For Profit or Nonprofit? That Is the Question

NPQ Editors’ note: NPQ noticed a comment from Stephanie on one of our articles, and thought that her question about starting up a new organization to serve the health needs of low-income women was worth a larger audience. We would love to hear your thoughts.

Penda Health is starting up as a for-profit social enterprise that provides sexual and reproductive health services for hard to reach populations in Kenya. Our company grew out of the realization that one in four women in Kenya have an unmet need for family planning services. Penda Health aims to aid in meeting that need by opening a chain of Women’s Health Centres and reaching out to customers via partnerships with community groups and places of employment.

Through focus groups held all over Kenya, we quickly learned that although women were reluctant to pay for family planning services alone, they would pay relatively high prices for comprehensive women’s health care (or as close we could get to achieving that goal). Our desire to be a for-profit organization thus required that we rapidly expand our offerings to include what women were demanding: things like cervical and breast cancer screening, STI testing/treatment, and treatment for such basic ailments as yeast infections and urinary tract infections.

Many people hearing about Penda Health are surprised that we have chosen the for-profit model. We are providing health care to low-income women in Kenya, which sounds like the perfect project for a nonprofit. And yet, I feel confident that our decision to be a for-profit social enterprise rather than a nonprofit one will not only make us more sustainable and able to scale quickly, it will also ultimately result in higher quality services for the women of Kenya.

Imagine, for a moment, that we were a nonprofit. Our donors would provide the majority of our funding, and, as a result, they would have an extremely strong voice in shaping our business. What projects we did or did not do, and what order we did them in, would largely depend on our fundraising ability. In the field of sexual and reproductive health, where donors often promote particular health strategies based on religious or ethical perspectives rather than the latest medical research, this could lead to an inconsistent quality of care for women.

As it stands now, although investors will likely provide seed funding to get us up and running, Kenyan women—our customers—will ultimately bring in the majority of our funding. Our ability to be sensitive to the needs and desires of our customers will therefore be the number one factor in the success of our business. If women do not see the value in our products and services, they won’t buy them, and our revenue stream will dry up.

What we believe women in Kenya want is high-quality women’s health services. So in order to retain our revenue stream, we will continuously need to ensure we are providing high-quality care at a cost that is affordable to low-income Kenyan women.

I’d like to clarify that I do not mean to either vilify the nonprofit model or glorify the for-profit model broadly. Rather, I offer Penda Health as a case study of a for-profit model bringing real value to a cause more often championed by nonprofits. Penda Health’s success would indicate that in the space of sexual and reproductive health, where many donors will have an agenda that may change abruptly depending on the politics of the moment, one might consider the for-profit model to allow the customers of women’s health centres (low-income women)—rather than donors—to shape the direction of the organization.

Stephanie Koczela leads Penda Health’s management team. She previously managed Kiva’s global field staff operations and led the effort to create the plan for, fundraise, and execute the construction of a four-story school in Mathare, Nairobi’s worst slum, where she has spent extensive time. She also created—and continues to work for in a support and advisory capacity—Witethye, a women’s bag collective based in Mathare, which sells globally.

For more on this topic, you can consult: “In but Not Of the Market: The Special Challenge of Nonprofit-ness.