Click here for search results

Community Financing - Key Topics

Resource Mobilization | Community Financing | General RevenuesSocial Insurance | Private Insurance | User Fees

Key Topics| Key Readings | Related Links | Document Library | WB Activities

What is community based health financing?

The term community-based health financing has evolved into an umbrella term that covers a wide spectrum of health financing instruments. Micro-insurance, community health funds, mutual health organizations, rural health insurance, revolving drug funds, community involvement in user fee management have all been loosely referred to as community-based health financing.

The rationale of referring to these as health financing arrangements under the same heading is that they exhibit a number of similarities that effectively distinguish them from other resource mobilization instruments. At the same time, there are important distinctions among them in terms of their core characteristics, organizational structure, management, and institutional environment. These differences make these arrangements dissimilar enough to make comparisons impossible without some kind of a typology.

The first common feature of various community financing instruments is the pre-dominant role of community in mobilizing, pooling, allocating, managing and/or supervising health care resources. Oxford dictionary defines community as the quality of (a) "joint or common ownership, tenure or liability"; (b) "common character"; (c) "social fellowship: (d) "life in association with others"; (e) "common or equal rights or rank"; and (f) "people organized into common political, municipal or social unity". Thus, community – according to this definition – is a broader concept than commonly used to refer to a geographic entity defined for political and administrative purposes. 

(click image to enlarge)

Various forms of community-based health care financing reflect most of the concepts in the above definition. Members of many CF schemes are bound together not only by geographic proximity but by shared professional and cultural identity. A narrow geographic definition would exclude many CF schemes whose members are not geographically linked but rather are members of the same craft, profession, religion, or some other kind of affiliation that facilitates their cooperation for financial protection. This is particularly reflected in the form (it is difficult to speak of a tradition since most MHO are of fairly recent creation) of mutual health organizations in francophone Africa, or micro-finance organizations that provide health insurance to their borrowers.

The second common feature of various community financing instruments is similar beneficiary group. Typically, it is expected that community financing will attract those with no access to financial protection and access to other health care financing arrangements. In other words, those who are not employed in the formal sector and thus are not eligible to be part of social insurance schemes; those who cannot take advantage of general tax financed health services because of geographic access barriers, unavailability of needed care and drugs; and those who do not have the ability to pay for market based private health care.

These population groups include the poor with no means of subsistence, those engaged in economic activity in the informal sector and in agriculture; and the socially excluded due to ethnicity, religion, mental and physical disability, other illness.

Finally, the third common feature of the definitions is reference to the social values and principles under-lying the design of community based financing. This includes the principles of voluntary participation, built-in solidarity mechanisms, and reciprocity. In many societies, these principles originate from the traditional self-help mechanisms of the poor that have existed for a long-time embracing not only health (or primarily not health) but also many other risks with potentially devastating financial implications.

For the purposes of this website and additional informational materials that follow, we adopted a broad definition of community financing. By community financing, we mean any kind of health financing arrangements characterized by the following:

  • The community (geographic, religious, professional, ethnic) is actively engaged in mobilizing, pooling, and allocating resources for health care.
  • The beneficiaries of the scheme have predominantly low income, earning subsistence from the informal sector (rural and urban); or socially excluded.
  • The schemes are based on voluntary engagement of the community (although not necessarily of the individual community members).
  • The structure of resource mobilization and benefits reflect principles of solidarity. The primary purpose of the schemes is not commercial (i.e. not-for-profit).

The disadvantage of this definition is that it does not address the problem of "apples and oranges".  In other words, this definition does not facilitate comparability across the schemes. Health financing arrangements that meet the above definition can still significantly differ from each-other in terms of their objectives, structure, management, organization, institutional characteristics. For example, community level revolving drug funds in Honduras would qualify as CF, and so would the hospital based prepayment/risk sharing scheme of Bwamanda (DRC), or individual savings account for pregnant women in Indonesia. Yet, these various arrangements have different capacities to mobilize resources, to provide financial protection and include the poor. We address this problem by grouping similar community financing instruments into modalities.

What are the commonly encouraged modalities of community fanancing? 

There are four commonly encountered and well identifiable modalities. The first health financing modality referred to as health financing is where the resource mobilization instrument is out-of-pocket payments but the community is actively involved in fee design, collection, allocation and management. We refer to this modality as community cost-sharing to distinguish it from individual cost-sharing arrangements. The second one is community based pre-payment scheme or mutual health organization. The third one is provider based community health insurance. And we label the final category as community based pre-payment scheme attached to government or social insurance system. This table below summarizes these four modalities schemes based on their core design features, management, organizational and institutional characteristics. 

Table 4. Often encountered forms of community financing

(a) Community cost-sharing. In these types of arrangements, the community participates in mobilizing resources for health care through user fees. The health financing instrument in this case is out-of-pocket payments but the community is involved in setting user fee levels, allocating the collected resources, developing and managing exemption criteria, and general management and oversight. The community may also be involved on management of at least the first level of health care, the health centers, through participatory structures. The most important characteristics that distinguishes this type of financing arrangement from the other 3 modalities is the lack of pre-payment and risk sharing. The Bamako initiative is a good illustration of this kind of health financing mechanism.

(b) Community prepayment or mutual health organizations. These schemes are characterized by voluntary membership, pre-payment of usually a one-time annual payment, and risk-sharing. Some of these schemes cover catastrophic benefits (including hospital care and drug expenditures) others do not. The community is strongly involved in designing and managing the scheme. Schemes are typically not-for-profit. Examples include: Grameen Health Plan in Bangladesh, Boboye District Scheme in Niger. (The "Concertation" initiative – –provides a census of MHO in francophone Africa).

(c) Provider based health insurance. These schemes are often centered around single provider units such as town or city or regional hospital. They are characterized by voluntary membership, pre-payment of usually a one-time annual payment, risk-sharing, and coverage of catastrophic risks. They are often started up by the providers themselves or through donor support. The involvement of the community is often more supervisory than strategic. Examples include: Bwamanda Hospital insurance scheme in the Democratic Republic Congo, Nkoranza Community Health Financing Scheme in Ghana.

(d) Government or social insurance supported community driven scheme. These community based health financing schemes are attached to formal social insurance arrangements or government run programs. The community actively participates in running the scheme but the government (Thailand) or the social insurance system (Ecuador) contributes a significant amount of the financing. These schemes are not always voluntary (Burundi) and some have referred to this category as district or regional health insurance. Often such financing initiatives are initiated by the government and not the community. Examples include Ecuador's Seguro Social Campesino.

How does community financing perform as a health financing instrument?

Here we summarize key findings of a recent survey for the literature regarding the performance of community financing on resource mobilization, social inclusion, and financial protection. Detailed references can be found in the attached document entitled Literature Survey 0525. 
Summary findings for resource mobilization capacity

  • Community financing arrangements contribute significantly to the resources available for local health care systems, be it primary care, drugs, or hospital care.
  • It appears that the involvement of the community – in various forms - allows to tap into more household resources than it would be otherwise available for health care.
  • At the same time, there is large variation in the share of CF in the total resources of local health systems.
  • There continues to be a need for more rigorous evaluation of the resource generation capacity of community based schemes. 

Summary findings for social inclusion

  • Community based health financing is effective in reaching a large number of low-income populations who would otherwise have no financial protection against the cost of illness.
  • The poorest of the poor and socially excluded groups are not automatically included in community-based health financing initiatives.
  • High income groups are frequently under-represented relative to the entire population undermining redistribution from rich to poor. 

Summary findings for financial protection

  • Generally, community-based health financing schemes (modality 2-4) are reported to reduce the out-of-pocket spending of their members while increase their utilization of health care services. 

What are the strengths and weaknesses of community financing?

 Design features  
 Supporting effective revenue collection and financial protection
Undermining revenue collection and financial protection
Technical design characteristics

Addressing adverse selection through group membership

Accommodating irregular income stream of members (allow in-kind contributions, flexible revenue collection periods)

Sliding fee scales and exemptions for the poor make schemes more affordable

Non-compliance, evasion of membership payments

Adverse selection

Lack of cash income

No cash income at collection time



Community involvement in management can exert social pressure on member compliance with revenue collection rules

Extent of capacity building

Information support


Provider capture – high salary of providers at the expense of service quality improvement

Weak supervision structures increase the chance of fraud with membership card

Poor control over providers and members contributes to moral hazard, cost escalation, and undermines sustainability of the scheme

Organizational characteristics

Linkages with providers to negotiate preferential rates raises attractiveness of schemes and contributes to successful membership

Fragmentation between inpatient and outpatient care leads to inefficiency and waste ultimately resulting in loss of membership

Institutional characteristics

Overnment and donor support make the schemes more sustainable and pro-poor.



Community Involvement in Health Care Financing: Impact, Strengths and Weaknesses: A Synthesis of the Literature.

Permanent URL for this page: