FinDev Blog

Are Refugees Too Risky for Financial Inclusion?

Opportunities and challenges in serving refugee communities in West Nile, Uganda
Woman sorting tomatoes for her customer at the marketplace. Photo credit: VisionFund International 2019.

Large numbers of vulnerable communities continue to flee their home countries due to war and conflict. Settling in refugee camps, they are perceived by many financial institutions as too risky to serve. But without economic opportunities, do these communities have a fighting chance to survive and thrive?

VisionFund International, along with its local microfinance institution VisionFund Uganda and other partners, recently completed an assessment of the financial capacity of savings groups situated in some of Uganda’s largest refugee settlements to determine the viability of providing formal financial services to these community groups. The assessment analyzed the savings and lending capacity of host and refugee communities as well as challenges the population faced. The findings of the assessment were presented in the report, Contextual and Financial Assessment of Savings Groups in West Nile, Uganda, and in a recent webinar hosted by VisionFund in honor of World Refugee Day on 20 June.

Our journey to the West Nile

The West Nile region borders South Sudan and hosts more than 800,000 South Sudanese refugees. We selected areas where our parent organization World Vision was already implementing humanitarian and development projects, and our aim was to assess the capacity of the existing savings groups and farmers groups based on their records and the savings cycle they were in. Our staff at VisionFund Uganda worked with stakeholders including other NGOs, as well as the coordinating organizations UNHCR and OPM (Office of the Prime Minister) to gather information from these groups.

From September to December 2018, VisionFund assessed 215 groups, representing more than 6,700 individuals in West Nile, Uganda. We analyzed the savings and lending activity, the primary sources of income and livelihood activities, and the opportunities and challenges the population face. Because of the increasing importance of mobile payments, we also looked at the presence of mobile money agents as well as their liquidity in each of the locations surveyed: Arua, Adjumani, Moyo and Yumbe.

What are the challenges faced by refugees and host populations?

Across all locations, we found that refugees and host populations experienced the following challenges:

  • High transport costs to reach near towns or markets.
  • Lack of storage for produce.
  • Insufficient capital for business.
  • Lack of security or collateral required by formal financial institutions.
  • Price fluctuations and unstable markets.
  • Drought and other irregular weather patterns.
  • Lack of business skills.

What are the opportunities?

Despite all of these challenges, the detailed assessment results revealed that these communities had enough financial capacity to merit the presence of financial service providers, especially in those areas where there is currently limited access. Opportunities include:

  • Markets: The presence of daily and weekly markets in the settlements, some bigger than in the nearby towns.
  • Technology: Availability of fairly good network coverage and an increasing network of mobile money agents.
  • Culture: Existence of entrepreneurial groups and business activity, especially trade and a savings culture, i.e. the capacity to save and lend.

How do we respond to these challenges and opportunities?

In response to these opportunities, VisionFund Uganda will be providing a Savings Group Linkage Loan for refugees and host communities in West Nile, Uganda. Since it will be managed as a group loan, rather than as individual loans, it is important that the savings group members know each other and have been working with each other for at least two years. For this reason, we will work with already existing groups who have been trained by NGOs, and we are already working with the NGOs to make sure that financial literacy trainings are incorporated early on as they form groups.

Then, building on the work done by the NGOs, we will continue with financial literacy trainings and screening. Groups will be assessed against the product criteria, using for example a group recognition test which shows whether the groups have strong procedures in place, are following their own methodology and have the capacity to handle extra capital. Once the selected groups receive their loans, they will continue to follow internal lending and savings procedures while being assisted by VisionFund Uganda’s field officers who will provide Training of Trainers (ToTs) to group leaders on financial literacy education.

There will be no need for the clients to come to the branch. The loan registration will be done in the field with an application on the field officer’s phone, and sent to the branch. All loan disbursements and repayments will be made using mobile money. The disbursement will be made to a “group phone.” Then, the SIM card-holder, the PIN-holder and a member of the executive team (e.g. chairperson) will go to a close mobile money agent and cash out. The same goes for the repayment. Group members will repay at a mobile money agent and send the repayment via mobile money to the branch. At this time, we have started promotion and screening in Moyo, where we opened our first branch in West Nile in May 2019.

So, are refugee communities ready to receive financial services?

The findings presented in our report point us to a “yes.” Financial capacities are similar among refugee and host community groups. International and local NGOs are offering capacity-building for refugee and host populations on the ground, and we see a strategic shift from humanitarian response to self-reliance, which includes improving access to financial services and boosting livelihoods and income of families.

It’s time to work together to help restore hope and dignity in these communities. And it’s time for the financial sector to step up and provide the financial support needed by families striving to build back their livelihoods.


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06 January 2020

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