Too Risky Not to Invest: Why Funding Latin America’s Healthcare Sector Should Be an Investing Priority

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Too Risky Not to Invest: Why Funding Latin America’s Healthcare Sector Should Be an Investing Priority

Too Risky Not to Invest: Why Funding Latin America’s Healthcare Sector Should Be an Investing Priority

In a poor, peri-urban neighborhood in Quito, Ecuador, women arrive at a simple yet trusted clinic for reproductive health services. The NGO CEMOPLAF manages this clinic and has been successfully providing sexual and reproductive health services to the poorest Ecuadorians for over 40 years. While it has achieved some cost recovery and scaled to serve people in nine of the country’s 24 provinces, the organization needs funding to strengthen both its services and revenues as it transitions to a non-profit social enterprise model.

Across town, the four-year-old for-profit social enterprise Novulis offers high-quality, low-cost dental care through high-tech mobile and stationary clinics – including inside the international airport to cater to service workers. Though Novulis began with a sustainable vision, most impact investors initially viewed the company as too early-stage for investment.

While both CEMOPLAF and Novulis are seeking capital to sustainably scale healthcare delivery to underserved Ecuadorians, they represent unfamiliar approaches and profiles to potential investors. Nevertheless, based on the William Davidson Institute’s research and Linked Foundation’s years of in-country discussions with a host of stakeholders, we see many opportunities worthy of more impact investment in Latin America’s healthcare sector – particularly as it relates to women’s health. But for these investments to happen, investors will need to embrace a more a flexible approach to funding, delivering the kind of support required by different health models at various stages of growth, and approaching these investments with realistic expectations around risk and returns. They’ll also need to recognize the fact that remaining on the sidelines represents another kind of risk: the risk of missing out on a sector full of profitable, impactful opportunities – including the opportunity to improve the overall investment climate in the region.


While Latin America is generally seen as having “good enough” health outcomes and “high enough” incomes to no longer warrant donor funding, health outcomes in Latin America and the Caribbean (LAC) are still well below average and highly unequal – particularly for women and marginalized groups.  Five-year survival rates for cervical cancer range from 52% in Ecuador to 73% in Cuba, demonstrating regional inequality. The effects of income inequality are apparent in the mortality rates of children under age 5 in the region: In Peru, Honduras and Haiti, children in the poorest 20% of the population are roughly twice as likely to die before their fifth birthday as those in the richest 20%. Medical technology is also much less available – the LAC region has just half the mammography units and less than one-fifth the MRI units of the OECD.

Making matters worse, COVID-19 has heightened inequities in access to work and healthcare, while highlighting weaknesses in healthcare systems. The pandemic has not been gender-neutral, disproportionately impacting women globally and in Latin America. Various media reports have pointed to increased gender-based violence since the crisis began, and decreased access to contraceptives and essential women’s health services. As a recent Criterion Institute report details, a gender lens approach is critical to pandemic recovery and rebuilding from a purely economic standpoint – especially given that women are disproportionately leaving the workforce. This is leading to increased unpaid labor and therefore lower workforce efficiency and business output, and it has a particular impact on the healthcare sector, as women are the primary consumers of health services.

Despite public sector programs, households throughout the region pay more than one-third of their health expenditures out of pocket, nearly 95 million people incur catastrophic health expenditures and nearly 12 million become poorer as a result. But while there is, in fact, a willingness to pay out of pocket and a demand for services not met by the public sector, many of the existing options are not necessarily high-quality or low-cost.

An increasing number of health entrepreneurs have recognized these gaps in product and service access as opportunities – both social and economic. For example, Medical Innovation & Technology in Lima, Peru provides remote ultrasound imaging solutions for rural pregnant women and patients with lung damage from COVID-19. These enterprises have a growing need for investment to establish and expand their services. At the same time, health organizations that were established mainly to pursue social impact rather than business goals, primarily nonprofits like CEMOPLAF, recognize the need to attain sustainability to protect their services and beneficiaries from the impact of fickle and increasingly scarce donor funding.

Yet despite the clear need, health investment in the region is low. During 2018-2019, impact investors deployed over US $600 million in 619 deals in Latin America, according to ANDE’s Impact Investing in Latin America – Trends: 2018-2019 report. Agriculture and microfinance dominated the landscape with 253 and 113 deals respectively, for a total investment of US $291 million. Debt instruments were still the predominant route, accounting for 80% of the capital deployed. Healthcare as a sector was seventh on the list, with just 20 deals and US $8 million invested.


The complexity of health systems across LAC countries, the multitude of players, the role of the public sector and the incorrect assumption that people won’t accept out-of-pocket spending all contribute to perceptions of risk/return on health sector investment. This leads to the widespread assumption that information asymmetries in healthcare disincentivize quality – particularly for the most marginalized. In other words, investors assume that these customers will seek lower-cost (or free public) health services rather than higher-quality private options, and that therefore, these services should be public or grant-funded. In addition, many health enterprises are too big for microfinance and informal local investors, yet too small or too risky for banks, private equity firms, development finance institutions and other direct investors focused on financing later-stage, larger entities.

However, many innovative models in the LAC region are proving there is indeed demand for high-quality, customer-centered approaches – even among low-income, high-risk groups. While still limited, these approaches have proven their impact in improving health outcomes, and their value as high-return investments as well. One example is Clinicas del Azucar (CdA), a “one stop shop” for high-quality, affordable diabetes care for low-income patients in Monterrey, Mexico. The for-profit CdA gained support through affordable, grant and foundation-backed loans to expand and grow its clinics and client base. This funding enabled CdA to develop a call center to contact existing patients with appointment reminders and other customer interactions, which improved patient retention and payments. The call center also provided jobs to CdA’s female clients, generating employment while improving the company’s bottom line. CdA later “graduated” to a mainstream impact investment fund. It has now treated more than 154,000 patients at 17 clinics, more than 38% of whom are low-income, and it has prevented an estimated 200,000+ diabetes-related complications. Additionally, the enterprise says it plans to raise US $10-12 million to continue its clinic expansion, and it projects that it will reach profitability by the end of the first quarter of this year.

Reina Madre, an affordable maternal health enterprise with several outpatient clinics and a birth center in Mexico, is another example. The business initially leveraged grant funding and “friends and family” support, allowing it to grow its clinics rapidly. By providing services with high market demand, it was able to subsequently qualify for larger impact investment funds. At the same time, Reina Madre is deploying grant funding to deepen its social impact in rural communities through a program cross-subsidized by its urban clinics and made possible through strategic alliances with local authorities. In 2016 the company served 9,500 patients, and by 2020 the annual number served had jumped to 130,646 patients, 44% of whom were low-income (earning under US $600/month).

Both of these companies benefitted from “missing middle”-focused investment and blended finance from impact investors willing to provide flexibility and guarantee riskier loans to promising early-stage organizations. As we learned from mapping the healthcare sector in Colombia and Peru, in addition to addressing the missing middle of financing, there is also a need for technical assistance to connect local organizations with international funding opportunities – and in some cases, to help them refine crucial functions such as business plan development and human resource management. This is especially important for healthcare organizations such as the aforementioned CEMOPLAF, which start as donor-supported NGOs and eventually need specialized assistance to facilitate their transition to social enterprises and sustainable revenue models.


One thing many successful healthcare companies have in common is existing access to social and human capital, in the form of education and connections to investors in the U.S. and elsewhere. In contrast, hyper-local non-profits – many run by women – often lack the same networks and resources to scale sustainably, despite their understanding of the health care infrastructure and the needs of marginalized groups in their communities. Though they boot-strap critical healthcare delivery organizations, female entrepreneurs receive less funding and are less likely to ask for it, as investors often gravitate towards well-networked entrepreneurs with prestigious credentials.

There is a clear need and great opportunity for blended finance, missing middle support, technical assistance and unbiased pipeline sourcing to move small women-focused health enterprises toward sustainability, scale and deeper impact. There’s also a secondary – but no less important – need for the infrastructure that would enable organizations with different experiences and structures to learn from each other.

One important mechanism for identifying, scaling and preparing enterprises for capital is a social impact fund that would bring organizations as varied as Novulis (which recently scored an investment from MediSystem Holding) and CEMOPLAF (which is still looking for the right type of investor) under one banner. This sort of fund would create an opportunity to mitigate risk and leverage the complementary strengths of different investors and different companies in the fund’s portfolio. To advance this goal, Empodera 360, a new project led by New Ventures Mexico and Linked Foundation, will map out health enterprises benefitting women in the LAC region that represent economic and social impact opportunities. A selected cohort of promising social entrepreneurs will receive technical assistance and funding opportunities, with the goal of structuring an impact investing fund focused on women’s health – the first fund of its kind in Latin America.

It’s time for bold action among investors who are willing to serve the nuanced capital needs of the region’s diverse health enterprises. Investors with the courage to broaden their lens will be rewarded by high social and economic impact returns on their investments. Investors who hold back risk missing out on an impactful – and profitable – opportunity.

Andrea Bare is a Program Director at ThinkWell and Anna De La Cruz is a Social Impact Consultant at ADLC Consulting, LLC

Photo courtesy of Reina Madre