Why healthcare industry is a good bet for investment clubs
Informal investment and saving groups or chamas as they are locally known have steadily gained membership over the years.
Initially popular amongst women in the low income groups and used as a means of getting easier and cheaper loans, their memberships now includes men and even those in high income groups.
There are about 50,000 or more chamas at the very modest estimates, although no official statistics exists since they are not formally registered or regulated.
Their activities range from the monthly or quarterly merry-go-rounds where funds are periodically rotated in a pre-arranged rota. These are then used by the members to buy group or member assets like livestock, motorcycles and household items like water storage tanks among others.
The last three have in particular found favour as most members with low wages cannot afford them.
For many informal and formal groups, identification of investment opportunities have tended to be “tunnel-visioned” with most resources channelled in a few areas.
Land in particular has always been a favourite investment fixation. It is estimated that half of such groups have at some point put their cash in land.
While real estate investments have always tended to be good and profitable if carefully selected, their returns tend to take years to appreciate. They sadly also offer not so good regular returns save for liquidation or sale of the asset; a one-off affair.
For example, its unlikely that land bought at Sh300,000 five years ago would have risen to Sh10 million as is expected. It is also unlikely that a similar investment in healthcare would return such an amount.
However, one advantage of healthcare investments is that as long as the idea is good and the management team prudent, the returns are guaranteed until Jesus returns.
This is the reason why many venture capital and private equity firms are making forays into the healthcare industry. These investors understand one thing; healthcare investments are not quickie deals.
They also know an obvious fact that Kenya is on the verge of an economic boom. By extension the more money you have, the more you spend in staying healthy and alive.
As a social entrepreneur with a start-up convincing such investment clubs on the viability of health projects often is a hard sell. One shortcoming is that most of these groups have members from different socio-economic backgrounds. Though financially stable they, lack the capacity to understand the feasibility of such “alternative” investments.
How do we convince them? As a challenge, we could identify 50 health start-ups with viable projects. Each will receive “virtual” funds modelled along the Nairobi Securities Exchange students’ investment competition where students invested “virtual funds” over two years.
At the end of five years, we shall see which of the chamas investment had higher returns. Will it be from the health investment?
There is no doubt, healthcare costs will go up tenfold in the next five years. Put your money there.
Courtesy of Business Daily