Thanks for looping me in, Bernard. What I have missed so far in the wider discussion about finance for refugees, is some attempt at segmentation. The most obvious clients for a business loan would be the people who were entrepreneurs before they fled their home country.
The dynamics of the host country would also be important. Say the host country is a developing economy, the typical challenges for the (micro) finance industry in general, such as information asymmetry (no efficient credit bureau, land registry, tax filings, etc.) and imperfect legal systems (making it hard to enforce covenants in loan agreements) are exacerbated by the fact that refugees typically have even less historical data against which one could lend and obviously bring no or very little collateral. Uncertainty about a refugee’s status and duration of stay creates even more risk for lenders.
However, if one could use a combination of forward-looking credit assessment tools (such as psychometrics and the online ID options suggested earlier in the thread) and perhaps some kind of government-backed guarantee scheme to lower the risk for the lenders in case a refugee leaves the country, it’d become more interesting and cost-efficient to lend to refugees from a financial perspective. Such a guarantee scheme could be financed from funds which would otherwise be used for direct grants to refugees or other financial incentives, and might earn itself back quite quickly if a proper selection is made whom to lend to and when the economic value add they create for their host country is taken into account (perhaps by incentivizing economic activity in specific underserved market segments in the host country).
These entrepreneur refugees would also be the most likely candidates to invest in their home country once the situation there allows for it and help build things back up. For example, in Uganda the Asian, largely middle class, entrepreneurial population was expelled by Idi Amin in the 1970s. Many of them fled to the UK (most were brought in by the British a century before) and set up businesses there. About a dozen years later many returned to Uganda for various reasons, and the ones who had successful businesses in the UK typically also went on to set up successful businesses in Uganda and provide a necessary boost to an economy in ruins. Some interesting examples from young East African refugees turned successful entrepreneurs include Ruparelia (possibly the richest man in Uganda) and Thakkar (a refugee from the Rwandan genocide, who is now buying up African banks together with ex-Barclays CEO Bob Diamond). After dealing with the hardship of fleeing for war or civil unrest, typical business challenges might not seem so hard anymore…
If a guarantee for lenders to deal with the uncertainty of stay is not available, the ideal financier of refugees who wants to provide long term financing would also need to have the flexibility to support refugees as they move from country to country – a role to play for a borderless FinTech solution perhaps? Anyone seeing any practical examples? TechCrunch’s editor Mike Butcher set up Techfugees (he talked about it during Innovate Finance 2016), which is a community of techies who work on solutions for refugees. So far I’m not aware of scalable FinTech solutions developed there though, but they could be a relevant platform.