MICROFINANCE PAPER WRAP-UP: “Analysis of the Strategy of Microfinance for Financial Inclusion of Refugees,” published by the European Microfinance Network

By Amna Malik, Halil Orhan, Halil Fatih Akgul, Altay Elçin; published by the European Microfinance Network; July 2019; 7 pages; available at https://www.european-microfinance.org/sites/default/files/document/file/6_Analysis%20of%20the%20Strategy%20of%20Microfinance%20for%20Financial%20Inclusion%20of%20Refugees.pdf

Turkey is host to an estimated 4 million refugees, more than are living in any other country. This paper assesses “the feasibility of microfinance as an appropriate strategy for the financial inclusion of refugees in Turkey.” The authors draw on the experience of the Turkey Grameen Microfinance Program to identify some of the risks of lending to refugee populations and steps that can be taken to mitigate them:

It is possible that, instead of being used for income-generating activities, borrowed funds may be used for unapproved purposes such as to repay other debts. This may be mitigated by visiting the borrower’s place of work to assess how the credit is to be used.
Excluding local residents from lending programs can create resentment. This may be mitigated by issuing loans to groups whose members span both the local and refugee populations.
Refugees may move away, making recovery of loan repayments significantly more challenging. This can be mitigated by assessing a loan applicant’s level of integration into the local community, her experience level in the sector in which she wishes to use the credit, and information from governmental bodies regarding the applicant’s past movements.

Although the authors highlight various risks of lending to refugees, they emphasise that refugee populations are one of the most vulnerable groups in society and thus can benefit greatly from credit. They argue that this, coupled with existing evidence that refugee populations can use credit productively, constitutes a strong case for exploring the use of microfinance as a strategy for working with refugees in Turkey.

By Jolene Khor, Research Associate

Sources and Additional Resources

European Microfinance Network publication
https://www.european-microfinance.org/sites/default/files/document/file/6_Analysis%20of%20the%20Strategy%20of%20Microfinance%20for%20Financial%20Inclusion%20of%20Refugees.pdf

European Microfinance Network homepage
https://www.european-microfinance.org

Turkey Grameen Microfinance Program homepage
http://tgmp.net/

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