Authors: Jacqueline Mbabazi and Flavia Bwire Nakabuye.
On March 14, e-MFP was pleased to launch the European Microfinance Award (EMA) 2024, which is on ‘Advancing Financial Inclusion for Refugees and Forcibly Displaced People’. This is the 15th edition of the Award, which was launched in 2005 by the Luxembourg Ministry of Foreign and European Affairs, Defence, Development Cooperation and Foreign Trade, and which is jointly organised by the Ministry, e-MFP, and the Inclusive Finance Network Luxembourg, in cooperation with the European Investment Bank.
In the eighth of e-MFP’s annual series of guest blogs on this topic, The Association of Microfinance Institutions of Uganda (AMFIU) describes the challenges its member organisations face in serving forcibly displaced people and refugees, and some of the financial products and other services that can help mitigate the difficulties that displacement can bring.
AMFIU is an umbrella organisation, founded in 1996, of currently 172 microfinance institutions in Uganda, providing a common voice for these organisations, influencing government policy, sharing information and experiences between members, and forging links with other national and international actors. We at AMFIU operate in possibly the most active and dynamic market for financial inclusion of forcibly displace people and refugees in the world, and many of our members work to serve FDPs as well as the host communities around them.
With this context comes unique needs and challenges – and they are not subject to ‘quick fixes’. Being a refugee is generally perceived as a temporary or transient state. However, most causes of forced displacement do not dissipate within a short time, and many people end up being refugees for prolonged periods – sometimes decades. Studies show that more than 77% of the refugees in Uganda have been resident there for more than a decade. Uganda is currently the largest-refugee hosting country in Africa, and the fifth largest  globally. More than 900,000 refugees have fled to Uganda from South Sudan; nearly 450,000 hail from the Democratic Republic of the Congo (DRC); 51,000 are from Burundi; and the rest are from Rwanda, Somalia, and other African countries. UNHRC data indicates that as of March 31, 2024, the total number of refugees in the country is over 1.6 million, of which almost 50,000 are asylum seekers.
Despite various efforts aimed at improving living conditions for refugees in Uganda, there are still barriers to integration, as evidenced by numerous anecdotal reports that suggest a large proportion of refugees are still highly dependent on the support of humanitarian agencies and have yet to be able to make progress towards self-reliance.
Most refugees have no access to formal financial services, and this creates an enormous hurdle on their way to self-reliance and economic independence. They lack a safe place to save and receive money, have much fewer options to make payments or access loans and therefore cannot fully participate in a country’s economy or build a stable life for themselves and their families.
According to a study conducted by U-Learn, UK Aid and Cash Working Group (CWG ) financial services for refugees in Uganda, levels of literacy in the refugee and host communities are low. Nearly two- thirds of refugees (66%) and host community members (65%) reported not being literate. When disaggregated by gender, 51% of male refugees’ report being literate — compared to only 25% of female refugees — and 40% of male host community members — compared to 29% of female host community members. The same study further probed the business, financial and digital literacy skills of the refugees and host communities and the findings revealed that the majority of refugees and host community members do not have knowledge on personal financial management issues and business skills but report being able to use basic phone functions — including making and receiving calls and topping up airtime — this proportion decreases for more complicated tasks, with obvious implications for mobile money use.
In order to deepen financial inclusion for refugees and host communities to enhance economic empowerment and reduce reliance on unsustainable donations, AMFIU in collaboration with its members is employing various channels to reach this population that include: conducting research to establish the financial needs of the communities; capacity building to help make the refugees attractive to the financial institutions; and provision of financial services by the members that are MFIs and savings and credit cooperatives. The financial institutions are reaching the refugee communities through establishing physical branches in the refugee camps, using digital platforms, establishing satellite offices and using agents.
Common financial products that are provided include money transfers, loans and savings. Access to loans however still faces challenges as it requires much more personal details about the applicants, compounded by the issue of lack of acceptable identification documentation for refugees, collateral requirements for the larger loans, and the broader uncertainty related to being a refugee, which is perceived as risky.
To deal with these challenges, AMFIU works in collaboration with various stakeholders in the ecosystem including government, development partners and NGOs as a successful individual intervention is close to impossible. There is need for support that can prepare and enhance the status of refugees to be a more attractive target segment for financial institutions. Some interventions that AMFIU is implementing include ‘mindset change’ training, business skills and entrepreneurial skills training, and digital literacy and financial literacy, among others. The efforts of financial institutions need to be complemented by other stakeholders whose mandate may allow for more time and resources allowing the institutions to concentrate on their core business of providing financial services.
Evidence from the field indicates that providing financial literacy knowledge resulted in refugees opting for access to financial services after attending financial literacy training. AMFIU worked with one of its members to support knowledge building in financial literacy in the refugee settlements of Nakivale and Kyangwali. Of the 2,900 people trained in Kyangwali camp between March and June 2024, 14% opened savings accounts on the same day of the training to access formal financial services.
In a meeting held between AMFIU and the General Manager of another of its organisational members based in Koboko district in northern Uganda, with 78% of its customers as refugees, he emphasised the urgent need for capacity building for their customers and potential customers in the refugee settlements and host communities in order for them to extend credit to them with comfort, well knowing that the credit risk levels have reduced because of the capacity built in handling credit and professionally managing a business. The need for more such collaborations and stakeholder synergies is paramount to expedite the refugee financial inclusion process, allowing for building resilient and self-sustaining communities for refugees making them less vulnerable. These concerted efforts can enable financial institutions to remain focused on supply of their core financial services, while other stakeholders support the demand – building a resilient and reliable base of informed customers.
Jacqueline Mbabazi is the Executive Director of the Association of Microfinance Institutions of Uganda (AMFIU). Her experience spans over 15 years in the areas of financial inclusion with specific focuses on microfinance, rural development, and support for small- and medium-sized enterprises.
Flavia Bwire Nakabuye is the Manager Membership and Financial Inclusion for the Association of Microfinance Institutions of Uganda (AMFIU). She has extensive experience that spans over 18 years implementing initiatives that aim at increased access to financial services for the underserved vulnerable sections of society.
