An Investigation Into the Use of Venture Capital by Private for-profit Managed Health Care Firms (Hmo's) in Kenya

Abstract

This research project investigated the use of venture capital by for-profit health management firms in Kenya. The firms are important because their services are critical to the development of Kenya. Venture capital is provided to firms operating in risky sectors with high growth and return potential. This research established that these firms lack funds to provide affordable and comprehensive health care and venture capital is an important source that can alleviate this problem. A questionnaire was used to collect primary data from all the managed health care firms in Kenya. The study also established that bank loans and personal savings are the main sources of finance but firms avoid bank loans because of the high interest charged on them. Half the firms investigated used venture capital mainly for restructuring and expansion and 30% used venture capital to start their operations. Respondents indicated that the health Management sector is risky because of high variations in returns. This makes most financiers for example banks to charge high interest rates or give no loan at all and this makes it a fertile ground for venture capitalists. All respondents believe that existing venture capital firms need to create more awareness in Kenya about their operations. Major providers of venture capital in Kenya are foreign multilateral institutions and the main determining factor for a venture capitalist to invest is the product/service and returns.