Author: Swati M. Dhawan.
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 16th edition of the Award, which was launched in 2005 by the Luxembourg Ministry of Foreign and European Affairs — Directorate for Development Cooperation and Humanitarian Affairs, 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 second of e-MFP’s annual series of guest blogs on this topic, Swati Mehta Dhawan discusses the importance of integrating a financial health lens into strategies to advance financial inclusion of FDPs, and the role that community networks play in achieving this.
To mark World Refugee Day in June last year, I wrote a blog that emphasised integrating a financial health lens into our strategies to address the challenge of financial exclusion among refugees. It has been a few years since the foundational research, which was called Finance in Displacement (FIND) and which informed both that blog and this one too. However, as refugees continue to remain in protracted displacement in developing host countries without durable solutions, we see that many of the findings remain pertinent:
Between 2019 and 2020, we tracked the financial trajectories of more than 170 refugees across a span of 12 to 18 months in Kenya and Jordan. The high-level findings produced were informed by similar research in diverse contexts including – Uganda, Columbia, Mexico, and even developed countries such as the United States and Germany. The lead researchers continue to document new insights from across the world on the Journey’s project website of the Fletcher School.
This blog seeks to delve deeper into these findings, focusing on the pivotal role of community-led approaches in enhancing the financial well-being of refugees and forcibly displaced people (FDPs).
The critical role of community networks
In the intricate web of challenges that FDPs navigate, informal social networks and community-driven organisations (CDOs) stand out as fundamental pillars of support. Initially, family and kinship networks (bonding social capital) provide indispensable support to refugees and FDPs. However, these connections can weaken over time due to migration, loss, and the ongoing pressures of displacement. As these networks erode, refugees often find themselves without the internal community support that once played a critical role in their lives, leaving them increasingly vulnerable.
Simultaneously, building new networks with the host community (bridging social capital) is invaluable during different phases of displacement. These connections are crucial for finding housing and work opportunities, developing skills, accessing capital, building businesses, and sharing risks. For instance, in Kenya, refugees were unable to access M-Pesa, a critical financial service, and often borrowed the IDs of Kenyan friends to carry out transactions. Connections with the host community helped refugees and internally displaced people (IDPs) to secure better-paying jobs and the necessary financial capital to start or expand businesses—support that the displaced community alone cannot provide.
However, building these connections is challenging in a low-trust environment where certain groups face greater exclusion. Women and individuals from minority groups are particularly vulnerable, often isolated due to language barriers, cultural expectations, and social stigma. Women who head households face compounded challenges, burdened with the dual responsibilities of caregiving and providing for their family, further restricting their opportunities to engage with both refugee and host communities.
In the FIND research, several examples highlighted how these social networks effectively supported managing financial risks. In Jordan, we heard of Yemeni and Somali refugees successfully raising funds for immediate medical needs upon arrival. A Syrian woman crowdsourced US$200 for a medical emergency through 40 members of a faith-based group she attended, while a Somali woman received financial aid facilitated by her local mosque's sheikh to settle debts. We also saw Jordanian small shop owners extending shop credit to refugees and low-income locals, allowing them to purchase essential goods and pay later. Though routine for the shops, this practice played a critical role in ensuring food security by offering unbureaucratic, flexible, and timely financial support.
For internally displaced persons (IDPs), their networks are crucial for maintaining a semblance of stability through translocal livelihoods. These livelihoods involve the movement and exchange of goods, money, and information between their places of origin and their current residences. Such networks are vital for managing day-to-day survival and maintaining connections that could facilitate eventual return to their homes. However, these translocal networks are fragile and can be disrupted by factors such as increased security issues or economic downturns, which in turn can exacerbate the isolation and vulnerability of displaced individuals.
A key insight from the FIND research was about the role of Community-Driven Organisations (CDOs), which are grassroots organisations where refugees themselves are members and are able to set the terms for providing support. Unlike traditional support agencies that view individuals as “clients,” CDOs treat their participants as “members,” offering support with dignity and a community focus. Being closer on the ground, they are able to better listen and respond to the ever-changing needs of the heterogeneous group of FDPs they serve through different phases of displacement. These organisations engage in various activities, from providing debt relief and distributing food to offering medical services and educational programs. They provide these services through personalised support, counselling, and mentorship, often in ways that are often more accessible and culturally sensitive than the more formal support institutions, fostering personal connections and bonding over shared experiences of displacement and recovery.
Common across all the above examples is support that is rooted in solidarity. Social solidarity is defined as “the glue that keeps people together, whether by mutually identifying and sharing certain norms and values, or by contributing to some common good, or both.” Unlike modern-day humanitarianism characterised by hierarchy and bureaucracy, these solidarity-based support networks assist in a horizontal and anti-bureaucratic manner, emphasising mutual support and collective well-being.
Critical questions to address…
We know that financial health outcomes are often less about financial resources and more about social resources: the ability to find better-paying jobs, access information about humanitarian and financial systems, seek legal support, and receive psycho-social support. These capabilities hinge significantly on the relationships that FDPs can forge. However, humanitarian programming frequently overlooks the importance of strengthening these essential relationships, underscoring a critical area of focus for humanitarian and development agencies.
Looking ahead, several critical questions persist regarding how humanitarian organisations and the private sector, including financial service providers, can enhance their support for FDPs through community support mechanisms:
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What non-financial interventions might be necessary to strengthen the existing mechanisms of financial support offered by community networks?
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What insights could service providers gain from the adaptive responses of CDOs to the evolving needs of FDPs?
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How might they facilitate a greater role for CDOs in improving the financial well-being of FDPs?
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How could financial services (product design or delivery) be adapted to leverage these community networks?
By addressing these questions, we can help ensure that FDPs are not only surviving but thriving in their new communities. Embracing community-led approaches offers a model for humanitarian aid that is not only effective but also dignifying and empowering for all involved.
We hope to explore some of these questions during the discussions leading up to the European Microfinance Week in November 2024. Among other thematic streams, as always, this event will spotlight this year’s European Microfinance Award topic on the financial inclusion of refugees and FDPs.
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Illustrations by Liyou Zewide:
No.1 – Ismail, a 29-year-old Somali refugee, volunteers as an English teacher for fellow refugees at a Community Development Organization in Amman, Jordan (2020).
No.2 – Farah, a 35-year-old Yemeni refugee, participates in an informal sewing course led by a Jordanian tailor in Amman, Jordan (2020).
For more details refer A hope for home: A brief compendium of financial journeys of refugees and asylum seekers in Jordan
For biographies from Kenya refer Refuge?: Refugees’ Stories of Rebuilding their Lives in Kenya
The European Microfinance Award 2024 on “Advancing Financial Inclusion for Refugees & Forcibly Displaced People” was launched on March 14th and seeks to highlight organisations active in financial inclusion that help forcibly displaced people build resilience, restore livelihoods, and live with dignity in host communities. The Round 1 application period is now closed and received 49 applications from 26 countries. The multi-stage evaluation process will culminate with the winner of the €100,000 prize (plus the two runners-up, who each win €10,000) being announced during European Microfinance Week in November.
About the Author:
Swati M. Dhawan is an independent consultant. Her primary focus is on conducting research related to financial inclusion at the intersections of gender, displacement, climate change, and digital transformation. She holds a PhD in Economic Geography and her dissertation was based on the Finance in Displacement research in Jordan. She has previously worked with GIZ and MicroSave Consulting, and was a German Chancellor Fellow in 2017-2018
