Supporting refugees to find freedom by expanding access to finance

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.

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FI4R Diaries Round IV Insights: Gender

FI4R Diaries Round IV Insights: Gender

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    This is the final(part four) of an ongoing series of insights from a financial diaries study undertaken with refugees in Uganda, focused on their ability to cope with risks. The respondents are drawn from customers served by three financial service providers: Equity Bank Uganda, VisionFund Uganda, and the Rural Finance Initiative.

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    FI4R Diaries Round III Insights: Digitization of Saving Groups

    FI4R Diaries Round III Insights: Digitization of Saving Groups

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      This is part three of an ongoing series of insights from a financial diaries study undertaken with refugees in Uganda, focused on their ability to cope with risks. The respondents are drawn from customers served by three financial service providers: Equity Bank Uganda, VisionFund Uganda, and the Rural Finance Initiative.

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      Covid – 19 Market Diagnostics and Options for Long-Term Recovery (Supply – Side Report)

      Covid – 19 Market Diagnostics and Options for Long-Term Recovery (Supply – Side Report)

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        The overall objective of the study was to develop practical solutions for preserving and building relevant elements of the financial system to support the survival, recovery, and growth of micro and small enterprises (MSEs) in Uganda. The core of the market analysis was to understand how the supply of finance to the MSE sector in Uganda had been affected by the COVID-19 crisis and what options were available to build on ready measures to mitigate the impact. This analysis identified both threats and opportunities for inclusive finance service providers (IFSPs) to meet the financing needs of MSEs.

        With the support of the Association of Microfinance Institutions of Uganda (AMFIU) and with some direct provision of information by IFSPs, the study team had detailed operational and financial information on 30 SACCOs and 11 MFIs. Due to confidentiality/nondisclosure policies, AMFIU provided anonymous data, stating only the region in which the entity operates and its institutional form.

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        Covid – 19 Market Diagnostics and Options for Long-Term Recovery (Demand- Side Report)

        Covid – 19 Market Diagnostics and Options for Long-Term Recovery (Demand- Side Report)

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          The COVID-19 pandemic has had significant impact on the Ugandan economy especially hitting the micro- and small enterprises (MSEs) in the informal sector. MSEs have been facing unprecedented income losses and uncertainties about their future because of business disruptions due to the outbreak of COVID-19.

          FSD Uganda commissioned a demand side market diagnostic study to assess the impact of COVID-19 on micro and small enterprises in Uganda. The overall objective was to develop practical solutions to preserve and build relevant elements of the financial system to support the survival, recovery and growth of micro and small enterprises in Uganda.

          From the research, only 3% MSEs reported to be completely recovered. 71% of the surveyed MSEs are yet to return to normal pre-COVID-19 operations timing. Several factors such as reduced hours of operation, disruptions in movement, and general low customer turnout have impacted the businesses severely.
          MSE owners hope to bounce back, however, some issues continue to plague the recovery of enterprises. These include, on an average 50% of reduction in household income due to low revenue from the business, job losses in the family, or depletion of other income sources hit by the pandemic.

          Women-led enterprises have suffered a greater average loss in income (50%) compared to men-owned MSEs (33%) from the pre-pandemic level of income. Also, while MSEs in urban areas have been able to attain 57% of the pre-pandemic income level, MSEs in rural areas have recovered up to 50% of the pre-pandemic income level.

          As per the estimates of the World Bank, the COVID-19 crisis has pushed around 2.6 million Ugandans into poverty. With longest closure of schools in Uganda, not only the education sector but many other businesses providing services in the ecosystem suffer a great deal in their bid to recovery to pre-pandemic level.

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          Rebuilding livelihoods in displacement Endline Report – March 2022

          Rebuilding livelihoods in displacement Endline Report – March 2022

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            Little has been known about the financial strategies employed by refugees over time to build their livelihoods and manage their finances. This report provides an in-depth analysis of a baseline survey undertaken in January 2020 and an endline in November 2021. The sample included refugees and their host communities in the settlements of Nakivale, Bidi Bidi, Palorinya and in the capital Kampala. An endline study was conducted to understand the evolved financial behavior of refugees, get feedback on financial products offered by the implementing partners and assess how new financial products were used by the refugees. The COVID-19 pandemic occurred during the study period and offered the opportunity to track how households coped with the situation.

            The Financial Inclusion for Refugees (FI4R) project was launched in 2019 by FSD Uganda and FSD Africa to support financial service providers (FSPs) to offer financial services to refugees and host communities. The project is supporting three financial service providers (FSPs) Equity Bank Uganda Limited (EBUL), Vision Fund Uganda (VFU) and Rural Finance Initiative (RUFI) to offer financial services to refugees and host communities.

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            IRA Regulating for Innovation – Case study

            IRA Regulating for Innovation – Case study

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              The enactment of a new Insurance Act, which came into operation in early 2018, expanded the Insurance Regulatory Authority (IRA)’s mandate from market soundness and consumer protection to also include market development. As part of this new mandate, the IRA is committed to encourage and facilitate innovation in its market. However, encouraging innovation may introduce new risks, thereby leading to conflict between the different mandates. To strike the right balance, the IRA recognised that it needed to update some of its existing supervisory processes and regulations, plus introduce new tools to steer its interaction with the market.

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              Financial Inclusion for Refugees Case Study in Uganda

              Financial Inclusion for Refugees Case Study in Uganda

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                To credit Henry J. Leir Institute – The Fletcher School of Law and Diplomacy

                During a year that most of the world has spent locked indoors, we should remember that 1% of the world’s population has been forced to flee their homes due to conflict or persecution. This is roughly 79.5 million people. 26 million are refugees, and almost half are under the age of eighteen. Nearly three-quarters of displaced persons are hosted by neighboring countries, which often are in need of help themselves.

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                The Overall Impact of COVID on The Economy; An Agile Scenario Analysis

                The Overall Impact of COVID on The Economy; An Agile Scenario Analysis

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                  This agile scenario analysis conducted in partnership with the Ministry of Finance, Planning and Economic Development and The Bank of Uganda explored the potential short and mid-term economic effects the pandemic would have on the key labour segments. Using additional insights from ongoing economic recovery efforts, the team also identified the potential role various sectors could play in strengthening the inclusiveness of the country’s recovery efforts.

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                  Assessing the Economic Resilience of Ugandan Households During COVID

                  Assessing the Economic Resilience of Ugandan Households During COVID

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                    This phone-based survey conducted between April 2020 to September 2020 over five waves provides a detailed analysis on the resilience of the sample surveyed. It demonstrated:

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                    Highlights: Impact of COVID-19 on the economic resilience and financial behaviour of Ugandans

                    Highlights: Impact of COVID-19 on the economic resilience and financial behaviour of Ugandans

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                      FSD Uganda partnered with the Ministry of Finance, Planning & Economic Development and undertook a COVID-19 tracker survey which traced the impact of COVID-19 on livelihoods, financial behavior, and social responses of Ugandans. The phone-based survey was conducted in 5 waves between April and September 2020.

                      Similar surveys were conducted by the FSD Network in Kenya, Rwanda, South Africa, Nigeria, Zambia, and Ghana. The COVID-19 Tracker explored composite data sets from across the continent.

                      This highlights document is based on an analysis of data from the five waves of the tracker survey and presents insights on how the pandemic continues to affect Ugandan adults across several domains.

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                      FI4R Diaries Round I Insights: Linking Refugees to Formal Financial Services

                      FI4R Diaries Round I Insights: Linking Refugees to Formal Financial Services

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                        By The Financial Inclusion for Refugees (FI4R) team

                        Financial services are an important avenue for refugees to save money, access loans, and manage life shocks. However, many of them struggle to access finance because of legal barriers, lack of identity documentation, lack of credit history in their new locations, or collateral as security. Despite the challenges they face in accessing formal finance, refugees have found ways around financial exclusion. They save in savings groups, borrow informally, and receive remittances. As part of a financial diaries[1] study started in September 2020 by BFA, we spoke to 48 refugee households in Uganda to understand their financial lives over the course of a year. This blog shares the initial insights from the financial diaries research in Nakivale and West Nile refugee settlements.

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                        Unlocking the Potential of Uganda’s Housing Value Chain Through Strategic Partnerships and Collaboration

                        Unlocking the Potential of Uganda’s Housing Value Chain Through Strategic Partnerships and Collaboration

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                          By Jimmy Ebong and Maria Nkhonjera
                          Uganda’s Financial Sector Development Strategy (FSDS) estimates the country’s housing deficit to be 1.6 million units, with an annual requirement between 180,000 and 210,000 units. Given rapid rates of population growth and urbanisation, a widening housing need may overwhelm cities in the near future. Uganda has the third highest population growth rate in Africa (at 3.6%), while the country’s urbanisation rate is projected to be 5.6% per annum. Urban households are expected to grow to 3.8 million in 2025, from 2.9 million in 2020 – a 31% increase. Uganda’s urban areas are therefore poised for a rapid increase in households, implying a huge demand for adequate, affordable housing. Only 44% of the urban population own their dwellings[1], while the 2018 FinScope Survey indicates 19% of adults aspire to acquire a house.

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                          Regulating for Innovation Supervisory Toolkit

                          Regulating for Innovation Supervisory Toolkit

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                            The fast-paced changes in the financial sector are primarily driven by innovation and advancements in technology. Proactive engagement with the market will help policy makers and regulators build their understand of trends and allow them to effectively assess the opportunities new technologies present against any emergent risks.

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                            FI4R Diaries Round II Insights: How Refugees Perceive and Cope with Risk

                            FI4R Diaries Round II Insights: How Refugees Perceive and Cope with Risk

                            By The Financial Inclusion for Refugees (FI4R) team

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                              This is part two of an ongoing series of insights from a financial diaries study undertaken with refugees in Uganda, focused on their ability to cope with risks. The respondents are drawn from customers served by three financial service providers: Equity Bank Uganda, VisionFund Uganda, and the Rural Finance Initiative.

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                              Cooperatives as Engines of Transformation

                              Cooperatives as Engines of Transformation

                              By Anthea Paelo

                              Cooperatives continue to be an important engine for economic productivity and growth in countries like Uganda. They play a critical role in mobilizing savings, increasing access to credit, and facilitate various activities along production value chains, including procurement, storage and distribution. Where, for example, a farmer might find it challenging to access a tractor to plough his fields, or credit to purchase seeds, as a part of a cooperative he can access these inputs more readily and at much better terms. It is perhaps for this reason that as of January 2020, agricultural cooperatives numbered over 9,000, double the number just twelve years ago1.

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