In the interest of saving: Refugee-led microfinance in Kampala, Uganda

Abstract

Motivation: While livelihoods are increasingly promoted for refugees in long-term situations of displacement, refugees can rarely access microfinance loans—the very start-up capital generally considered necessary for creating businesses. Yet across Kampala, Uganda, refugees meet to place small amounts of money into group savings and take out and repay microloans. Purpose: This article sheds light on this underexplored phenomenon through an empirical study of refugee-led microfinance groups in Kampala and an overview of the existing local landscape of refugee-serving organizations and microfinance institutions providing loans. We analytically reflect on the role of trust in executing microfinance programmes both for and by refugees. Approach and Methods: We conducted snowball and purposive sampling, semi-structured qualitative interviews, focus group discussions, and non-participant observation. Findings: Our study found that refugee-led microfinance groups have created a loan structure that is successful for refugees—because it was developed by refugees—with low default rates. This success is underpinned by strong community trust between members. These groups access vulnerable populations important to humanitarian organizations, including women, single mothers, unregistered refugees and the very poor. However, despite filling an important gap in livelihoods assistance—the provision of business capital—refugee-led microfinance groups lack large amounts of capital to loan members, and do not feel they provide adequate business, livelihoods and financial literacy trainings. Policy Implications: Our findings suggest that non-governmental organizations (NGOs) should support existing groups through offering safe spaces to hold meetings, and with financial and business trainings. Debunking stereotypes of refugees held by financial providers, and advocating for refugees’ financial rights remains crucial. Providing loan capital to groups to enable members to take out larger loans may offer another means of support, but collaboration between formal microfinance institutions or NGOs and refugee-led groups must reinforce rather than devalue the networks of trust that contribute to grassroots savings and loan groups’ success.