Kenya: How is Ilara Health Improving Availability and Affordability of Diagnostic Devices?
Kenya has a lot of talent and opportunities for innovation. Access to care is not a problem, because there are plenty of community nurses present all across the country. However, they have a limited problem and mostly focus on main infectious diseases, leaving serious conditions undiagnosed, says Emilian Popa, Founder and CEO of Ilara Health.
Ilara health equips a network of small healthcare providers with lifesaving and essential diagnostic tools to improve the quality of medical care in Sub-Saharan Africa. In this episode, Emilian Popa talks about:
why health insurance is hard to scale in Africa, where people are concerned with daily costs and survival,
investments and how local VCs mostly invest in sectors like real estate and investments for health tech are supported by foreign investors,
why Ilara Health is expanding on the Kenyan market but not in Tanzania, South Africa, Nigeria or Egypt.
This is the full transcript:
Emilian, you are originally from Europe, but you actually live in Kenya.
Right, I live in Africa, specifically in Kenya. I've been in Africa for the past 15 years, with the last seven to eight years spent in Kenya.
The main thing that you currently do in Kenya is lead Ilara Health, which is essentially bringing AI-enabled digital tools for diagnostics to the region. Can you elaborate on that?
From the surface, it indeed looks like we're bringing diagnostic devices, many of which are powered through AI or technology, to enable small medical practices run by nurses to provide better care. However, we do much more than that. The market is extremely fragmented, with about 20,000 small primary care practices, equivalent to doctor practices in Europe. Interestingly, there are more medical practices per thousand people here than in developed markets. However, these practices are small and run by nurses, not doctors. They lack the resources to provide quality care, so while access to care isn't a problem, the quality of care is a significant issue.
Can you talk a bit more about the quality of care? What exactly can these nurses provide?
Imagine stepping into one of these small houses, or shacks, with a sign labeling it a hospital. Inside, you might find a reception room, a chemist providing over-the-counter and prescription antibiotics, a consultation room, a procedure room for basic tasks, and a kitchen that serves as a laboratory equipped with a microscope and a couple of rapid tests for malaria and HIV. These facilities are usually run by a nurse or a clinical officer, a profession that falls between a nurse and a doctor. These individuals are well-intentioned and capable but have basic training. They can identify respiratory and digestive infections and test for basic infectious diseases, but their capabilities largely stop there. Many health issues remain undiagnosed. For example, only one in five people in Kenya who are prediabetic or have diabetes are aware of their condition due to limited testing and understanding of treatment options.
How can care be improved in such an environment? Last year, I spoke with Medtronic Labs, and they are addressing non-communicable diseases and trying to provide care for chronic disease management. Where do you come in, and how do you work with these healthcare providers? How much upskilling is required?
There are two ways to approach this. One could attempt to train everyone, but that's not scalable. We tried training nurses to perform scans with portable ultrasounds in the early stages, but it proved impossible. The alternative is to complement the basic skill sets of these medical professionals with technology, which is our approach at Ilara Health. We provide these individuals with tools, like diagnostic devices and systems, that enhance their capabilities.
Can you mention examples of the devices you provide and explain their functions for clarity?
Certainly. Consider a portable ultrasound. Pregnant women need two to three scans during pregnancy, but many haven't ever seen an ultrasound or received scans. We train clinicians or nurses to use portable ultrasounds for scanning, with a remote sonographer operating the scan. This approach is a prime example of how we complement skill sets, using the nurse's hands mechanically while the actual scanning is performed remotely through a mix of technology and human intervention. In the realm of metabolic health, we offer portable analyzers for cholesterol, lipid profiles, and hemoglobin A1c, which are crucial for monitoring metabolic markers. These devices are straightforward to use; a simple finger prick and a drop of blood yield the necessary results.
What happens next for patients? Diagnosis is only part of the problem. I remember a stakeholder from Medtronic Labs mentioning that managing non-communicable diseases is challenging because patients often can't afford the medications they need. Can you comment on that?
In an ideal scenario, most of these health issues would be treated at the clinic, with referrals made as necessary. However, the challenge is that most primary care in Kenya is paid for out-of-pocket. For context, a Kenyan might spend about $70 per year on healthcare, compared to a European who might spend between $3,000 and $5,000, or an American who might spend $10,000 — primarily through insurance. So, in the primary care sector, a visit might cost about $20, which is quite minimal. The reality is that while we aim to provide diagnostics, treatment, and follow-ups at low costs in these clinics, the conditions diagnosed and treated there are quite basic. We're dealing with infections (respiratory and digestive), prediabetes (mostly type 2 due to nutrition and lifestyle), and high blood pressure. The medications for these conditions, like Metformin for diabetes, are relatively cheap. While this approach doesn't fully solve the problem, it at least helps prevent severe outcomes like amputations due to untreated diabetes.
How can these small practices you work with afford the devices you provide? Even though these point-of-care devices are smaller and generally cheaper than the clinical-grade hospital equipment we see in the Western world, I imagine it can still be challenging for some practices to afford them.
That's a great question. Take the example of an ultrasound. In a developed country, a scan at an imaging center might be conducted using a $50,000 ultrasound machine. The portable devices we provide cost only a fraction of that. We use a device called the Butterfly iQ, which is essentially a digital version of the large ultrasound machines you might see in a developed country's imaging center. It costs a couple of thousand dollars. We don't sell these devices outright because these small practices can't afford to buy them, whether it's a $50,000 or a $2,000 device. Instead, we offer a lease-to-own model where the clinician pays a monthly fee (let's say $200) over 24 months. At the end of the leasing period, the clinician owns the device. This model makes the technology accessible and affordable. Clinicians can scan 30 to 40 patients at $10 per scan, generate revenue, make patients happy with the service, pay the leasing fee, and still make a profit.
How sustainable is this business model for Ilara Health? How do you see the healthcare market developing in terms of insurance, buying power, and the additional services you might want to provide in the future?
The business model is sustainable from a unit economics perspective because I firmly believe that whatever we build in healthcare needs to be economically viable; otherwise, it won't work. If you just inject free money into these healthcare systems, they will fail once the funding dries up. What we've been building for the past five years is not just a collection of devices; it's an ecosystem. We enable small medical practitioners, entrepreneurs, with the technology, both software and hardware, to provide better care and grow their practices. It's somewhat like micro private equity. We invest in these clinics, provide them with a system, and support their growth. We identify the best entrepreneurs and equip them with more tools. Each of these ventures is too small in itself to make a significant difference, so we need to be widespread. We've done business with about two and a half thousand clinics since the company's inception and currently work with about a thousand clinics across 42 out of 47 counties in Kenya.
How did you choose Kenya as the market you wanted to enter? You also expanded to South Africa. Can you talk about building a base of over 1,000 customers and deciding to go beyond Kenya? Are there other countries in Africa that you are eyeing?
I chose Kenya because I've been in Africa for 12 to 15 years, initially doing management consulting, then building ventures, and eventually creating a fund investing across the continent. I've known Kenya well since 2015. It's a place where one can raise impact funding for impactful businesses. Several criteria made me choose Kenya over other countries. It's relatively easy to do business there; it's fairly developed with a good entrepreneurial scene. However, it's not the easiest market because individual spending on care is minimal, though higher than in surrounding countries. We tried South Africa but ultimately stopped because the problems we solve, mainly financing for small entrepreneurs and access to patients, are issues that exist in East and West Africa. Other countries have different healthcare problems.
When I spoke with entrepreneurs from Nigeria, they mentioned that there's no buy-in yet from people to see value in health insurance because the healthcare infrastructure and provision are poor. People don't see value in investing in health insurance until they have actual health problems. Kenya plans to have universal health coverage by 2030. How realistic do you think that is?
Achieving universal health coverage is a complex challenge, especially when public systems are inefficient, and there's a lack of funding.
In emerging and frontier markets where people have a very different risk tolerance, insurance is difficult to penetrate. People might pay for car insurance because it's mandatory, but they are primarily concerned with immediate needs like buying food for their children for the next day, not potential future risks like diseases or flooding. That's why insurance penetration is minimal in most communities. What we're building isn't traditional insurance. We're not trying to sell insurance products to individuals. Since we have access to and control over the infrastructure, we can approach corporations and large plantations and offer coverage for their low-income employees in the clinics we power for a fixed monthly amount, which functions like a membership or insurance.
How would you describe the broader ecosystem in Kenya? You mentioned there's a lot of innovation and entrepreneurship happening, with mobile banking idea M-Pesa originating from Kenya. How does this innovation transfer to healthcare? What trends are you observing?
My take, both as an entrepreneur and an investor, is that technology only works in certain sectors. For example, in the financial sector, you can build a tech platform for transferring money. However, in most other sectors, you need some kind of infrastructure. In healthcare, people need to enter a physical space to get a consultation. The idea of free or almost free online consultations doesn't work in markets where in-person consultations are already free or almost free, and where there are many medical centers. There are more chemists per thousand people in Kenya than in any other country in the world, making the market very fragmented. The solution is to identify the best entrepreneurs, finance them, and help them grow and build sustainable businesses.
How do you see the scarcity of resources in relation to the broader development of Africa? Many entrepreneurs I spoke with have funding from the West and even spend part of their time there. Is this inevitable? How do you manage your funding, and where do you see the relationship between foreign investors and the local ecosystem?
Most venture capital and private equity money indeed comes from the West. Even if funds are based in Africa, their limited partners are often Western pension funds or development finance institutions. There's very little African money invested, and what is invested typically goes into conventional industries like real estate and oil. There's a lot of impact money on the continent, and development finance institutions invest significant capital to support impact startups. I don't think funding is the biggest issue; the challenge is finding entrepreneurs who can build sustainable businesses in difficult sectors. Healthcare is particularly challenging because people spend so little on it. The venture capital money spent in Africa has been doubling every year, so the opportunity is there. It's just a long-term play.
How do you convince investors to invest in Africa where the buying power is smaller, making it harder to create large returns on investments?
We engage investors who target Africa. The challenge isn't convincing them to invest in Africa but in showing that our business model is economically viable and scalable.
What are the significant challenges in developing Ilara Health and growing your customer base?
The healthcare sector is highly fragmented, with individuals spending very little on healthcare. We need to identify and invest in the best small clinics and clinicians, which is a meticulous process. To scale, we need to expand into multiple markets and cover the entire ecosystem, which is a long-term play.
So, which markets are you eyeing after Kenya?
We'll be looking around between Uganda, Tanzania, and spending a bit of time in Ethiopia. I also looked at Francophone Africa, specifically West Francophone Africa, like Senegal and Cote d'Ivoire. There's a massive difference and distance between East and West Africa, not only geographically but also culturally. It's like doing business in Slovenia and then trying to launch in the UK or France the next day; the people are different.
That's exactly my point. Often, there's a perception that Africa is this one big country.
Indeed, but it's not. Africa comprises 52 countries. People often generalize Africa, but it's a vast continent, larger than the US and China combined. The countries, systems, and legislations within Africa are very distinct and different from each other.
Can you mention any specific differences or cultural specifics?
Take South Africa, for example. It's a developed market for a certain population but very undeveloped for the rest. A South African doctor, even one practicing in a township, can easily secure a bank loan to build a clinic and purchase devices. South Africa has a high insurance rate, and clinicians there often don't perform diagnostics themselves because there are plenty of labs available. So, bringing our solution to South Africa wouldn't make sense. Egypt is another distinct market, with government insurance covering many and a higher doctor-to-nurse ratio. We target a very specific market that lacks skill sets and is very fragmented. Each country has different regulations for importing medical devices, and some are very difficult to navigate. For instance, it's currently almost impossible to bring anything into Ethiopia due to procedural and bureaucratic hurdles. Tanzania, while it has been changing, has complicated human resource policies, making it difficult to conduct business efficiently. Nigeria is often touted for its business opportunities due to its large population, but it's a distant and expensive market to tap into, even though it faces problems similar to those in Kenya.
Despite these barriers, what makes you optimistic, and what plans do you have for the further development of Ilara Health?
I'm very optimistic. I've been working on this for the past five years because I believe that what we build can be impactful and financially viable; it just needs to grow more than it is now. It's a longer play than initially thought, but we're heading in the right direction, covering the entire ecosystem, not just diagnostic devices, training, investment in clinics, or the platform.
What advice would you give to anyone considering starting a business in Africa, whether a startup, a corporate, or a nonprofit initiative?
First, identify and understand the problem you want to solve and determine if it can be solved profitably. Don't take the markets for granted; they are very complex, especially for companies from the developed world launching in Africa. For entrepreneurs, it's crucial to truly embrace and believe in the problem you're solving. Start by solving it for yourself, then for friends and family, and eventually for others. Also, be cautious with fundraising. We've seen ventures raise significant funds at high valuations only to struggle when the market downturns. Be mindful of your spending and focus on building a long-term business rather than aiming for a quick turnaround and dreaming of making billions overnight.