BREAD working paper, March, Alessandro Tarozzi, Aprajit Mahajan, Brian Blackburn, Dan Kopf, Lakshmi Krishnan, and Joanne Yoong (2011)

In this paper, the authors use a randomized controlled trial to examine the impact on malaria reduction of free bednet provision versus microfinancing services to help households purchase full cost bednets.  They find that free provision substantially increases bednet usage compared to microfinancing.  They suggest that microfinancing is a possible policy tool where free provision is impossible, but caution that bednets may be ineffective unless provided on a large scale.

For the very poor, even heavily subsidized health interventions can be prohibitively expensive.  For example, Michael Kremer and Ted Miguel find that in Kenya, a 20% co-pay for deworming drugs drastically reduced uptake from 75% to 19%.  J. Cohen and Pascaline Dupas find that also in Kenya, the uptake of insecticide treated bednets is 99% when free but only 10% when offered at a 90% subsidy. 

In  this paper, Tarozzi et al. argue that “Such high price elasticities, coupled with the positive externalities commonly observed with health-protecting technologies, have provided strong arguments in favor of free distribution” (2).  Obviously, free distribution is sometimes cost-prohibitive to donors.  The authors therefore propose an innovative solution: using micro-loans to ensure cost recovery but allow households to distribute payment over some time.  They evaluate the first large, developing country, randomized controlled trial of micro-loan provision for purchasing insecticide treated bednets versus free distribution. Specifically, they estimate the effect of these two treatments on increasing bednet ownership and decreasing the malaria burden in Orissa, India—a rural and highly malarious area and one of the poorest states in India.  In collaboration with Bharat Integrated Social Welfare Agency, the authors offered free bednets to roughly a third of 141 villages, full priced bednets with microfinancing to another third, and no services to control villages.  In the free villages, 96% of households received at least one insecticide treated betnet with an average of 2.7 nets per household.  In microfinanced villages, 52% of households chose to purchase at least one net, at an average of 1.2 nets per household.  Overall, approximately 1,100 bednets were sold.  This was a relatively impressive rate of uptake, considering that bednets cost approximately three to fives times the local daily agricultural wage.

Tarozzi et al. find that in villages with free distribution, 47% of individuals report sleeping under a bednet the previous night, compared to 16% in microfinanced villages and 2% in control villages. 77%, 36%, and 7% of individuals in the respective villages report “usual” usage during peak mosquito seasons.  Perhaps surprisingly, conditional upon ownership, bednet usage rates were higher for free nets.  Therefore, the authors report that “we thus find no evidence in favor of the hypothesis that free provision leads to lower usage of health products relative to cost sharing (we actually find support for the opposite)” (4).

Overall, this study supports the argument for free provision of health technologies.  However, the authors identify a troubling finding.  Even when bednets were provided free, increased usage rates did not lead to health improvements.  The authors cannot reject the null hypothesis of equal malaria prevalence across post-intervention survey experimental groups.  They attribute this surprising finding to bednet coverage that remained too low, even with net-providing interventions.  They argue that bednet programs must be broad and large rather than small and targeted if they are to have the desired impact.  In this light, cost recovery programs are especially undesirable if the goal is broad coverage.

The authors conclude that “micro-loans should be considered as a potentially effective tool to increase uptake of health products in poor areas, when free provision is not possible or desirable” (29).  The authors caution, however, that only 64% of households repaid loans, corresponding to a 36% effective price subsidy of the nets.

They also caution that their results (in particular, that malaria prevalence did not decrease) should not be interpreted to suggest that bednets are ineffective.  Rather, they are only effective on a certain scale.  They write that “Far from suggesting that ITNs are not useful to combat malaria, our results suggest that public health interventions which only achieve the distribution of a relatively limited number of ITNs may fail to achieve the desired effects.  Much more may be needed, and efforts should include ensuring high village-wide coverage, providing incentives for regular use, and possibly adding complementary interventions such as indoor residual spraying, case management and environmental measures.  Otherwise, in the words of Hawley et al. (2003) (p. 126) ‘low levels of coverage with treated nets, or, worse, untreated or poorly treated nets, may do little but fritter away scarce resources’” (32).