Refugees: A Growth Opportunity Hiding in Plain Sight

Over 120 million people around the world have been forced to flee their homes. Among them, nearly 43.7 million are refugees. This population is driven by economic hardship, war, violence, human rights abuses, persecution and climate change, among other factors. Refugees face many difficulties in getting to their host countries, settling in, and beginning to participate in their new host community’s economy. One of the main challenges they face is accessing finance to start and grow businesses.

What barriers do refugees face in gaining access to financing?

Many financial service providers (FSPs) consider refugees to be unbankable for multiple reasons, including:

• Lack of credit history in their new country.
• Lack of collateral and guarantors.
• Lack of proper documentation such as an official ID card.
• Their stay in the host country may not be permanent.
• Prejudices against refugees, for instance that they are less trustworthy.

These factors certainly put refugees in a difficult position, but do they tell the whole story? Or do they simply provide an excuse for FSPs to avoid a complex target group? In reality, refugees often have more experience and skills to run successful businesses than locals do. They can contribute to the economy of their host countries and have new ways of looking at opportunities, but they often cannot access the resources to achieve their business plans.

This unseen and underserved population represents a missed opportunity—not just for refugees, but for FSPs and host country economies, too.

Studying the financial lives of refugees and debunking misconceptions

At L-IFT, we have worked with refugees in Ugandan settlements through the Refugees, Innovations, Self-reliance and Empowerment project (RISE) since 2019. Our work with the refugees there – who came from Democratic Republic of Congo, Burundi and South Sudan - focused on better understanding their financial lives and ambitions using the financial diaries methodology to collect longitudinal financial and non-financial data from the refugees. We then worked with them to design and implement appropriate financial interventions, including financial literacy training, facilitating access to bank accounts, and creating pathways for them to access finance for their businesses.

This experience – which involved following real people over time, tracking how they earn, save, spend and plan – taught us a few surprising things about refugees which counter misconceptions FSPs may have about them:

1. Refugees are a profitable subsection of the population for FSPs, showing high repayment rates.
2. Refugees represent a diverse group with widely varying experiences and knowledge. They can range from subsistence farmers with low levels of education to highly skilled farmers and other professionals, such as former business owners and former high-level government officials. Because they are new in the host country and bring with them different skills and views, they are quick to see opportunities and grow faster.
3. Refugees show tremendous resilience, managing to create income and employment for themselves and others. In our research, they mostly employed other refugees, including refugees from countries other than their own, and with some employing host country citizens.
4. Refugees take initiative and are proactive. In both the Kiryandongo and Nakivale settlements in Uganda, refugees were quick to set up successful savings and credit associations among themselves. A third of the refugees who participated in the research were members of these associations. The level of participation in savings groups was as high as in host communities, and the savings groups even set up a federation for inter-group borrowing and lending.

Here’s the kicker: Refugees weren’t just scraping by—they were building businesses, hiring others, and forming financial groups faster than many expected. And they weren’t just helping people from their own country—they were crossing boundaries, collaborating, and including host community members, too. It’s not an aid story. It’s an entrepreneurship story.

A triple win for refugees, FSPs and host countries

Data and insights have shown how attractive refugees are as borrowers and innovators. As a diverse group, they need to be studied and segmented more carefully, and FSPs need to tailor services to the specific segments. Host country FSPs have an opportunity to reach new client groups and serve them profitably - it’s a growth opportunity hiding in plain sight.

When asked about the greatest challenges they faced in rebuilding their lives in their host country, refugees in our study mentioned lack of access to capital as the biggest challenge, together with lack of job opportunities and access to land. If financial service providers address the first challenge, then the next two - jobs and access to land - can follow. Understanding these challenges and creating the right pathways for refugees to gain access to finance will not only ensure that they can develop sources of income and employment opportunities, but also that they’ll begin to actively contribute to the economy of their host country.  

The real issue is not that refugees are unbankable—it’s that systems aren’t built to recognize their value. And that’s something we can change.