Financial Inclusion for Refugees
At least 65.3 million people around the world have been forcibly displaced from their homes as a result of natural disasters, persecution, conflict, generalized violence, or human rights violations. According to data from the United Nations High Commissioner for Refugees (UNHCR), 21.3 million of these displaced people are refugees, 29% of them hosted in Africa.
Refugees in Africa, as is the case globally, don’t travel far from their home countries. It is estimated that about 86% of them settle in low- and middle-income countries close to their home countries. The top six refugee destinations in Africa are Ethiopia, Uganda, Kenya, Chad and South Sudan. The majority of people fleeing the crisis in Yemen have settled in Djibouti, Ethiopia, Somalia and Sudan. It is estimated that 2,800 people arrived in Uganda every day from South Sudan in March 2017, bringing the total to just over 1 million refugees at the end of April 2017. Burundi and Rwanda are hosting refugees fleeing violence, rape and killings by militias in the North Kivu region of the Democratic Republic of Congo.
One of the large refugee camps in Africa is the Kakuma refugee camp in Turkana county in Kenya, home to at least 154,000 people as at December 2016. When it was set up in the early 1990s, Kakuma was thought to be a temporary settlement. About 20 years later, and with evolving priorities of funding partners, there is need for modifying the support for refugees and host communities to enable them, especially those in the working-age group (ages 18-59), to be more self-reliant.
The UNHCR’s Global Trends report indicates that the proportion of refugee populations in the working-age group was at 47% in 2015. Humanitarian actors in refugee-hosting countries have for a long time contemplated the best support for refugees – in a way that can sustainably improve their quality of their lives. But recently the attention is being focused on this working-age group, with new approaches to protect their lives and dignity being taken into account. One such approach is models that offer financial products tailored for refugees.
The World Bank describes financial inclusion as ‘means that individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way’. Financial inclusion is considered significant in realizing for 10 of the 17 Sustainable Development Goals – No poverty (SDG 1), Zero hunger (SDG 2), Good health and well-being (SDG 3), Quality education (SDG 4), Clean water and sanitation (SDG 6) and Affordable energy (SDG 7), Decent work and economic growth (SDG 8), Industry, innovation and infrastructure (SDG 9) and Reducing inequalities (SDG 10) and Peace, justice and strong institutions (SDG 16).
On one hand, refugees are in desperate need of opportunities to be self-reliant. However, given their circumstances, it is not always given that they would have complete identification or guarantors or collateral to access financial products in the countries they have settled in. These factors have led to the perception that refugees are a financial risk. On the other hand, financial service providers are now assessing the risks, identifying potential advantages, and are looking for ways to best serve refugee communities.
According to UNHCR statistics for December 2016, inadequate livelihood opportunities in the Kakuma Refugee Camp render 37.7% of the working-age group of refugees vulnerable to socio-economic shocks in the camp. In Kenya, organizations such as Action Africa Help International (AAH-I), in partnership with UNHCR, have from 2015 been implementing an innovative model that allows entrepreneurs in Kakuma refugee camp, Turkana county, access business capital. Through a private sector partnership with Equity Bank, refugee entrepreneurs can access structured institutionalized micro-finance services. Group and individual businesses can receive between KES. 5,000 and KES. 100,000. So far 67 businesses ranging from tailoring, bakeries, vegetable farming and fishmongers have benefitted from the revolving fund. One of the key characteristics of humanitarian work is its impulsive nature, usually responding to emergencies. Offering financial products to refugees is seen as one way of making the sector’s interventions more responsive and sustainable.
Shukurani Hota Biclere, a refugee from the Democratic Republic of Congo, is one of the beneficiaries of funds for business startups. She arrived at the Kakuma Refugee Camp in 2012, already with tailoring skills she had acquired from her home in Uvira, south of Kivu. She qualified for an AAH-I loan of KES. 100,000 for her business start-up in June 2016. Almost one year later, Biclere now boasts an average of 40 clients per month, and has employed 7 staff, all refugees within the camp. As at March 2016, she had repaid KES. 72,000 of the loan.
Biclere showcases benefits of this type of conditional loans – building credit-worthiness of refugee businesses, the creation of employment for fellow refugees and host community members and the stimulation of the local economy through expansion and diversification of businesses.
For those refugees with entrepreneurial experience or talent, small business loans are one way of getting them integrated back into normal life. As we mark the World Refugee Day on June 20th, we honor the courage and resilience of refugees like Biclere.