As wars and calamities have forced people from their homes in Somalia, DR Congo, Rwanda, Southern Sudan, Burundi, and other countries, 1.4 million refugees have made their way to Uganda to start a new life. Starting fresh isn’t easy when you leave your livelihood behind. To help people rebuild, the UN Refugee Agency (UNHCR) has long recommended job training and placement, and increasingly, it’s looking to use financial services to help displaced people find new opportunities.
Our portfolio company UGAFODE Microfinance Limited (MDI), is working with other organizations and governmental agencies in Uganda to help refugees tap into the power of financial services to build a business.
At the beginning of 2019, UGAFODE launched its financial inclusion refugee program as a pilot to serve urban refugees in areas around Kampala. UGAFODE worked alongside many partners to navigate the cultural diversity and sensitivity in serving this population. The Office of the Prime Minister (OPM) helped with verifying refugees’ identities, and InterAid Uganda aided in mobilizing urban refugees. Livelihood Resilience Sector, Congolese Refugee Community in Uganda, United South Sudanese Urban Refugee Community, and Jesuit Refugee Services all supported refugees in developing financial literacy and skills. For UGAFODE to implement refugee financing successfully, it also partnered with Kiva, an international nonprofit organization, to provide funds for lending and guaranteeing loan losses so refugees don’t need to pledge collateral. UGAFODE resolved the challenge of identification requirements by lobbying the Bank of Uganda to accept official IDs issued by OPM, and the institution worked with credit reference bureau CompuScan to get the OPM-issued IDs included in their system.
Over the past year, UGAFODE’s pilot program has shown that refugee customers are not, in fact, high-risk and that they need high-quality financial services to succeed. In 2019, 1,251 refugee customers opened accounts with UGAFODE, and they currently have 100 percent repayment rates on loans for this population.
Now, with grant funding from the Swedish International Development Cooperation Agency (SIDA) through Grameen Credit Agricole (one of UGAFODE’s lenders), UGAFODE has opened up a branch within Nakivale, a settlement in Southwest Uganda that is home to more than 100,000 refugees. With this launch, UGAFODE has become the first financial institution in Uganda to open a branch to serve refugees inside a refugee settlement.
A United Nations decision to switch from providing commodities to giving cash aid means that UGAFODE’s branch in Nakivale is well-timed. UGAFODE will offer a seamless process to deliver financial assistance through physical locations like this one and digital means (UGAFODE Mobile). Once someone has opened an account at the local branch, they will be able to use UGAFODE Mobile, a digital wallet that allows customers to transact between their savings accounts and mobile money wallets. They can even pay bills without visiting a physical branch location. Customers will be able to receive money transfers from agencies directly to their mobile wallets and cash out through mobile money agents if they need to. UGAFODE will also provide an opportunity for refugees to use a portion of their cash aid to open a savings account at UGAFODE. Since the savings from the cash aid is limited, UGAFODE will provide additional credit to refugees looking to start or grow their small businesses.
In addition to providing financial services for refugees in the settlement, the branch also creates jobs — some of the staff are from the refugee community.
We are proud of the work UGAFODE has done to demonstrate that providing financial services to refugees is possible and can make a substantial difference for a vulnerable and often underemployed population. According to the CEO of UGAFODE Mr. Shafi Nambobi, the team hopes to serve 5,000 refugees in 2020, to reach more than 29,000 in the next three years, and to continue UGAFODE’s outreach into other refugee settlements. Mr. Nambobi recognizes that to be successful in the long-term, “we should come up with universal products that not only satisfy refugees’ needs but are also targeting the host communities.” When refugees have the financial tools they need to thrive, communities and countries will be stronger and more resilient in a changing world.
We are thankful to all our partners, including OPM, SIDA, BOU, Kiva, UNHCR, InterAid and local communities.
Eva Arinaitwe from UGAFODE also contributed to this article.