Reimagining settlement communities: responding to the growing financial needs of Uganda’s refugees and their hosts

By David Darkwa & Fred Ndiwalana.

Mama Nicole is what most academics would call a ‘Forcibly Displaced Person’ – a refugee. Three years ago, she fled her village in Northern Kivu in the Democratic Republic of Congo when fighting broke out between two armed groups. Upon arriving in Uganda, she chose to settle in Kampala where she felt safer mingling in the city and being proximate to good schools and reliable health care for her four children. Settling in, however, has not been easy. Today, she rents a two-room house in Katanga, one of the sprawling slums of Kampala.  Two of her children go to nearby schools and the other two have dropped out.

New lives, new tools: The financial lives of refugee communities

Observations by BFA Global based on initial field research 

Access to financial services and a steady source of income are key concerns for displaced populations when they begin to settle in camps. Understanding how refugees cope as they grow their livelihoods, incomes and adopt both formal and informal financial tools can provide insights on what financial services they need to strengthen their resilience.

In August 2019, The Financial Inclusion for Refugees Project (FI4R) was launched by FSD Uganda and FSD Africa in collaboration with BFA Global to conduct refugee financial diaries in Uganda and provide insights into the financial strategies employed by refugees over time to build their livelihoods and manage their finances. The project will also support financial service providers (FSPs) to offer financial services to refugees and host communities. This is the first Financial Diaries project with refugees that will provide a detailed picture, over the course of a year, about the incomes, expenditures and financial flows of refugee households. The project will also reflect on how financial service providers engage with these households.

The FI4R project kicked off with extensive focus group discussions and individual interviews across Kampala, Nakivale, Bidibidi and Palorinya camps. Several observations stood out from this initial field research.

Financial and human capital determines how refugees are able to support themselves

The financial and human capital that refugees arrived with in Uganda was a factor in determining their ability to support themselves, their families and grow their assets and income sources. These findings are similar to observations made during our research in Rwanda on Refugees and Their Money.

Access to any financial services is key

Refugees have significantly expanded their use of formal financial instruments since they came to Uganda – particularly mobile money and savings groups. However, these tools were not without risk. Many refugees did not have strong enough livelihoods to keep up with savings group contributions. In addition to this, the risk of sim cards being shut-off  left refugees unsure of whether they would lose money saved in their mobile wallets, a common savings strategy. Several respondents, especially those who operate businesses, narrated how they had tried to access formal financial institutions but had their requests rejected because of the stringent government policy not to accept refugee IDs or other non-approved forms of identification for the (Know Your Customer) KYC process.

Refugees leave home with little or nothing

The eagerness to take up financial products would have been hard to believe when these refugees first came to Uganda. Most respondents came into the country with close to nothing, perhaps only in possession of a small phone that was likely broken or even stolen by the time they reached Uganda. Many left their home countries very quickly as a result of violence or threats, which afforded them very little time to prepare. Most of the refugees walked long distances, or at least part of the way, and relied heavily on strangers to get to either Kampala or the camps.

Small amounts can make a difference in how quickly refugees can get on their feet

Jack* came from Congo in 2015 with CDF 500,000 ($295) in his pocket, which he changed for 1 million UGX ($270) at the border at Bunagana*. He spent 400,000 UGX ($100) on food and a bus to Nakivale refugee settlement. This left him with 600,000 UGX ($160) to start a business – just enough for him and his wife to start making and selling local sorghum-based drinks. He estimates that they now make a profit of about 10,000 UGX ($2.7) per day which supports the couple and their seven children. Jack was able to save enough from these profits to buy a motorcycle. Leah’s* story follows a similar path. She lives in Bidibidi refugee camp with her five children. She left Juba, where she was a restaurant manager and came to Uganda in 2016 with only a small phone and two cooking pots. When UNHCR gave her two cooking pots, she was able to sell them and used the proceeds to start a business selling sugar and salt – pots are given to all incoming refugees. Leah has since graduated to selling charcoal, and has been able to buy five goats and six local-breed chickens.

Savings groups are beneficial

Leah has immensely benefited from her membership in savings groups in the Bidibidi settlement. Initially Leah participated in a rotating savings group with other women selling charcoal (her mechanism to buy the goats), and then from the Accumulating Saving & Credit Association (ASCA) that the rotating savings group morphed into. Currently, she contributes 5,000 UGX ($1.30) per week and has been able to borrow up to 200,000 UGX ($54), paying it back within two months. Early in 2019, she joined a different group of 36 members based in the same area of the settlement camp. This group is sponsored by an NGO which provided them with seeds to grow eggplants and onions. When they sold their produce for 400,000 UGX ($100), the NGO gave the group a grinding mill, encouraging them to start a savings group with the 400,000 UGX. The grinding mill makes a profit of about 30,000 UGX ($8) per month, which goes into the savings group to increase the loan sizes it is able to offer members. However, it must be said that Leah is an exemplary example of a savings group participant. Other women we interviewed had not yet contributed anything to their savings groups or were lagging in their weekly contributions. Challenges that have contributed to the delay in remitting contributions include the lack of adequate income-generating activities within the settlements. Some refugees relied on working for NGOs to either sell them goods or perform small services such as fetching water. This work can prove temporary when projects are complete, and institutions leave.

Livelihood assets are key for settling down

The livelihoods refugees create from the human capital they bring from their home countries determines how they settle down. We found a keen “livelihood agility” among some people who had worked in a diverse number of jobs in their home countries – one man in Nakivale farmed, then operated a Boda Boda taxi, finally taking a job as a cleaner in a Vodacom shop. Leah, above, had never sold charcoal, but she understood the basic concepts of running a business from her time as a restaurant manager in Juba.

This “livelihood agility” is less present with Amara*, a 35-year-old woman from Eritrea who doesn’t write (even Arabic) or speak English or any Ugandan dialect. Amara was married in 1998 to a soldier and she had seven children with him – four are still alive and three died. She was a full-time mother and housewife. She came with her four children to Kampala at the beginning of 2019. Luckily, her husband had built networks with a number of journalist friends while he was in South Sudan. One of them was based in Kampala, and he was able to reach out to the network of Amara’s husband’s friends to support her. In all, Amara received about 11 payments from them through a woman in Kampala, totaling about USD 2,000 (7 million UGX). With this capital, she set up a small shop where she sells powdered and liquid soap, sugar and fresh bread and makes tea and coffee. However, the shop is doing badly and the funds from her husband’s network have stopped. She is behind on rent, even after the landlord decreased it from 480,000 UGX ($130) per month to 380,000 UGX ($103), and she does not have enough money to send the children to school. She is now considering going to one of the settlement camps.

Stigma and fear are constraints to livelihoods

Even the refugees who are doing relatively well face huge risks and their livelihoods tend to be constrained, especially in Kampala. They live in constant fear of threats from people back in their home country while also being harassed and stigmatized by the locals.  This makes it difficult to grow a small business and getting a job is almost impossible. When refugees do get jobs, they are often cheated out of their pay or are sexually harassed.   Because many refugees don’t speak or read the language, they are persistently cheated by landlords, business owners, and mobile money agents.

Access to financial services is still limited

In addition to the everyday risks that refugees experience, they also face challenges from service providers. The most significant example which currently exists is the unexpected de-registration of their mobile money wallets. There have been instances of fake identity documents presented at the points of registration and financial service providers are now concerned that this does not allow them to undertake a valid KYC process. Sim cards have been shut off with refugees losing money in the process. The refugees we spoke to said they often save in their mobile money accounts – the bank was for larger amounts money, which they never seemed to have. One person we spoke with lost 150,000 UGX ($40) after their sim card was deregistered. Without a proper ID, it is very difficult to recover the money or get the sim card turned back on. Additionally, mobile literacy remains a big challenge.  Refugees usually handover their phones to the mobile money agents to transact for them and are constantly taken advantage of because they don’t understand how to use their phones.

In the coming months, we will be tracking the financial flows of refugee households in Kampala and the camps of Nakivale, Bidi Bidi and Palorinya in the West Nile region. As we do, we will learn about the income, expenditure and financial flows of refugee households in Uganda, and share these learning with local stakeholders and the global community.

* Jack is likely to have gotten short-changed as the exchange rate in 2015 was 2.80 and he should have received about 1.4 million UGX.

Real names have been changed.

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By Observations from the Financial Inclusion for Refugees (FI4R) team