Special Report: Uniting Refugees, Locals via Lending Groups: European Microfinan...

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Nov 2016
Global , November, 16 2016 - Many MFIs consider targeting refugees based on their social mission. However, given the similarities of refugee and non-refugee populations, there is often a business case to serving this market segment as well. This is particularly true in places where financial services are more highly saturated.

Among today’s opening meetings of European Microfinance Week was a working session on serving refugees 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 statistics to counter some of the common misconceptions discouraging microfinance institutions (MFIs) and their funders from serving refugees. Key among these is  that the majority of refugees have been in the same location for over 10 years. And two thirds of refugees do not live in camps, although even those who do often are potential consumers of financial services. For example, Syrians in the Jordanian camp Za’atari spend USD 7 million per month on goods and services.

Ms Hansen cited research indicating that the financial needs and habits of refugees are in fact very similar to those of MFIs’ traditional clientele. Refugees only move a bit more often than locals. And refugees use technology at a slightly higher rate than non-refugees. Their businesses often support local suppliers, and they often have international ties to markets in their home country. She argued that there is no evidence that portfolio-at-risk (PAR) ratios are higher among loans to refugees.

Many MFIs consider targeting refugees based on their social mission. However, given the similarities of refugee and non-refugee populations, there is often a business case to serving this market segment as well. This is particularly true 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, a program manager for the Congolese arm of 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.



Source : MicroCapital
 

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