Issue 66 - Article 12

(Loan) cycles of innovation: researching refugee-run micro-finance

April 20, 2016
Robert Hakiza and Evan Easton-Calabria
A street view in Kampala, Uganda

Refugees across the global South are increasingly choosing to venture into cities rather than staying in camps. Currently, approximately half of the global refugee population now lives and pursues their livelihoods in non-camp settings. Increasingly, these urban refugees are undertaking their own entrepreneurial initiatives, often in sectors in which they have no prior experience. Most also lack access to the micro-loans that could help them start businesses. Few refugee-serving organisations have comprehensive loan programmes, and micro-finance institutions (MFIs) rarely target refugees as beneficiaries. Lack of legal status often prohibits refugees from becoming MFI clients or opening bank accounts in host countries, and lenders’ fears of refugees leaving the host country increase uncertainty about loan repayments and sources of collateral. Refugees in receipt of free assistance have sometimes perceived loans as handouts, and may not have adequate community or other support to successfully repay loans. The Alchemy Project at the Feinstein International Center has recommended that ‘Separate agencies, de-linked from relief, should manage and dispense loans to refugees’: K. Jacobsen, Microfinance in Protracted Refugee Situations: Lessons from the Alchemy Project (Boston, MA: Tufts University), p.15,

Despite these obstacles, and the fact that the majority of urban refugees survive without institutional assistance, little research exists on whether and how they access micro-finance. In particular, refugees’ own micro-savings and micro-lending groups (termed here refugee-run micro-finance) have not been comprehensively researched. This means that, despite an awareness of these groups, there is no real understanding of how they operate within communities, how they interact (if at all) with outside capital providers and the main challenges they face. Our research project, funded by the Humanitarian Innovation Fund (HIF), aims to illuminate not only the current state of micro-finance for urban refugees but also how refugees’ own communities and networks can act as sites of innovation for bottom-up micro-finance programmes. We are currently mapping existing initiatives and programmes in Kampala, and have already identified 25 refugee-run micro-finance programmes. Our work aims to expand upon the existing micro-finance structures refugees have created within their own communities, and to learn how these could be linked to MFIs (both Ugandan banks and MFIs and international non-profit lenders such as Kiva).

We aim to provide evidence-driven recommendations for micro-finance providers and develop a model that builds on refugee-run micro-finance initiatives. In this way, we hope to provide avenues for urban refugees to directly access capital. To do this, various questions must be more comprehensively answered. What degree of access to financial tools is available to refugees? From a lender’s point of view, what conditions would enable refugees’ access to micro-finance? Are refugee- run micro-loans and micro-savings groups successful and, if so, how could these be expanded?

Experience: our innovation catalyst

The catalyst for this research came from our experiences as founders and directors of small grassroots non-profit organisations in Kampala, as well as from academic engagement with the Humanitarian Innovation Project (HIP) at the University of Oxford. Our organisations, the refugee-run Young African Refugees for Integral Development (YARID) and the Paper Airplanes Project, co-led by refugees, focus on livelihoods training, which led us into direct contact with urban refugees seeking capital for small businesses. Through discussions with potential beneficiaries, we identified urban refugees’ need for micro-finance, and the potential of refugee-run community micro-finance operations. A 2012 pilot initiative led by the Paper Airplanes Project confirmed the viability of such programmes.

The need for micro-finance opportunities for refugees has been clear to Robert, a principal investigator for this project and YARID’s founder, since 2013, when YARID’s Women’s Empowerment Centre opened. The centre has provided formal opportunities for women to develop vocational skills, with daily training in fashion design, tailoring and craft-making. YARID has regularly interviewed refugee women about their experiences in the programme. Twelve women completed the tailoring programme after a recent training cycle, but only four managed to start their own business. Representative of the situations of many refugees we know, lack of access to capital was repeatedly cited as a major barrier.

The decision to research refugees’ micro-finance innovations also grew out of our frustration at the lack of partnerships between refugees and researchers (not to mention between refugees and refugee-serving organisations). Although current rhetoric espouses refugees’ capabilities as active agents, they are still too often seen solely as subjects of study and beneficiaries of programmes. As a Congolese refugee and an American researcher, we represent the research partnerships we hope will become more common. As such, our project is a case study of process innovation in research, and a model of Northern academic research partnerships with Southern practitioners and researchers. Collaboration, particularly across nationalities, socioeconomic backgrounds – and sometimes across continents – is not always easy. It has required trust and transparency, and, to that end, a lot of very clear communication. We recognise that we each bring particular strengths to our project. Our different positions, for example, give us different sorts of access to informants, a reality that has been aggravating at times but has ultimately served our project well.

Refugees are doing it themselves

Our research in Kampala demonstrates that many urban refugee communities have developed their own finance mechanisms, such as micro-savings and lending groups in their own communities. These are divided amongst the main refugee populations – Congolese, Rwandan, Somali and Burundian – we are researching. Our research is centred on these populations based on our prior knowledge of micro-savings groups among Congolese and Rwandan refugees, our interest in examining the potential role of diaspora remittances in micro-savings groups among Somalis and the opportunity to examine micro-finance mechanisms among recent refugees from Burundi. Some 22,000 Burundian refugees have arrived in Uganda since Burundian President Pierre Nkurunziza announced in April 2015 that he would run for a third term of office. UNHCR Inter-agency Information Sharing Portal: Burundi,

The savings groups we have identified thus far are composed mainly of women, with between 20 and 40 members in each group. These groups generally meet once a week. Each member brings a contribution of money, which varies from one group to another. This starts at 2,000 Ugandan Shillings (approximately 40 pence) and goes up to 25,000 (about £5) depending on what members have agreed. The weekly meeting is also an opportunity for members to discuss their business challenges, or to borrow from or pay back money to the group. The loan cycle generally lasts a year, after which members divide the accrued interest among themselves and then decide whether to start a new cycle.

Preserving the grassroots nature of these groups while injecting them with more capital from institutions may offer a way to address some of the long-standing issues in refugee micro-finance provision. Many refugee-run micro-finance programmes do not have enough capital to make substantial loans to members (average loan sizes are generally under 300,000 Uganda shillings, roughly £62/$89, and not enough to start a small business), while a failure to repay loans is often a problem for NGO micro-finance programmes. Creating partnerships between refugee-run organisations and formal MFIs could address these problems: these micro-finance groups could provide larger loans, while the community collateral that grassroots refugee-run initiatives provide could also serve as an important bulwark for MFIs against loan delinquency.

To further investigate this option we are interviewing banks, MFIs and refugee-serving organisations offering micro-finance loans. There are over 100 MFIs in Uganda, yet only a few currently have refugees as clients. Since 2000, UNHCR has implemented different forms of microfinance in 45% of its country operations, but this has happened only recently in urban areas and the success rate is low overall. M. Azorbo, Microfinance and Refugees: Lessons Learned from UNHCR’s Experience, UNHCR Policy Development and Evaluation Service, Research Paper 199, January 2011, p.11.  To strengthen its micro-finance programme, InterAid, UNHCR’s only implementing partner in Kampala, has partnered with the international micro-finance organisation BRAC. However, BRAC only offers technical guidance, and does not administer or monitor loans.

We are also examining other micro-finance programmes that could provide models for urban refugees. These include successful initiatives for refugees in rural Uganda, like Hope Ofiriha and Kyangwali Women’s Microcredit Project. Hope Ofiriha (Northern Uganda):; Kyangwali Women’s Microcredit Project: Citing a need for micro-finance schemes for urban refugees in Kampala, the Women’s Refugee Commission argues for a combination of grants and loans ‘from informal village savings and loan associations (VSLAs) up to formal micro-finance institutions’. Women’s Refugee Commission, The Living Ain’t Easy: Urban Refugees in Kampala (New York: WRC, 2011), p.17. These options, which we believe rely on a strong community foundation, are all promising possibilities for further research.

It is important to research not just refugee-run micro-finance but also the types of community that provide the strongest basis for such programmes. Urban refugee communities exist in various spheres of life in Kampala, comprising church congregations, refugee-run organisations and refugee resource centres. However, these cohesive communities have not been examined as potential sites of micro-finance, where existing social structures might be enhanced and act as bases for livelihoods programmes. We are currently developing case studies on different communities with micro-loan programmes, as well as undertaking a best-practice literature review on community micro-finance models in different countries, and as provided through different lenders, including international and local NGOs and banks.

The Bondeko Women of Hope Savings Group

The Bondeko Women of Hope Savings Group is based at a refugee-run organisation known as the Bondeko Refugee Livelihoods Centre. The group began in 2013 and has now started its third year-long loan cycle. It comprises 30 women, who meet every Saturday to repay loans and discuss business challenges and ideas. Each member contributes between 2,000 and 10,000 Ugandan Shillings (approximately 40 pence–£2) each week. Loans must be repaid within one month. Each member runs her own enterprise, ranging from selling vegetables to jewellery, and the savings group offers a chance for these businesses to expand. The group also has a welfare component, where weekly donations are made to support other women in unexpected situations of need, such as family illness or death. The group was founded and is run by a former statistician, who was part of a micro-loan group in the DRC. As it was being established the group was supported by the Finnish Refugee Council (FRC), which supplied booklets to record savings, a safe box and business training. The Bondeko Women of Hope Savings Group is only one refugee- run micro-finance programme among many in Kampala. However, its professional nature and high loan repayment rate (98%) is similar to other initiatives we have identified. There is significant potential to expand refugee’s access to the micro- finance these groups provide.


As a research project directed by a refugee-run organisation and involving refugee communities themselves, we view this innovation as an important bottom-up contribution to both research and practice involving refugees. In order to increase the access and effectiveness of micro-finance programmes for refugees, it is vital to gain a sound evidence base on refugee- run micro-savings and lending groups, and how they could be built upon and linked to MFIs. This research is valuable for urban refugee micro-finance in Kampala, but is also relevant to other urban contexts where refugees have the right to work, such as South Africa or Turkey, where Syrian refugees are granted temporary work permits. We aim to contribute an evidence base, recommendations and a model for refugee micro-finance for the international humanitarian community. Research describing the conditions for refugee micro-finance and the development of implementable refugee-run models also contributes to the promotion of policy environments that offer refugees the right to freedom of movement and the right to work. Such research provides the foundation for micro-finance programmes that promote active refugee participation and the recognition of refugee communities as important social hubs for innovation.

Robert Hakiza, YARID, and Evan Easton-Calabria, University of Oxford.


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