Fintech companies have witnessed a spike in demand for healthcare loans in the past three months as the coronavirus crisis has prompted customers to secure their cash position for health emergencies.
With healthcare becoming an absolute necessity due to covid-19 and a majority of people in the country dependent on out-of-pocket expenses due to low penetration of insurance, people now want to have access to easy and quick financing avenues and thus are turning to fintech lenders that are providing such services.
According to the World Health Organization (WHO), financing health care through out-of-pocket payments results in “catastrophic health expenditure and impoverishment" in many Asian countries, particularly India.
“Out-of-pocket payments remain common in India, where only 15% of the population is covered by health insurance. In 2014, such payments were estimated to account for 62% of total health expenditure," the WHO said in a 2017 report.
According to Prithvi Chandrasekhar, head – risk and analytics at InCred, a fintech lender, overall demand for loans other than healthcare has declined.
Parvaiz Hussain, chief executive officer (CEO) of HealthFin, a healthcare finance company, said his firm saw a jump of nearly 220% in demand for so-called interest-free loans during April-June. He added that short-term (3-12 months) credit offtake has risen significantly, compared to long-term loans usually availed for planned treatments or surgeries.
"People need loans in short notice for healthcare and such loans come as exact solution for this particular issue of arranging funds at the quickest time possible," Hussain said.
HealthFin ties up with hospitals for these so-called interest free loans where the cost of interest is borne by hospitals as it increases their occupancy level. Hospitals are comfortable in taking this extra cost on their books as it is less than 10% of the total marketing budget earmarked for getting new customers, said Hussain. HealthFin has added over 650 hospitals on its platform since February.
Mint reported on 8 July that there have been several instances across the country where hospitals have denied cashless insurance claim facilities for coronavirus patients, forcing people to frantically arrange large sums of cash for the treatments. Such experiences are also motivating people to turn to lenders that are providing emergency lending.
Another fintech company MoneyTap, which provides loans for healthcare, travel, marriage, education, among others, has also recorded sizeable growth in demand for medical loans in the past few months, whereas other segments have seen a fall. The company provides a quick unsecured line of credit of up to ₹5 lakh to salaried and self-employed customers.
Customers can avail this line of credit free of cost, but when they draw an amount, it attracts interests from 13% to 25%, on amount drawn down. MoneyTap is also in talks to onboard hospitals to provide the option of no-cost loans in the future.
Anuj Kacker, co-founder of MoneyTap, said while his company has not registered many new customers in the recent months, higher credit offtake by existing customers has driven the demand volume up as they want to keep cash handy.
“We are seeing that the use of money on our app has gone up as people want to hold on to cash and medical expenses are among the top three (where the money is being used)," Kacker said.
The recent healthcare situation has also pushed hospitals to become facilitators of credit by directing patients to fintech companies.
"We are seeing a rise in customers coming from hospitals, earlier there was a flow but covid has increased the traffic," Hussain said.