Getting It Right: Providing Financial Services to Refugees
“I attended six vocational trainings including cooking, make-up, how to make soap and hairdressing. But in the end I couldn’t work as I couldn’t buy the necessary equipment. Not even scissors for cutting my son’s hair.”
This testimony came from a Syrian woman at Zaatari Camp in Jordan. She is one of over 200 refugees interviewed in Jordan and Uganda as part of a market study commissioned by Grameen Credit Agricole Foundation and conducted by the consulting firm Microfinanza. The studies, funded by the Swedish International Development Cooperation Agency (Sida), are the first step in the implementation of a joint program between Sida, UNHCR and Grameen Crédit Agricole Foundation designed to expand access to financial and non-financial services for refugees and host communities in Jordan and Uganda.
The research aimed to assess refugees’ demand for and access to financial and non-financial services. While their landscapes differ in terms of market opportunities and regulatory environments, both Jordan and Uganda have protracted refugee populations with similar needs for financial services.
Drawing on the findings from these studies, here we share our top five recommendations for financial service providers (FSPs) willing to contribute to the financial inclusion of refugees.
1. Do not develop specific financial products for refugees.
This recommendation may seem surprising, but findings from the study demonstrate that there are already products on the market that meet the demands identified among refugee clients. You may need to adjust your internal policies and procedures for ID and collateral requirements but there is no need for exclusive “refugee products” to match demand. Just reach out more to the refugees in your area to include them in the products you offer.
2. Find out what type of credit refugees in your area need, and how much.
In Uganda and Jordan, we found that while refugees were borrowing regularly from Savings Groups, friends and family, they were not able to borrow enough to cover their business needs. They wanted access to formal credit, they would prefer individual loans, and most were willing to pay interest. The survey also revealed a need for financing green energy products in settlements, as well as the potential to leverage digital financial services, which are already used by refugees in both countries. In Uganda, where land is reasonably available for refugees, there is also demand for agricultural products, both for individuals and for companies looking for raw agricultural products.
3. Screen their business ideas. Refugees manifest a remarkable spirit of entrepreneurship.
In Uganda, 78 percent of refugee respondents have plans to start or develop their own businesses, and 60 percent have already taken the first steps - using savings, borrowing informally and enrolling in vocational trainings. In Jordan, most refugees prefer to start their own business over seeking employment in the limited available sectors for non-Jordanians. In terms of gender segmentation, about one every four women interviewed in Jordan have strong plans to start or develop their own, mostly home-based, businesses, a proportion which increases to one every three women in Uganda.
4. Overcome the fear of flight risk, as data shows that refugees rarely resettle.
Flight risk is an oft-mentioned concern for FSPs when it comes to considering refugees as a potential target market. However, our studies found that the vast majority of respondents do not have any plans, not even vague ones, to return to their countries or to relocate to another country. Resettlements are also rare within countries. Refugees’ aspirations were much more related to gaining economic independency than to moving on to a new location. Between 2014 and the end of April 2018, only 5 percent of the registered refugee population in Jordan and 1 percent in Uganda have resettled.
5. Consider adding on non-financial services to complement the credit offer.
In both countries, non-financial services – primarily financial education and business management support – are particularly relevant for refugees with limited or no prior experience with credit or running a business. FSPs should apply their client segmentation procedures to assess which refugees may need non-financial service provision. Then, consider partnering with existing specialized NGOs which offer these services, or developing your own curriculum.