European Microfinance Week 2018

DISCUSSION

The panel discussion focused on entrepreneurship support to refugees. When asked by the moderator about the challenges faced by IDRs in Afghanistan in terms of entrepreneurship and access to finance, Mir SHEKIB indicated that the informality of the Afghan economy can be a “blessing-in-disguise” as there is no license or business permit needed to operate in many trades. However, IDRs lack IDs, credit history and asset ownership are needed in order to access financial services. Moreover, as IDRs are dispersed across the country it is difficult to serve them. Shekib also highlighted concerns on MFIs that have around flight, e.g. IDRs leaving areas where they are currently settled.

Swati MEHTA continued on the issue of rules and regulation, indicating that the situation in Germany is very different. It is not easy to start a new business in its highly formalised economy, in particular considering language barriers and limited support networks. Moreover, financial and non-financial (employment agencies) service providers lack trust in entrepreneurial capacities and whether entrepreneurship is the right route to sustainable livelihoods for refugees. When accessing finance, refugees also face issues around their credit history, their resident permit and a limited (micro)finance offering, due to size of the sector and reluctance among employment offices to extend business development grants.

Andrea LIMONE reflected on the difference between national and migrant borrowers, indicating that these are mostly related to context, where migrants operate within a community which can be leveraged as “moral guarantees”. Ewa BANKOWSKA highlighted the importance of connecting migrant support organisations with financial service providers around migrant entrepreneurship. Cooperation between these service providers can help people “talk the same language” and benefit from non-financial institutions’ better insights on this population. It allows for innovation, for example leveraging social capital and moral standing as guarantees. Bruno DUNKEL then provided insights from the COOPEst fund in Central and Eastern Europe. He indicated that while refugee populations are relatively small, interest is high. He underlined a need to show impact and proof of concept.

The discussion then turned to opportunities in serving refugee populations. Shekib indicated the importance of national strategic objectives in providing direction to, and incentivising serving IDRs. He mentioned the National Financial Inclusion Strategy which, in cooperation with UHNCR, sets specific objectives for IDRs. Moreover, financial literacy and business training and supporting MFIs to serve IDRs in terms of monitoring mobility, leveraging community organisations, and solving license issues has proved effective.

Mehta added her insights on how regulators and MFIs can do better. She stressed that understanding and segmenting the population is vital, for example between refugees requiring non-financial services and those that would benefit more from financial services. Within the latter category, scale and timing of financial services have to be adjusted to specific needs. In essence, similar products can be offered to migrant and host populations.

Mehta continued that segmenting can also help to build a business case, leveraging the potential of more entrepreneurial migrants. Hiring loan officers from migrant communities can also help. Finally, FI assessment models need to change from legacy systems around assets and credit history, to alternative data for loan assessments. Experiences from the developing world can offer great inspiration. Bankowska added that applications have been developed to reconstruct lost credit histories and identities, or to use alternative payments (such as utilities) as proof of creditworthiness. 

Looking at risks, Limone indicated that performance is equal between migrants and Italian nationals and even better for business loans. For migrants, microenterprise is often a last resort. The commitment to succeed is strong and supported by the community. Limone mentioned that refugees are a small part of their portfolio for business loans as refugee entrepreneurship is constrained by language barriers and knowledge of business opportunities and financial systems. In such cases, credit might hurt more than do good. Dunkel added that lenders have a responsibility to guard against adverse effects of credit and need to understand the context in which migrants, and in particular refugees operate.