Empowering refugees and host communities through financial inclusion

25/03/202031/03/2022

Martin Agaya

Background: Financial Inclusion for Refugees (FI4R) project

Uganda hosts one of the largest refugee populations in the world with approximately 1.1 million refugees settled in urban centres and 28 refugee settlements across the country. And while the number of adult Ugandans accessing formal financial services continues to grow, primarily driven by mobile money services, the figures are much lower in refugee settlement communities. According to FinScope 2018, overall financial inclusion stood at 78% for adult men and 77% for adult females in Uganda. In contrast, only 13% of refugees surveyed in Bidi Bidi Refugee Settlement recently were able to access formal credit, with most of them depending on informal groups, which have their limitations, to meet their financial needs.

The challenges faced by these groups and their members, as well as the demand for loans to make productive investments, provides an opportunity for financial service providers to tap into existing practices (including the rituals of Village Savings & Loan Associations), generate demand-side data that profiles refugees accurately to adopt alternative credit scoring and innovate based on their needs and profiles. Accurate data sets and partnerships with established humanitarian agencies will address supply-side barriers that prevent refugees and their host communities from accessing relevant financial products and services including societal prejudices and perceived legal and regulatory constraints.

Learnings from administering humanitarian aid indicate that direct cash assistance to displaced persons is more effective than in-kind donations. Uganda hosts over 1 million refugees – a shift towards efficient cash transfer programs that can be scaled will ensure that humanitarian agencies can strengthen the resilience of vulnerable, displaced groups living in settlements. Such programs would create a market for relevant, formal financial services, encouraging market actors including banks to provide refugees and their host communities with relevant formal financial services and products. The resulting systemic change will drive up financial inclusion, reduce vulnerability and improve livelihood opportunities for everyone within the settlements.

Project implementation:

The FI4R project, co-funded by Financial Sector Deepening (FSD) Uganda and Financial Sector Deepening (FSD) Africa – in collaboration with BFA Global – was successfully launched on March 17th in Kampala, Uganda. It includes a ground-breaking study that will track the financial lives of refugees in Uganda for 12 months. This study will inform the development of financial products and services offered to refugees and their host communities by three implementing partners – Rural Finance Initiative, VisionFund Uganda and Equity Bank Uganda Ltd. – as well as other market actors.

The implementing partners will be provided with funding and technical assistance to launch innovative projects which will create efficiency in humanitarian payments and provide relevant formal financial services to refugee settlements in the West Nile region and Isingiro District. These market-led interventions are expected to enable better integration, strengthen the resilience of households by stimulating economic activity and increase take-home incomes.