Uganda: Banks Move to Financially Include Refugees

With 1.5m refugees, Uganda is the biggest host country of refugees in Africa and the third largest in the world.

Majority of the refugees hail from South Sudan, Democratic Republic of Congo and a limited spread between Somalia, Rwanda and Burundi.

According to a baseline survey conducted by BFA global to determine financial inclusion for refugees, 79 per cent of the refugees in Bidibidi, Nakivale,Palorinya and Kampala have non employment income which includes food and cash transfers from World Food Programme and other Non-Government Organisations(NGOs).

This presents a challenge especially since most of the international organisations and NGOs are currently focused on fighting the coronavirus pandemic.

Financial inclusion of refugees is critical especially now during the coronavirus pandemic where income and food is key for survival.

Mr Simon Gerald Menhya, Acting Commissioner for Refugees, Office of the Prime Minister, says while provision of basic aid to refugees remains important, enabling them to access relevant services, including formal financial services, has the potential to coordinate humanitarian efforts more effectively and increase the impact of early stage interventions.

Accumulating savings and credit associations were found to be heavily used and attract high saving while mobile money is used less among refugees than host natives.

However, banks and Saccos are the least picked up financial instruments after refugees flee their home countries.

Customer limitations

Regulatory red tape such as the need for a National Identification to open a bank account still proves a challenge to financial inclusion of refugees.

However, Equity Bank through the aid of government and United Nations High Commissioner for refugees maintains a database for the refugees.

"The government has given us some leeway to use the United Nations High Commissioner for Refugees (UNHCR) registration letter as the best way to identify the refugees. We have gone further to biometrically register them for bank accounts to enhance the KYC," Mr Anthony Kituuka, executive director, Equity bank explained.

This has enabled EBUL in partnership with Financial Sector Deepening (FSD) Uganda provide electronic payment using bank infrastructure, channels and footprint to serve beneficiaries.

The process has seen the bank enable refugees save their incomes.

Understanding refugees' financial behaviour

To improve the products and services financial service providers deliver to refugees in Uganda, FSD Africa, FSD Uganda and BFA Global have started a study that will track the income and spending habits of refugees.

Through the study, refugees living in Bidi Bidi, Palorinya, Nakivale and Kampala will use diaries over the next 12 months to create a detailed picture of the financial strategies they employ to build their livelihoods and manage their finances.

By assessing refugee incomes and expenses, the research will inform the development of financial products and services offered to refugees in Uganda by Equity Bank Uganda Limited (EBUL), Vision Fund Uganda and Rural Finance Initiative (RUFI).

Successful case study

"When war broke out in 2016, we were compelled to close three branches in South Sudan. Most of the people came here (Uganda) and we decided to follow up our clients. We decided to step up operations in Uganda," Mr Yengi Lokule, recounts how RUFI, a micro finance Institution, where he works as the chief executive officer was set up.

"78 per cent of our clients are refugees," he says.

RUFI has successfully offered credit services to refugees for three years.

Despite fears of flight risk and loan defaults that banks often associate with refugees,

"refugees pay!" Mr Lokule says.

In his experience, even after they return to their countries after the war subsides, a foundation has already been grounded in the host countries, where the refugees lived.

"We have clients who have moved back to South Sudan but they leave the families behind so the chances that they will not pay our loans are really very low. In our experience, it takes about three to five years before someone can say I am comfortable to go back home and it is a gradual process," he explains.

The business has since grown to offer savings services which were demanded by refugees through partnership with Centenary Bank.

However, operating in refugee camps is challenging because of the long distance to collect and deposit cash in banks.

"We get overwhelmed by the high demand for cash because if you operate in some camps, you are in the middle of nowhere and moving cash in and out is challenging," he says.

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