparent because it involves independent bodies who make their own spending and budgetary decisions (Stabile & Thompson, 2014). University of Ghana http://ugspace.ug.edu.gh 29 By the medical savings account system, people pay a fraction of their income into a health account through which deductions are made when they fall ill. This type of insurance is not very common and is usually supplemented with other forms of insurance. The medical savings account is not for people with low incomes and so not a good mechanism to protect poor people against health risks when the need arises. This is very similar to private insurance, which is individual and voluntary. Private Health Insurance is usually employer sponsored or voluntary and so more popular in the formal sector. Private voluntary Insurance for the informal sector is rare and usually for high-income individuals (Wouters & McKee, 2017). With this system, you pay depending on the risk you pose. For instance, older people and sick people pay more than others. The duration of contract usually lasts for only one year. Private insurance does not account for much in the health care sector except in the United States where it contributes about a third of the total health financing (Rice et al., 2018). Though it’s contribution in some countries may be big, the total amount financed by the sector may be very small (Wouters & McKee, 2017). Out-of-pocket payment is the direct payment that a person makes at the point of service delivery. This is also popularly known as “cash and carry”. In other words, you pay for what you use. These services could be partially covered by health insurance or not covered at all. This system does not allow for cross subsidization between the rich and poor. The aim of out- of-pocket systems is to raise revenue as well as a way of achieving efficient allocation of health resources (Stabile & Thompson, 2014). Out-of-pocket payment is seen as a regressive health care financing method because both the poor and rich pay the same for health care services despite the disparities in their income and ability to pay (Akazili, 2012). Loans, grants and donations in health financing are usually in the form of bilateral and multilateral assistance to low and middle-income countries (Dieleman, 2017). This form of University of Ghana http://ugspace.ug.edu.gh 30 donation forms a substantial percentage of the health financing in these countries and ranges between 20% to 70% of funding in African countries (Ravishankar et al., 2009). In Uganda for instance, donor funding constitutes about 35% of total health spending (Orem & Zkusooka, 2010). Donor funding is not constant as donor interests vary and affect it. Loans and grants have to be paid back and this can sometimes be difficult in situations where the government is not charging user fees for the consumption of health services (Ravishankar et al., 2009). The combination of revenue sources that a country uses is dependent on various trade-offs of efficiency, equity and universal coverage and may not directly impact cost of health care and the quality of services (Stabile & Thompson, 2014). The way health funds are mobilized and managed is also dependent on the nature and role of the actors in the sector. The increase in the health economy globally has led to an increase in the number and type of actors involved in the financing of health care (McCoy, Chand & Sridhar, 2009). The global health financing space is a complex one and whiles some play specific roles others play various roles simultaneously. McCoy et al (2009), classify the functions of global health financing actors into providers, managers and spenders. The function of “providing’’ is to generate resources to finance global health. McCoy et al (2009) categorize actors under this function into: donor country governments like the United States and Germany; private foundations like the Bill and Melinda Gates, the general public and businesses/private corporations like Vodafone and MTN. The function of “managing” is interested in gathering all the funds from various sources as well as putting in place mechanisms to get those resources where it is needed. There are about six categories of actors performing this function (McCoy et al., 2009). They are the bilateral aid agencies such as USAID and JICA; partnerships on global health such as the Global Fund; Intergovernmental organizations such as the IMF and World Bank; Non-governmental organizations such as World Vision and Basic Needs; private foundations; and Business/corporate entities. The function of University of Ghana http://ugspace.ug.edu.gh 31 “Spending”, is focused on the direct dispensing of resources for the purchase and use of health care goods and services. Six main actors can be found in this category (McCoy et al., 2009). Health focused multilateral agencies; private sector, for profit organizations; governments and civil societies of low- and medium-income countries. 2.4.2 Overview of Ghana’s Health financing Reforms The government of Ghana, after independence, abolished all forms of payments for health care and set up the National Health Service (NHS) as the body to oversee the health sector (Addae-Korankye, 2013; Adamba, 2011; Mensah et al., 2010). Healthcare delivery was free for all and did not require any payment at the point of service delivery. This system was totally tax funded (Addae-Korankye, 2013). The focus was on the provision of primary health care by promoting a preventive care strategy (Akazili, 2010). This system of finance was thought to be progressive as the rich paid more tax than the poor. This prevented the poor and rural folks from spending too much of their household income on health thereby protecting them from catastrophic health expenses (Adamba, 2011; Adisah-Atta, 2017). However, because of the concentration of health facilities in the urban areas as compared to the rural parts of the country, urban dwellers benefitted more from the system than their rural counterparts (Adamba, 2011). The system could also not be sustained because of inadequate funding, which affected the quality-of-service delivery and led to the deterioration of health facilities (Addae-Korankye, 2013). The government was therefore forced to seek other forms of revenue to finance the health sector. In 1969, the government enacted the Hospital Fees Decree to charge a token as user fees at the point of service (MOH, 2015). This decree was amended in 1971 into the Hospital Fees Act 387. With this act, the government hoped to raise some revenue without burdening the populace. But the fee was so small that it could not do much to help the government increase University of Ghana http://ugspace.ug.edu.gh 32 their health revenue (Addae-Korankye, 2013). With the general downturn of economic conditions like inflation and unemployment, the government of Ghana sought help from the International Monetary Fund (IMF) and World Bank to stabilize the economy (Adisah-Attah, 2017). This led to the implementation of the Economic Recovery Programme (ERP) in 1983. The implementation of this programme meant a reduction in government spending on social services, deregulation of the economy, and reduction in the size of the civil service and trade liberalization (Adisah-Attah, 2017; Adamba, 2011). The Hospital Fees Regulation was introduced in 1985 to broaden the range of services that consumers paid for. This included the full payment for drugs, laboratory services among others in all public institutions. This was to recover 15% of operating cost in order to increase the revenue from the health sector but this also failed (MOH, 2015). Full-cost recovery popularly referred to as the ‘’cash and carry’’ system was introduced in 1992. This according to proponents was to reduce the over reliance of the health sector on government funds, increase its own revenue, prevent over use of facilities and improve quality. The percentage of total government spending on health dropped from 11.1% in 1991 to 6.9% in 1995 (Nyonator & Kutzin, 1999 as cited in Adamba, 2011). In response to the effect this could have on poor populations, the IMF asserted that the fees paid by the high-income populations were to be used to cross subsidize the poor whiles exemption schemes were to be used to cover the very poor in order to prevent them from incurring catastrophic health care costs (Adamba, 2011; Addae-Korankye, 2013). Contrary to what proponents of full cost recovery promised, there was widespread inequality in access to health care as a result of the introduction of user fees (Johnson & Stoskopf, 2009). This made financial accessibility one of the major barriers to seeking health care in Ghana. Recognizing the immense challenges and the effect thereof on the economy, the government, under the Ghana Poverty Reduction strategy promulgated the National Health University of Ghana http://ugspace.ug.edu.gh 33 Insurance Act (NHIA Act 2003: Act 650) (Mills et al, 2012; Akazili, 2010). This led to the implementation of a National Health Insurance Scheme in 2004 with the aim of making healthcare financially accessible to all especially the poor (NHIA, 2008). Unlike other countries that took decades to transition into universal coverage of their health system, Ghana was able to build on the structures of its Community-based Mutual Health Insurance plans into District Mutual Health Insurance Schemes in its first five years (Schieber et al., 2012). This also came with a standardization of the benefits package. The source of funding for the NHIS is diversified supplying stable revenue overtime (Schieber et al., 2012). The three major sources of finance are; 2.5% deductions from the SSNIT contributions of formal sector workers, 2.5% Value Added Tax on goods and services and premiums from the informal sector. Other funding sources include, government budgetary allocations, donor funds, grants, gifts and interest from the investment of NHIS funds and allocations to the central exemptions fund (Adisah-Atta, 2017; Adamba, 2011). The population below 17 years of age, above 70 years old and those identified as very poor were excluded from making any form of payments. This locally thought alternative health financing mechanism was to remove inequities in health care by the removal of any-cost sharing component beyond the premiums paid by subscribers. The design of the scheme also included having different premiums for different economic categories of the population. Implementation of the scheme has however not been smooth because of the lack of data on the large informal sector where majority of the population can be found leading to a flat premium rate irrespective of income (Akazili, 2010). Though the scheme is mandatory by law, those in the informal sector are to register voluntarily. Several additions have been made to the scheme since its inception. There has been an expansion in the number of providers through the accreditation of private health facilities who were not allowed to offer the service University of Ghana http://ugspace.ug.edu.gh 34 when the scheme started. The Free Maternal Health Service introduced in 2008 is also one very notable addition to the scheme (Twum et al., 2018). As a result of these efforts, the scheme was able to exceed its target of 40% membership by the end of its fourth year (Addae-Korankye, 2013; Adamba, 2011). This increase in the number of subscribers in the first five years of the scheme put a lot of burden on the scheme. This was not limited to the financial burden of the scheme’s huge expenditure alone, but also political interferences (Schieber et al., 2012; Akazili, 2014; Fenny, Yates & Thompson, 2018). Though the financing sources are diversified and so likely to provide a stable source of funding for the scheme, the funds are not enough to lead to financial sustainability in the long run. 2.4.3 Ghana’s Health spending The total budget for the health sector in 2019 was about 6 million Ghana cedis (MOH, 2019). Domestic health expenditure as a percentage of health expenditure declined to 38.9% (2018) from 42.5% in 2008 (Sasu, 2021). The Government of Ghana (GoG) funding for the health