Unlocking the Potential of Refugee Markets in Africa

Unlocking the Potential of Refugee Markets in Africa

Kenyan banks once labeled small farmers, market traders, and kiosk owners “unproductive,” enforcing minimum balances of about $100, layering on fees, and demanding title deeds few possessed. Equity Bank flipped that script by removing barriers, trusting disciplined micro-transactions, and building products that fit low-income realities. The result was a mass-market franchise serving more than 16 million customers and proving inclusion can be both profitable and transformative. Refugee economies sit at a similar crossroads today: too often framed as charity while evidence points to responsive, paying markets. If Kenya’s informal economy was once misread, and then unlocked with design, trust, and scale, the obvious question follows: what, precisely, are we still getting wrong about refugee markets?

In our experience, the hesitation clusters around three claims that feel intuitive but do not survive contact with the data. First, that refugees lack meaningful purchasing power and camps are purely aid economies; yet Kakuma hosts more than 2,500 businesses with an estimated annual economy of about $56 million, which has permanently increased the regional GDP by 3.4%. Second, that refugees are risky or transient borrowers; yet global lending shows roughly 97.2% repayment rates, and Uganda’s refugee portfolios have posted portfolio-at-risk as low as 3%, no different than the host community. Third, that displacement is too temporary to build a customer base; in fact, about 66% of refugees are in protracted situations for 5+ years, long enough to sustain multi-year relationships, apprenticeships, and formal jobs.

If the question is no longer whether refugee markets are investable, the real question is how to enable them to grow sustainably. That pivot matters because it reframes refugees from beneficiaries to economic actors and asks what practical steps will crowd in private capital at scale. Put simply, what are the building blocks that would make a bank, a distributor, or an energy company confident enough to serve refugees and host customers profitably over many years? One reason why this enabling agenda is decisive is that business models need early proof of demand, reliable channels, and risk-sharing while firms learn a new market. That’s especially true where market data are patchy and regulations vary—conditions that can raise perceived risk even when the opportunity is real. This is precisely where a catalytic tool comes in.

Blended finance, defined as the strategic use of public or philanthropic funds to mobilize additional private investment, is one of the most effective ways to convert latent demand into bankable demand. By de-risking projects, blended finance can pull in investors who might otherwise shy away from refugee-related ventures. Let’s look at some case studies from Africa that show how this works in practice, and the impact it’s having on the ground. Kenya’s Kakuma–Kalobeyei Challenge Fund has combined grants and advisory with private co-investment to help firms enter a market most had never considered. More than 100 enterprises have been supported across essential services such as energy, retail, healthcare, and logistics, creating direct jobs for refugees and hosts and bringing reliable services to well over 100,000 people. Separately, a KfW-initiated facility financed a private mini-grid operator through a long-tenor senior loan (about $4.5 million) paired with results-based payments per verified connection to expand solar-hybrid mini-grids in Kakuma and Kalobeyei, now serving thousands of customers. The concessional layer reduced upfront capex risk and the results-based tranche paid for real connections.

Uganda shows how the same logic applies to finance. A 5-year refugee financial-inclusion program blended donor grants, technical assistance, and concessionary debt to help local MFIs and banks open branches in settlements, design fit-for-purpose products, and accept refugee IDs for onboarding. Providers reached more than 130,000 clients across refugee and host communities, with repayment performance that tracked their mainstream books. During shocks such as pandemic lockdowns and aid cuts, portfolio-at-risk rose toward double digits, but in normal conditions it fell back to roughly 3%. New branches in settlements achieved operational sustainability on timelines similar to branches elsewhere. In both countries, blended instruments did the heavy lifting: technical assistance covered product design and agent networks; concessional funds cushioned early losses while models were tested; and commercial capital financed growth once risk was better understood.

Even with these successes, the current scale is small relative to the need. Africa hosts well over 30 million displaced people, yet only a handful of blended funds target refugee economic inclusion, typically in the tens-of-millions range—a drop in the bucket. A recent refugee investment facility spanning Uganda and Jordan, for example, assisted about 13,000 individuals in its first round (nearly 9,500 refugees) and created 565 jobs. These are meaningful gains for those families, but they barely scratch the surface of the millions who could benefit from greater economic opportunity. The evidence is on our side; now it is about multiplying impact by increasing capital volumes, standardizing structures that work, and aligning policy so successful pilots can scale.

So how should we structure blended finance for refugee markets in practice? There are three important considerations here. First, provide patient and flexible capital. Multi-year tenors, grace periods, and collateral-light underwriting reflect the realities of refugee-led and host-community businesses and give them time to mature. Character-based lending, group guarantees, or purchase-order financing can substitute where title deeds are not available. Second, link finance to outcomes that matter. Interest-rate step-downs or bonus payments tied to verified milestones like refugee jobs created, energy or water connections delivered, on-time repayment align private incentives with public goals and make success measurable. Third, build partnerships that combine capital with local delivery. Donors and DFIs bring concessional layers and risk sharing; local financial institutions and operators bring distribution; humanitarian and refugee-led organizations bring trust, data, and customer insight; governments unlock the policy moves that sustain scale, such as recognizing refugee IDs for KYC and clarifying the right to work.

Once the system recognized the discipline and potential of people it had overlooked, products and channels evolved, and inclusion became a growth strategy rather than a concession. Refugee markets are ready for the same shift. If we pair the density and energy of these economies with the finance they need, and use blended instruments to bridge the last mile from pilot to scale, the result will be enterprises that hire, households that spend and save, and communities, both refugee and host, that prosper together. We have enough evidence to move beyond doubt; the task now is design at scale.