Partner Organization: United Nations High Commissioner for Refugees (UNHCR)

Refugees and their money – understanding the enablers of the camp economy in Rwanda

Background

In Rwanda, financial inclusion allows low-income households to build assets, mitigate shocks and make productive investments. It also stimulates local economic activity by financing microbusinesses and is positively correlated with economic growth. Increased use of digital cash transfer technology, that delivers cash to recipients using card-based and mobile phone- based systems, provides potential opportunities for linking relief, rehabilitation and development activities. Humanitarian cash transfers offer beneficiarthe chance to ‘onramp’ to other important services, such as transactional accounts and bank accounts that lead to savings and credit lines.

Objectives

This study details the financial needs of the ‘forcibly displaced people’ (FDP) population in relation to their host populations. It offers insights into how different segments of the FDP population manage their portfolios and how the different stakeholder categories might engage with financial service providers (FSPs).

Key findings

1. Unclear KYC requirements make it difficult for both the refugees and FSPs to interact effectively.

2. NGO-promoted livelihoods, while appreciated, often generate subsistence-level incomes.

3. Credit is needed for business expansion

4. An information and ‘idea gap’ holds back camp resident

Refugees and their money: assessing the business case for providing financial services to refugees

Refugees have a strong need for comprehensive financial services to support their livelihoods. Refugees, like other relatively low-income segments, need: savings or transaction accounts to safely store their income and minimise the risk of theft; loan products to support business ventures and meet other personal needs; insurance to minimise the financial impact of unpredictable events; and convenient access to financial services channels to receive remittances. The refugees’ need for financial services has become even more apparent as the World Food Programme continues to shift its humanitarian support from food assistance to cash-based transfers.

Rwanda has been hosting refugees for over 20 years. In this context of long-term displacement, governments, humanitarian agencies, the development sector and other stakeholders must provide long-term solutions for refugees, such as financial services, which can support market-based livelihoods. FSDA, UNHCR and AFR partnered on this study to assess both the demand for financial services in refugee populations and the business case for Rwandan financial institutions to provide these services.

The study had two objectives: first, to provide market intelligence to build a sound business case for financial institutions to profitably serve the forcibly displaced persons (FDPs) population; and second, to better understand the financial needs of the FDP population in Rwanda to enable financial service providers (FSPs) to effectively target the segment.

This report is the result of a triangulation of four different research activities:  segmenting and sizing refugees as a market for financial services; translating the segments into business cases to assess potential for serving this market; creating profiles of segments based on field research in refugee camps; and assessing the regulatory environment to provide financial services for refugees.

Some of the key findings from the report are:

  1. At the moment, six of the seven camps in Rwanda have cash and the last camp Mahama is likely to
    become cash before the end of the year    .
  2. Contrary to expectations, refugees in Rwanda have enough income to be strong potential customers for FSPs.
  3. The report estimates that extending financial services to the refugee population of Rwanda would expand the market for financial services by approximately 44,000 individuals.
  4. Many refugees have used financial services before and want to use them again, perhaps even more urgently than Rwandan nationals.
  5. BFA’s dynamic business case model suggests the refugee population has as much potential to generate profit for FSPs as the traditional Rwandan population.
  6. One of the biggest challenges refugees face in accessing financial services relates to satisfying the ID requirement for ‘know your customer’ (KYC) purposes.

Notes from the frontier: FSD Africa’s fragile states approach – a learning journey (

Posted on by Kihingu Inc

In early November, FSD Africa brought two worlds together for the first time: taking five prominent financial service providers (FSPs) to Gihembe Refugee Camp in Rwanda to participate in a ‘Financial Product Design Sprint’ in partnership with UNHCR, Government of Rwanda, and Access to Finance Rwanda (AFR). We were also joined by a member of UNHCR from Geneva, the International Finance Corporation and FSD Uganda.

Earlier that week, FSD Africa and BFA presented research on ‘Refugees & Their Money’ to over 20 FSPs in Kigali – highlighting the business case for financial products focused towards refugees (you can find a short summary found here). Philip Kakuru, from Tigo, said ‘With the limited access of the refugees, there was little to know about them, but the sprint design opened our eyes’. These FSPs, along with any others, now have an opportunity to win one of our four £10,000 grants in our Innovation Competition – Financial Services for Refugees in Rwanda.

To read more about the wider FSDA approach to refugee finance, take a look at last month’s blog here.

Day One: Any ideas?

The next day, the five FSPs, chosen through an open competition, began the Financial Product Design Sprint. The FSPs were a diverse group representing MMOs, MNOs, MFI and banks: MobiCash, Equity Bank, Vision Fund, Tigo and Commercial Bank for Africa. This three-day event hoped to challenge misconceptions about refugees, their potential and FSPs to consider a refugee product seriously. The first day began with an in-depth presentation of BFA’s research and details regarding the structure of refugee camps. This was followed by product brainstorming with each FSP, before narrowing down to a select two or three ideas which were fleshed out.

Day Two: What are the financial lives of refugees?

On the second day, these FSPs were taken to Gihembe Refugee Camp, a camp with a population of around 12,000 refugees from DRC and located only an hour drive from Kigali. Here, each FSP had the opportunity to speak to at least two refugees and over the course of two hours get a better feel for their financial lives. For most, this was their first time interacting with refugees and particularly in a refugee camp. As one FSP noted ‘With this segment, there is a lot to offer and learn from them’. This was followed by further prototyping of the FSP’s idea and customising their product to the needs of refugees.

Day Three: Is this the right product for refugees?

The final day offered an opportunity to return to the camp and with initial prototypes, in the form of a drawing, poster or app, get direct customer feedback. This proved particularly helpful for many FSPs to refine their product. As Peter Kawumi, from FSD Uganda, said ‘Through the design sprint’s customer interaction iterations, misconceptions about the refugees’ technology literacy, economic independence and financial ambition were debunked.’
The first ‘Financial Product Design Sprint’ was well received by all FSPs and there is also potential for replication in Uganda, with FSD Uganda, and as Vishal Patel from the IFC said ‘helped inform IFC’s work in Kenya in Kakuma refugee camp and town.’
Learning from risk taking

Working with banks and beneficiaries in this way is new to FSD Africa. It builds on the FinDisrupt model, pioneered by our sister organistion – FSD Tanzania. We learned a lot, especially on the value of bringing the refugee voice into FSD Africa planning and FSP business casing. The type of discussion it generates, out of the office environment, created momentum that would otherwise never have been achieved.

To read more about the wider FSDA approach to refugee finance, take a look at last month’s blog here.

Notes from the frontier: FSD Africa’s fragile states approach – a learning journey

Posted on by TIMOTHYRADIER

In September 2017 we set out for Kinshasa, the capital city of the Democratic Republic of Congo, to conduct FSD Africa’s first scoping mission in the country. Having had a new fragile states strategy approved by the board earlier in the year, we were excited to get to know the country finally, a little bit of its people and explore the potential areas where FSD Africa could bring in its combination of resources, expertise and research to address financial market failures and deliver a lasting impact.

We spent almost two weeks meeting various stakeholders in the financial sector, understanding first-hand the constraints faced by different actors and charting paths of engagement with various institutions to improve the Congolese financial sector.

A few things stood out for me as we went about the scoping mission:

Collaboration with other development partners and private sector actors is critical in the quest to deliver sustainable financial sector development in the region.

FSD Africa is sed in Nairobi and therefore operating on a fly-in, fly-out model would be quite cumbersome and expensive. Striking the right partnerships with other development partners operating in DRC helps FSDA have critical boots on the ground, with the right expertise and local knowledge to inform its intended portfolio of work in DRC. During our scoping mission, we had the chance to meet and be part of the GPTF (Groupe des Partenaires Techniques et Financiers), a group of technical and financial partners who are all working to enhance financial sector development in DRC. Increasing donor collaboration and harmonization goes a long way in reducing duplication of efforts and wastage of valuable resources.

We will be partnering on various projects with ELAN RDC, a market development programme funded by UKAid and working to promote sustainable and inclusive economic development by empowering businesses and entrepreneurs in the Democratic Republic of the Congo.

The IDP and refugee crisis in DRC is worse than ever.

Last year, UNHCR received less than US$1 per person in donor contributions for its programmes for the internally displaced in the DRC. For 2018, UNHCR is appealing for US$368.7 million for the Congolese situation. A total of US$80 million is required to support the internally displaced populations inside the DRC.[1] This goes to show that a more sustainable approach for the economic livelihood of refugees is needed and refugee agencies such as UNHCR are now shifting emphasis from humanitarian aid to socio-economic inclusion and support for market-based livelihood strategies. There needs to be a paradigm shift towards private sector-led delivery of solutions in which financial sector providers have a big role to play.

Building on the success of its approach in Rwanda, FSD Africa will undertake a joint piece of research with ELAN RDC to assess the size and the scope of the demands of goods and services from IDPs and refugees in the DRC. The research will also provide evidence on the size and the dynamics of the demand and supply of financial and non-financial services amongst refugees and IDPs. We hope that the research will also shed some light on the constraints faced by private sector stakeholders that prevent them from serving the target population of IDPs and refugees in DRC and later communicate evidence fom the study to help change the perception of some actors that IDPs and refugees do not represent a viable client segment.

There exists a huge need for the development of capital markets in DRC.

Capital markets play a critical role in achieving developmental goals of ending extreme poverty, strengthening resilience as well as tackling global challenges such as climate change and urbanization. Capital markets facilitate the long-term financing of essential sectors such as infrastructure (ports, roads, power and water), and housing. They provide capital to growing businesses that generate income and jobs to households. They also widen the range of opportunities available to domestic investors, such as pension funds and insurance companies.  Furthermore, domestic bond markets help reduce foreign currency risk which arises when local investments are financed with foreign currency denominated loans.

The Democratic Republic of Congo is like many countries in Sub-Saharan Africa whose capital marets are at different stages of development with varying activity, liquidity, regulatory frameworks, market infrastructure and market structures.  Most markets lack depth, instruments and sophistication. Capital markets development seeks practical approaches that foster sustainability and FSD Africa is naturally poised to deploy its tried and tested approach from markets like Kenya and Nigeria to DRC and bring its experience from projects with a footprint in 15 countries (including the regional programmes in East Africa and West Africa).

Infrastructure remains challenging and development finance can play a huge role in addressing these challenges.

Energy, transport, water and communications infrastructure are all critical to private sector investment, competitiveness and job creation: yet across Africa and South Asia, 1.2 billion people lack access to electricity,[2] 1.3 billion lack access to an all-weather road, and 1.6 billion people lack improved sanitation.

The DRC remains one of the most infrastructurally challenged countries in the world. Road and rail transport is severely underdeveloped with only 2,250km of Congo’s roads being paved.

The country’s vast geography, low population density, extensive forests, and criss-crossing rivers further complicate the development of infrastructure networks. Public-Private Partnerships (PPPs) are a very useful means of harnessing private sector participation in the provision of high-priority infrastructure. Among the many benefits that PPPs can bring, PPPs can build local capacity and expertise (resulting in more cost efficiencies), encourage increased competition, and create opportunities for broader economic growth.[3]

Projects geared towards addressing infrastructure challenges have the potential to generate economic opportunity and employment through the creation of both direct and indirect jobs, and increase access to basic goods and services, especially in remote areas or fragile states.

Funded by CDC Group plc, the UK’s development finance institution, Virunga Energy, is a hydroelectric power company in the Eastern DRC, which provides electricity to a conflict-prone region where only three per cent of the population has access. The Virunga Foundation aims to provide clean electricity to communities living in and around Virunga National Park in North Kivu, Eastern Congo. CDC’s investment will support the development of the existing electricity grid and the construction of two new plants resulting in almost 50MW of total generation.

The investment, made through the Department for International Development’s (DfID) Impact Acceleration Facility, will establish power infrastructure in a region of four million people that faces a chronic lack of electricity supply. In many target areas of the Virunga grid there is currently no access to electricity; in the wider Kivu area there is only 3% electrification and around 15% in the DRC in general.[4]

Political stability remains a huge influencer but it should not deter us from doing work in DRC.

We cannot gloss over the conflict and political uncertainty in DRC. However, we also cannot close our eyes to the fact that despite the conflict and tension, DRC remains a country with enormous potential for growth. There is a lot of work to be done in a country where less than 11 percent of adults in the DRC have an account with a formal financial institution, and only 2 percent have access to formal and regulated credit services.[5] This level of financial exclusion can be a huge impediment to individual and overall economic development. FSD Africa remains committed to its mandate to create jobs and provide services for more people, particularly from economically excluded groups such as women, the poor, and those who live in fragile and conflict-affected states, and will endeavor to make inroads in the development of the financial sector in DRC.

[1] http://www.unhcr.org/news/briefing/2018/2/5a8be92c4/unhcr-alarmed-reported-atrocities-dr-congos-tanganyika-province.html

[2] World Energy Outlook 2015.

[3] http://ppp.worldbank.org/public-private-partnership/small-and-medium-enterprises-and-ppps

[4] http://www.cdcgroup.com/Media/News/News-CDC-investment-brings-electricity-to-Eastern-Congo/

[5] http://www.worldbank.org/en/programs/globalfindex