Donors have taken a step back; can we now step forward?

Having navigated the precarious intersections of donor dependency, fragile health systems, and the unrelenting burden of disease in low- and middle-income countries (LMICs), we must view healthcare financing not merely as numbers, but as a test of political will, strategic foresight, and institutional courage. Innovation in health financing in LMICs has been gradual, nudged by necessity, refined through trial, and often hobbled by inertia.

When donor aid began to plateau around 2010 and decline by 2015, it was not a surprise, it was a long-anticipated reckoning: “build sustainable systems or face patchwork solutions.” Yet many leaders and technocrats shrugged, hoping the next Gavi window or US President’s Emergency Plan for AIDS Relief (Pepfar) tranche would buy more time. LMICs found themselves in crisis with no blueprint. The tragedy was not donor retreat, but failure to respond with courage, creativity, and homegrown solutions. Donor dependency had become a comfort zone, breeding structural stagnation.

As funding dried up, “innovative financing mechanisms” emerged, promising and bold, but often poorly adapted to local realities. Performance-Based Financing (PBF) succeeded in contexts, such as Rwanda, but elsewhere became a metrics game chasing indicators rather than outcomes.

Sin taxes, impact bonds, matching funds, expanded insurance schemes, Public-Private Partnerships (PPPs), and blended finance followed. Some were promising; others privatised risk while socialising loss. The Lesotho PPP hospital, despite controversy, asked whether the private sector could modernise health infrastructure. India’s cataract surgery Development Impact Bond brought Wall Street logic to community eye care—a spectacle indeed. Sin taxes on alcohol, tobacco, and sugary drinks promise both revenue and lives saved, yet in countries where sugar is political capital and alcohol sponsors national sports, enforcement is difficult. Blended finance, though elegant in theory, often mixes public risk with private gain. Health insurance schemes, launched with fanfare, frequently lacked actuarial rigour or institutional trust. Innovation, too often externally designed and donor-driven, is parachuted into LMICs like unwanted software updates. When hospitals become investment portfolios, patients risk becoming line items, not lives.

True healthcare financing innovation must be locally grounded, frugal, and community-owned. As LMICs pursue Universal Health Coverage (UHC) and pandemic preparedness, key questions remain: who bears the risk, and who reaps the reward? Too often, the poor prepay for care they never receive, while investors claim guaranteed returns for outcomes they scarcely understand. That is not innovation, it is injustice.

Financing justice demands that sustainability and equity advance together. It is not just about raising money, but ensuring resources flow to centre dignity, access, and accountability.

Starved of donor aid in 2025, LMICs must mobilise domestic resources without burdening the vulnerable, embrace results-based financing that measures what matters to people, not donors, and partner with the private sector on fair terms. Innovation must no longer be imported; it must be forged in LMICs’ own struggles.

Dr Mugambi is a healthcare leadership scholar