Microfinance and Refugees: Lessons Learned from UNHCR's Experience

Microfinance can assist displaced populations by alleviating poverty through income generation and providing access to financial services. The United Nations High Commissioner for Refugees (UNHCR) seeks to support refugees, returnees and internally displaced persons through livelihood programs that include financial access, training and labor-based activities.

This paper presents UNHCR's experiences in extending microfinance to refugees. It reviews microfinance initiatives in refugee situations in the last decade, and evaluates their outcomes. The paper discusses challenges in adapting microfinance to refugee situations and highlights gender-related risks affecting interventions focused on women. It explores approaches to successful and effective programs, and outlines UNHCR’s microfinance initiatives. The paper identifies success factors for microfinance from UNHCR’s experiences. They include:

• Training and in-house expertise;
• Diversification of microfinance services;
• Clear distinction between grants and loans;
• Balance between social and financial aspects of performance;
• Realistic expectations about microfinance;
• Effective client selection and screening;
• Ongoing monitoring of microfinance programs;
• Adapting to local circumstances;
• Focus on reducing risk and vulnerability of target group.