Advancing access to financial services for refugees (Part II) Panel 2: Engaging FSPs - funding and other market-based incentives

  • Lene M.P. HANSEN, Financial Inclusion Specialist
  • Speakers
  • Resi JANSSEN, Cordaid Investment Management
  • Philippe GUICHANDUT, Grameen Credit Agricole Foundation

    Lene M.P. HANSEN opened the panel addressing the question “How do we encourage more Financial Service Providers (FSPs) to serve refugees”? She highlighted three common FSP constraints to serve refugees. Firstly, in terms of reputational risk, FSPs are concerned about reprisals caused by societal fears and prejudices reflected in policies and media. Secondly, FSPs face real or perceived legal barriers. Thirdly, ignorance - the lack of familiarity with refugees, information and relevant data - fuels perceptions of refugees being “high risk” clients.

    Although an ecosystem is emerging with UN agencies entering into partnerships with the private sector, increased investor engagement, and (International) NGO commitment to market-based approaches to support refugees, advocacy, coordination and information sharing still is needed. She mentioned how national financial inclusion and integration strategies can help overcome reputational risks. Advocacy and assistance to national governments and regulators can help improve the legal issuance and acceptance of refugee IDs, their right to work or to launch own businesses, and their freedom of movement. She also highlighted that (digital) innovations may help to reduce legal constraints. But the best way to overcome stereotypes about refugees as high risk clients is for FSP staff to actually meet refugee entrepreneurs.

    FSPs lack information and ask for case studies, guidelines, toolkits and data to support the business case. In addition, HANSEN mentioned the need for funding for technical assistance, guarantees or other de-risking strategies, and finance for pilots to help break through prejudices, ensure buy-in at all levels of the FSP, and evidence-based documentation to show how serving this new client segment can help to grow inclusive portfolios.

    Resi JANSSEN presented Cordaid Investment Management’s first experiences with investing in cross-border growth and refugees. They stepped in on the request of the FSP RUFI from South Sudan, one of their investees. Up to 90% of RUFIs clients fled across the border to Uganda in 2016. Initially its cross-border activities were focused on loan recovery, but RUFI quickly discovered a continued need for financial services among refugee communities and decided to open a branch in Uganda with the support of Cordaid. Although the portfolio is small, first results show financial viability and the importance of service delivery to the refugee population.

    She also highlighted the Remedy Project which focuses on entrepreneurship, job creation and income generation within the camps. Beneficiaries are supported to develop business proposals, are trained in their selected trade, and are provided with assets, co-financed by savings. First results indicate high demand and good performance. In terms of success factors, JANSSEN mentioned that RUFI was already known by clients and understands their context, both in terms of origin and culture, and is the only FSP present within the refugee settlements in Northern Uganda. The intervention is responding to a strong local need for credit, and with a recent agent banking MOU with the Ugandan Centenary Bank, RUFI can now also offer remittances and savings products.

    Philippe GUICHANDUT explained Grameen Crédit Agricole Foundation’s (GCAF) implementation of a SIDA-UNHCR debt financing and TA programme in Jordan and Uganda. Initial studies by MicroFinanza on financial and non-financial needs of refugees in Uganda and Jordan showed that demand was more or less similar and pretty high even though the contexts are quite different between Uganda (rural, favourable legal environment for refugees) and Jordan (urban, restrictive). Guichandut presented the differences in financial practices found, with VSLAs being common in Uganda, not in Jordan. In both markets, however, the common FSP concern of flight risk was disproved, as the majority of refugees do not intend to leave the host country.

    The main take-aways from the studies were the importance to develop and reinforce partnerships in the field, not to create products specifically for refugees, but to screen their business ideas and leverage the high entrepreneurial spirit while overcoming FSP concerns. The next steps, with implementation starting in 2019, are to work with three to four FSPs in Jordan and Uganda combining debt financing by GCAF and TA funded by SIDA. This TA will focus both on the FSPs, financing staff training, marketing and branch development, and on refugee clients, offering financial education, business support and business coaching.

    Jim BRANDS presented Nasira, a programme supporting financial inclusion of migrants, youth and women. It was co-created by the EU and FMO and is awaiting final approval. The programme is structured in a way to de-risk these populations at different levels with MFIs or other financial service providers assuming risks up to regular risk levels and excess risks assumed by FMO. 

    Brands mentioned the strong data focus of the programme, which is aimed to build track records and trust in the new client segments among FSPs, to enable them to work without guarantees in the future. Nasira includes a TA program to help FSPs with implementation, and in particular to improve risk understanding and management. 


    Hansen proposed the following vision of the future: “By 2020 refugees and other foreign born residents (FBRs) will be considered an attractive market segment by FSPs” and asked the audience to vote on the EMW conference app. Two thirds of the audience voted in favour. JANSSEN added that to achieve this vision we need to show that refugees do not threaten the livelihoods of host populations, and existing research provides a good start. BRANDS added that legal barriers remain, but FMO’s outreach to lenders also showed that there is a lack of data to justify investments into the segment. Guichandut’s research outcomes also pointed in this direction, in particular showing the hand-holding TA needed to convince FSPs, help them develop more inclusive portfolios, and show that it works in practice. Concrete proof will be needed, Janssen added, to make sure FSPs engage with this new segment on their own accord, not because funding from donors is available.

    Hansen closed the panel by reminding us that 40 years ago the poor were considered unbankable, but that microfinance has disproved the many misperceptions about their demand and performance as FSP clients. She expressed hope that in the coming years, the inclusive finance industry will be able to overcome the very similar objections to serving refugees and other foreign-born residents in our markets and serve them as well.