Powering health care: Blended finance for health facilities in Kenya

Ominous cracks are appearing in the foundations of global health funding. The ongoing contraction of foreign aid, heralded by the dismantling of USAID in 2025, is threatening to reverse gains in global health outcomes such as child mortality reduction and HIV prevalence. Sub-Saharan Africa is significantly affected because the region is more reliant on foreign aid than any other region in the world. Although global health has faced funding cuts in the past, this time the picture is different. Countries are experimenting with models to complement and augment their publicly funded health systems.  

An International Monetary Fund (IMF) report noted that the aid cuts that began in 2025 are unusually broad, synchronized and donor-driven, with low-income and fragile states facing the greatest pressure. 

Blended finance: An innovative solution

Although philanthropic funding is growing, the USD13 billion provided annually will not fill the USD50 billion gap left by foreign aid cuts. To address this gap, global health actors are increasingly turning toward private capital.

An IDRC-supported research project in Kenya is designing an evidence-based blended finance product to address the problem of unreliable electricity supply that affects over half of Kenya’s healthcare facilities. The issue is especially prevalent in private primary healthcare facilities, which serve most rural and remote populations. Unreliable power supplies mean service interruption, interrupting cold chains, and potentially risking lives to name a few implications.  

The project is exploring how local bank loans can be blended with donor funding to allow healthcare facilities access to more affordable and sustainable solar energy. Using quantitative and qualitative approaches, the study collected insights from primary healthcare facilities, energy-as-a-service (EaaS) providers, local financial institutions (LFIs) and donors.  

Diagnosing the problem

The project found that over 90% of primary healthcare facilities reported a willingness to adopt solar energy, but the structuring of available financing is a major constraint. For example, to purchase solar energy equipment, suppliers require upfront cash deposits as high as 70%, but most primary healthcare providers stated they could only raise 10 to 30% of the capital upfront.  

“What stood out most across both the qualitative interviews and the survey data was how consistently liquidity, not willingness, emerged as the real barrier,” explains researcher Betty Syanda, associate engagement director, inclusive finance at the Busara Center for Behavioral Economics. “That single gap between what facilities can mobilize and what providers require explains much of why a clearly viable market hasn't scaled.” 

Under normal circumstances, primary healthcare facilities could turn to LFIs for credit to purchase solar energy equipment. However, health care is a small portion of most LFI lending portfolios, and this limited institutional familiarity reduces confidence in healthcare lending. Many LFIs perceive primary healthcare facilities as high-risk, even though evidence shows that healthcare loan default rates do not exceed those of broader loan portfolios.  

Cash-flow volatility was another concern of LFIs, as reimbursement from the national health insurance provider (the Social Health Authority) can be lengthy and unpredictable. LFIs noted that they would consider healthcare lending on the condition that a donor provides guarantee coverage of 75% or more, whereby a third party would cover any losses.  

“What’s holding the sector back is a mismatch between perceived risk and actual risk: lenders are pricing in caution that the data doesn’t support,” says Syanda. “Closing that gap is where blended finance can have the most leverage.” 

While most donors agreed that guarantee coverage and similar de-risking tools are important, they were more interested in providing technical assistance rather than de-risking LFIs. Moreover, donors reported that they typically supported large ticket-size projects (USD2 million and above) and that most primary healthcare facilities were too small and fragmented to engage with directly.  

Toward a new blended finance product

The project is now using these insights to design a blended finance product that overcomes the barriers and has the following considerations:  

• Portfolio aggregation: Aggregation involves grouping primary healthcare facilities into defined clusters, typically based on geographic location. This approach allows donors to engage with a consolidated and more investable portfolio instead of managing many individual facilities. 
• Structured risk allocation: To address lending and investment risks, the blended finance product should incorporate a range of strategies, such as first-loss capital, partial guarantee coverage and results-based financing, which attract different types of investors. Institutional investors may be drawn to the product if a donor agrees to absorb losses, and donors, in turn, may be motivated to participate when there are measurable outcomes in terms of scale and impact. 
• Upfront deposit reduction mechanisms: Upfront barriers can be reduced through mechanisms such as catalytic funding, deposit buy-downs and concessional credit lines. Deposit buy-downs supported by donors can make it easier for primary healthcare facilities to access solar energy equipment through EaaS models. In addition, concessional equipment credit lines can reduce the cost of capital, which is a major reason why EaaS providers require high deposits. 
• Technical assistance and standardization: Banks would benefit from better understanding of the healthcare sector, along with standardized credit appraisal tools and loan performance monitoring systems designed specifically for health care. Primary healthcare facilities need training in the operation and maintenance of solar energy equipment to ensure long-term sustainability. 

Conclusion

This IDRC-funded research suggests there’s an opportunity for an evidence-informed blended finance product that is a win-win: consistent access to healthcare services, while a relieving pressure on public financing, freeing resources for others health system needs that are less attractive to private funders That said, blended finance is not a silver bullet. Its value lies in cases where commercially relevant demand exists, such as healthcare solar electrification. But realizing that value means donors, investors and financial institutions moving beyond individual solutions to build flexible, context-specific financing mechanisms. If global health innovations are to become more sustainable, scalable and impactful, the task is not to mobilize more money or simply survive the cuts, it is to restructure finance, so it attracts diverse and lasting sources of support.