Supporting refugees to find freedom by expanding access to finance

“Independence”, “having the power or right”, and “liberty”, are some of the phrases that describe freedom. This year’s World Refugee Day theme is ‘finding freedom’ and access to financial services is a key component to achieving that once refugees resettle so that they become self-reliant and economically independent.

Though important, little has been known about the financial strategies employed by refugees over time to build their livelihoods and manage their finances.

To learn more, the Financial Sector Deepening (FSD) Uganda and FSD Africa commissioned the Financial Inclusion for Refugees (FI4R) project. The project aimed at deepening and broadening access to and usage of formal financial services among refugee and host communities in Uganda, with a focus on the West Nile and South-West regions. The project also had a learning and research component to assess refugees’ incomes and expenses to inform the development of financial products and services offered to them in Uganda.

Consequently, the project supported three financial institutions; Rural Finance Initiative (RUFI), VisionFund Uganda, and Equity Bank Uganda Limited to rectify this grim situation by enabling them to offer a variety of savings and credit products as well as financial literacy programmes to refugee groups in the target areas.

Florence is one of many refugees who benefited from the Financial Inclusion for Refugees project by getting a RUFI loan through her savings group. The single mother of two who lives in the Palorinya refugee settlement in Moyo district arrived in the settlement five years ago from South Sudan. She is a tailor belonging to three saving groups where she saves Ushs 4,000 (1.04USD) and Ushs 20,000 (5.2USD) weekly in each group.

She used the loan as capital for her business and continued to save money together with her group so that she can later purchase stock.

Over a period of 12 months, Florence has increased her contributions to the savings group as she has realised saving diligently is essential to growing her business.

Through its implementation, the project addressed some of the key barriers to increasing access to financial services for refugees including, low-risk appetite among the financial service providers highlighted by the limited appreciation of refugees as a potential market and underdeveloped ecosystems where there is high reliance on saving groups and limited adoption of formal financial services.

In addition to evaluating the impact of financial services on refugee livelihoods in Uganda, the learning and research component also provided insights for financial institutions on how to improve access to financial services in the refugee settlements.

The project endline study reports that Ushs 7.6 bn was disbursed in loans by the three financial institutions to savings groups. Additionally, over Ushs 12 bn was deposited in savings accounts with three financial institutions.

Florence’s experience and the endline report numbers demonstrate that refugees are a viable market segment. For that to be fully exploited, respondents’ reasons for hesitation to use formal financial services must be tackled.

Interested commercial banks and micro-financial institutions should therefore improve access by deploying more agents in the different villages of the settlement. This is in place of having a few agents in the major trading centers which are far away from the settlements.

Additionally, information regarding details of products and services offered including interest rates, fees, and prerequisites should be availed and simplified even when services are offered digitally.

Further, the high transactional costs of using mobile money should be revised as these were sighted as a reason for limited or avoidance of usage.

When these adjustments are made, financial service providers will register transactions worth more than the recorded Ushs 7.6 bn and Ushs 12 bn in loans and deposits/savings respectively in the two years of the Financial Inclusion for Refugees project’s implementation. This will make financial inclusion for refugees and host communities a win-win for financial service providers whose decisions are profit based as well as the target market segment.