Among today’s opening meetings of European Microfinance Week was a working session on the financial inclusion of refugees that was organized by the US-based nonprofit Social Performance Task Force (SPTF) and the Luxembourgish nonprofit European Microfinance Platform (e-EMP). Lene Hansen, a consultant to SPTF, offered evidence to counter some of the common misconceptions discouraging microfinance institutions (MFIs) and their funders from serving refugees. Key among these is that (1) the majority of refugees have been in the same location for over 10 years; and (2) two thirds of refugees are self-settled rather than living in refugee camps. Many camps themselves grow into economic hubs. For example, the 3,000 Syrian businesses in the Jordanian camp Za’atari have a aggregate turnover of USD 7 million per month.
Ms Hansen cited research indicating that the financial needs of refugees – after their initial “arrival” phase – are in fact very similar to those of MFIs’ traditional clientele. Refugees use technology at a slightly higher rate than non-refugees. And refugees often use their ties to their home countries to develop international trade. She has found that MFIs serving refugees experience no significant difference in portfolio-at-risk (PAR) ratios between loans to refugees and loans to other clients.
Many MFIs consider targeting refugees based on their social mission. However, there is often a business case to serving this market segment, particularly in places where financial services are more highly saturated.
Alia Farhat, the business development manager for Lebanese microlender Al Majmoua, described the experience of serving Syrian refugees as they have become more settled in Lebanon. The organization began by using donor funds to offer non-financial services to the newcomers. After spending time to get buy-in from the organization’s Board of Directors, Al Majmoua issued 250 loans to refugees during 2015. Finding the associated PAR to be line with its other loans, the organization expanded to serve 2,200 refugee clients as of October 2016. With USD 1.7 million in loans outstanding to this group, PAR is at 0.46 percent. These loans, most of which are in amounts smaller than USD 1,500, are used for a mix of consumption and entrepreneurship. In an effort to help the refugees access services when they return home, Al Majmoua is building a relationship with an undisclosed MFI in Syria to share credit data.
While the refugees remain in Lebanon, most of their borrowing from Al Majmoua is in the form of group loans. In addition to women who have fled Syria, these groups include Lebanese women. Ms Farhat reports this is helpful in reducing friction between the Syrians and local permanent residents. Government guidelines require that at least half those participating in any livelihoods initiative must be Lebanese.
Mado Kubaki Lufuluabo, who serves as a program manager for Caritas Congo, an NGO in the Democratic Republic of the Congo that is affiliated with the Catholic Church and Italian NGO Caritas, described how her organization links refugees to MFIs. She also recommends that the MFIs include locals within lending groups. The practice is not government mandated, and the groups include fewer local borrowers – about 20 percent. Ms Lufuluabo argued that one key to success is “awareness raising to convince locals that helping [refugees] helps everyone.”
The challenges of serving refugees often lie in the legal system. In Lebanon, the government restricts the sectors in which Syrians may work. In Rwanda, government officials required domestic identity cards to satisfy “know-your-customer” regulations. Allan Waititu, the director of special projects at Kenya’s Equity Bank, explained that it was highly significant when Rwanda began allowing financial institutions to accept identity cards issued by the UN High Commissioner for Refugees.
This story is part of a sponsored series on European Microfinance Week, which is being held through November 18 by e-MFP, a 124-member network located in Luxembourg. MicroCapital has been engaged to cover the event on-site.
MicroCapital Coverage of European Microfinance Week
Serving Refugee Populations: Guidelines for Financial Service Providers (draft)
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