Community-Based Health Financing


Addis Ababa, Ethiopia, 20 November 2006 -

What is health financing?

Health financing refers to the collection of funds from various sources, pooling of funds and spreading of risks across larger population groups, and allocation or use of funds to purchase services from public and private providers of health care [1].

What is the current situation of health financing in the WHO African Region?

According to World Health Report 2005 [2], forty-four countries of the WHO African Region spent less than 15% of their national annual budget on health; 29 national governments spent less than US$10 per person per year; fifty per cent of the total expenditure on health in 24 countries came from government sources; prepaid health financing mechanisms cover only a small proportion of populations in the Region; private spending constituted over 40% of the total expenditure on health in 31 countries; direct out-of-pocket expenditures constitute over 50% of the private health expenditure in 38 countries.

What are the key health financing challenges confronting countries in the Region?

Countries of the Region are confronted with a number of key challenges including low investment in health; low economic growth rates; lack of comprehensive health financing policies and strategic plans; extensive out-of-pocket payments (consisting of mainly user fees); limited financial access to health services; limited coverage by health insurance; lack of social safety nets to protect the poor; inefficient resource use; ineffective aid; and weak mechanisms for coordinating partner support in the health sector [1].

With a view to addressing some of the above-mentioned challenges, countries have been exploring various financing mechanisms, e.g. taxes, health insurance for formal sector employees, social health insurance, private health insurance, community-based health financing (CHF) and external donations. This brief paper dwells on the CHF.

What is community-based health financing?

CHF refers to any scheme that has the following features [6]:

Common objective, e.g. to meet unmet health needs, increase financial access to health services;

  • Voluntary in nature (exceptions, e.g. mandatory insurance as in Boboye, Niger);
  • Predominant role of community in mobilizing, pooling, allocating, and managing and/or supervising health care resources.

What are the objectives of community-based health financing?

Health financing through community-based involvement can be seen as having three independent objectives [7]:

  • To provide financial resources to promote better health and to diagnose, prevent and treat known illness;
  • To protect individuals and households against direct financial cost of illness when channeled through risk-sharing mechanisms; and
  • To give the poor a voice and make them active participants in breaking out of the social exclusion in which they are often trapped.

What are the different types of community-based health financing?

  • Community managed user fees – relies mainly on out-of-pocket payments at the point of contact with providers, but the community is involved in setting user fee levels, allocating funds, developing and managing exemption criteria and carrying out general management and oversight, e.g. Bamako Initiative [7,8].
  • Community prepayment or mutual health organizations – characterized by voluntary membership, prepayment of usually one-time annual fee, risk-sharing, community involvement in designing and managing the scheme [7], e.g. the Boboye District Scheme in Niger, MHO in Senegal, UMASIDA Health Insurance Scheme in Tanzania.
  • Provider-based health insurance – often revolves around single provider units such as a town, city, or regional hospital. It is characterized by voluntary membership, prepayment of usually a one-time annual fee to the provider, risk sharing, coverage of catastrophic risks and involvement of community in supervision, e.g. Bwamanda Hospital Insurance Scheme in DRC, Nkoranzaman Community Financing Health Insurance Scheme in Ghana, Chogoria Hospital Insurance Scheme in Kenya [7].
  • Government or social insurance-supported community-driven scheme: - the community acts as “agent” to reach rural and excluded populations on behalf of the formal government or social health insurance system via contracts or agreements, e.g. Burundi, Community Health Fund in Tanzania [7].

What are the indicators of the performance of community-financing schemes?

  • The ultimate performance indicators for community financing schemes include: health, preventing impoverishment from cost of illness, and social inclusion of the poorest socioeconomic groups of people [7].
  • The intermediate performance indicators include: level of resources mobilized, sustainability of resource mobilization, level of health care utilization, financial access and barriers, successful risk management, equity, efficiency, and quality of care (technical and perceived) [7].

What are the factors affecting the success (resource mobilization and effective financial risk protection) of community health financing schemes?

  • Active involvement of the community engaged in mobilizing, pooling, allocating resources for health care, and scheme management;
  • Ability to address adverse selection and rent-seeking provider behaviour through revenue collection and purchase of instruments;
  • Durable relationship between the scheme and providers to achieve better value for members’ money;
  • Sustained donor and/or government support;
  • The beneficiaries of the scheme have predominantly low income, earning subsistence from the informal sector (rural and urban) or are socially excluded;
  • The schemes are based on voluntary engagement of the community (although not necessarily of the individual community members); and
  • The structure of resource mobilization and benefits reflects the principles of solidarity and cohesiveness and the motivating force is not profit but welfare-oriented [6].

Questions for discussion

  • What is the potential of CF schemes to mobilize resources in a sustainable manner?
  • Is CF inclusive of the poor? In other words, do CF schemes reach out to the poor?
  • How effective are CF schemes in preventing impoverishment due to the cost of illness? Do CF scheme members have better access to health care than non-members? Does CF eliminate the financial barriers to health care?
  • Are certain forms of CF schemes better than others in terms of capacities for resource mobilization, social inclusion, and financial protection?
  • What are the key constraints to community health financing options?
  • How can CHF schemes be influenced in terms of technical design (revenue collection, pooling, and purchasing), management, organizational and institutional characteristics to better achieve their objectives?
  • What is the role of government and donors (partners) in the success of CHF schemes?


1. WHO Regional Office for Africa. Health financing: a strategy for the WHO African Region. Brazzaville. 2006.

2. World Health Organization. The world health report 2005 – making the life of every mother and child count. Geneva, WHO. 2005.

3. Nabyonga J, Desmet M, Karamagi H, Kadama PY, Omaswa FG, Walker O. Abolition of cost-sharing is pro-poor: evidence from Uganda. Health Policy and Planning. 2005, 20: 100-108.

4. The Save the Children Fund. An unnecessary evil? User fees for healthcare in low-income countries. London: The Save the Children Fund. 2005.

5. Gilson L, McIntyre D. Removing user fees for primary care in Africa: the need for careful action.British Medical Journal. 2005, 331: 762-765.

6. Khetrapal S: Community health financing.Regional Health Forum 2004, 8(1): 114-139.

7. Preker A.S. & Carrin G (editors). Health Financing for poor people: resource mobilization and risk sharing. Washington, D.C.: World Bank.

8. Gilson L, Kalyalya D, Kuchler F, Lake S, Oranga H, Ouendo M. Strategies for promoting equity: experience with community financing in three African countries.Health Policy 2001, 58: 37-67.


In order to improve financial access, a country like Uganda opted to abolish user fees for all public health services in 2001. That led to a surge in utilization of health services [3,4]. The literature proposes a number of practical strategies for managing removal of user fees to minimize the negative effects on health system [5].