Out-of-pocket healthcare costs in Africa are alarming, creating even more financial burdens for individuals and families grappling with limited income. Per the World Health Organization (WHO), such payments represent significant healthcare spending in many parts of Africa. In Nigeria, for example, they make up about 77% of total healthcare expenditure, while in Kenya, it stands at approximately 40%.
These yet-rising costs can be devastating. In countries like Namibia, South Africa, and Botswana, where high healthcare spending is prevalent, many households are pushed into poverty due to medical expenses.
Known as healthcare impoverishment, this occurs when the bills exceed paying capacities, forcing patients to sell assets, take out loans, or altogether forgo treatment.
Health Savings Accounts (HSA), the first of its kind in Nigeria, is a lifeline that offers solutions to these challenges posed by providing people with a tool to save, earn interest, and spend funds specifically for health and wellness expenses. Through HSAs, funds can be set aside regularly to cover future medical needs.
Clafiya, one of Africa’s burgeoning health-tech startups, is latching on to this trend of HSAs. In response to the challenges plaguing the African healthcare landscape, the company is launching an HSA product, with a primary focus on young Nigerians, including Millennials and Gen Zs as well as business owners.
By introducing HSAs to the system, Clafiya aims to provide a unique avenue for individuals and businesses to proactively manage their healthcare needs and expenses. The principle is offering a flexible means to access health and wellness services, distinct from traditional healthcare insurance models, to everyone who needs it.
“We’re witnessing a growing trend of heightened health awareness among individuals, prompting them to prioritize their well-being like never before. This shift in mindset underscores a rising demand for diverse healthcare solutions tailored to their needs,” says Jennie Nwokoye, founder and CEO of Clafiya.
“Recognizing this, we’re introducing HSAs as a means to empower individuals and employers to take control of their health and wellness journeys. They serve as a pathway for Nigerians, individuals and employers alike, to not only cultivate a vested interest in their health but also gain access to a wide range of discounted health and wellness products and services,” she tells Condia.
In most African countries, access to healthcare is limited and inequitable. The sector grapples with low-quality care and a lack of public trust, which can be traced to inefficient spending, underinvestment, and a constantly expanding populace. These, in turn, affect economies’ efforts to achieve Universal Health Coverage (UHC).
Over half of Africa’s 1.2 billion people lack access to basic healthcare services. What’s worse, every year, about 15 million of them are impoverished due to the use of household income for access to rudimentary treatments. Health insurance penetration is also low, currently below 10%, except for private sources, where only Kenya impresses with 42%.
Clafiya HSA aims to fix the checkered healthtech sector
With the U.S. freezing foreign aid under Trump’s latest policy, Nigeria’s health sector—where over 70% of total health expenditure comes from out-of-pocket payments and donor funding—faces potential setbacks. Programs tackling malaria, maternal health, and infectious diseases, which rely heavily on aid, risk being underfunded, leaving millions vulnerable.
In 2023, the United States provided approximately $1.2 billion in aid to Nigeria, with around $570 million dedicated to health initiatives such as preventing tuberculosis, HIV, and COVID-19, and about $71 million aimed at reducing malaria-related deaths. (nairametrics.com)
Despite this support, Nigeria allocated only ₦1.17 trillion (approximately $2.91 billion) to healthcare in its 2023 budget, representing just 4.91% of the total ₦21.8 trillion budget. (icirnigeria.org) This is significantly below the 15% benchmark set by the 2001 Abuja Declaration, highlighting a persistent underfunding of the health sector.
Clafiya’s new offering aims to address these challenges. HSAs assist customers in saving up to 30% on their healthcare expenditures and wellness expenses. By setting aside funds in their HSAs, which accrue at a 7 – 10% annual interest rate, customers can access significant discounts of up to 30% on health and wellness services offered by platform partners.
“I strongly believe this model can be replicated across Africa and even globally. Drawing from my experience in the United States, I initially encountered Health Savings Accounts (HSAs) there. It’s a booming $150 billion market, driven by the escalating healthcare costs,” Jennie explains to Condia.
“Many are turning to HSAs to alleviate this financial burden on Americans. So, why not replicate this success in Nigeria? We’re partnering with financial agencies in Nigeria to tap into the country’s existing culture of saving and investing,” she adds.
Long term, Clafiya hopes that its HSAs serve as a new way to finance health and wellness – one that is personalized, flexible and meets the needs of Africans.
In July 2023, Clafiya raised $610,000 pre-seed in a mix of VC funds, angel investments, and grants. Google, Norrsken Accelerator, Acquired Wisdom Fund (AWF), Hustle Fund, Voltron Capital, Microtraction, Ajim Capital, HoaQ, Bold Angel Fund, Shivdasani Family, and other angel investors participated in the round.
