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ADB Approves $50M Loan to Improve Rural Health Care Services in the Philippines

News Release | 26 March 2009

MANILA, PHILIPPINES - The Asian Development Bank's (ADB) Board of Directors have approved a US$50 million loan to improve the quality of health care in the Philippines, and to make these services more accessible and affordable to the poor.

The project will focus on cities and municipalities outside the capital region of Metro Manila and is expected to result in increased use of basic health care and referral services by the poor, and by women and children in particular.

The loan will finance the construction of new public health facilities and provide state-of-the-art equipment to existing facilities, with a particular focus on providers of maternal and child care health services and partnerships with the private sector. This will help facilities qualify for higher accreditation and increased financing from the Philippine Health Insurance Corp. (PHIC), and reduce the out-of-pocket payment of health care.

The Better Health Care Project will also provide financial support to small private health providers - such as midwifery clinics, diagnostic facilities, and community drug stores - to allow them to move closer to rural communities. It will also provide funds for capital investment and working capital to promote a more efficient health care delivery system through the outsourcing of services, and establishing private insurance schemes.

The ADB loan will be coursed through the Sustainable Health Care Investment Program, a credit facility established by the Development Bank of the Philippines to support the government's health sector reform agenda and implementation framework, Fourmula One for Health.

The credit facility has two lending windows. The direct retail lending window is for local government units (LGU) and larger private sector borrowers, such as health providers, foundations, and health maintenance organizations, with projects costing between $100,000 and $5 million. The wholesale lending window is available to accredited financial intermediaries, such as microfinance institutions and rural and thrift banks, where small private companies can borrow from $100,000 to $500,000.

"In addition to direct benefits resulting from this investment, the project will trigger increased LGU and PhilHealth spending on health," says Vincent de Wit, ADB's Principal Health Specialist for the Southeast Asia Department.

Demand for health services remain low among the poor and vulnerable groups, due to various reasons including the relatively high cost of medicines. Estimates suggest that around 30% to 40% of the population finds it difficult to pay for drugs.

The ADB loan will have a 25-year repayment term, including a grace period of 6 years and an interest rate determined in accordance with ADB's London interbank offered rate (LIBOR)-based lending facility.

The Gender and Development Cooperation Fund (GDCF) will provide a grant of up to $400,000, to be administered by ADB. The GDCF's contributors are the governments of Canada, Denmark, Ireland, and Norway.

A technical assistance grant of $1 million will be financed by the Japan Special Fund to build capacity for public-private partnership in health services.