Abstract
Motivation
While livelihoods are increasingly promoted for refugees in long‐term situations of displacement, refugees can rarely access micro‐finance 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 micro‐loans.
Purpose
This paper sheds light on this under‐explored phenomenon through an empirical study of refugee‐led micro‐finance groups led in Kampala and an overview of the existing local landscape of refugee‐serving organizations and micro‐finance institutions providing loans. We analytically reflect on the role of trust in executing micro‐finance 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 micro‐finance 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 micro‐finance 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 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 micro‐finance 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.