How can investments support and harness the economic potential of forcibly displaced people? The refugee-lens investing movement offers a means to connect investors with businesses that support improvements in the lives of refugees.

Refugees and their hosts – who, collectively make up hundreds of millions of marginalised people worldwide – can significantly contribute to economic growth in their new communities. But, too often, the investments needed to support this positive impact aren’t available. This is where refugee-lens investing (RLI) comes in.

Refugee-lens investing is a new way of engaging the private sector in the improvement of the lives of refugees and host communities. By some accounts, as many as one billion people could be forced to move by 2050 due to climate change alone.[1] While this data varies, it is clear that the number of forcibly displaced people will continue to rise. Traditional humanitarian donors cannot and will not be able to finance the needs stemming from this displacement. Donor financing is already inadequate for acute emergencies and these migrations need sustained investment to support social and economic integration.

The burgeoning RLI movement draws on lens-based impact investing approaches, which strongly consider the concerns and opportunities surrounding specific populations and social and environmental challenges. Based on consultations with, and learning from, gender-lens investors, the Refugee Investment Network developed the ‘Refugee Lens’ framework to qualify and track investments that support improvements in the lives of refugees[2] and their host communities over time. The RLI movement also seeks to crowd-in impact investors, development finance, philanthropic dollars and other financiers for an ‘all capital on deck’ approach.

Agnostic to sectors, geographies, asset classes or financing mechanisms, RLI’s emphasis on refugees and other forcibly displaced people as economic actors – entrepreneurs, employees, suppliers and customers – positively shifts the narrative about them, to one focused on opportunity. Research and data demonstrate that refugees and their communities are indeed employable, hardworking, credit-worthy and ultimately consumers – facts that are already benefiting the enterprises, investors and their partners that can harness this economic power.[3] RLI has the potential to play a huge role in how communities affected by displacement can shift the humanitarian paradigm and give investors the understanding, tools and community of practice to unlock mutual economic benefits.

For RLI to be successful, a wide range of stakeholders – investors, development finance institutions, philanthropy and other donors, humanitarians, business development and measurement experts, among others – need to come together to develop, test and scale a shared vision and approach.

Refugee lens investing in practice

The concept of RLI may seem new, but a lot of work is already being done. Highlighting examples and approaches helps demonstrate what this type of financing can look like in practice:

Refugee Investment Facility
Launched in September 2022, the Refugee Investment Facility (RIF) is a collaboration between the Danish Refugee Council (DRC) and Swiss impact finance firm, iGravity. The RIF is operational in Jordan, Uganda and Kenya and lends to private enterprises that contribute to addressing the livelihood and self-reliance challenges faced by refugees and their host communities.

In the first pilot fund, the RIF mobilised USD 4 million which will be deployed into eight to ten investments across the two countries, reaching at least 27,000 refugees and host community members across the fund’s impact themes. It will do this by providing impact-linked financing to enterprises that generate tangible outcomes for refugees and their host communities, and by offering both business-focused and impact-focused technical assistance to companies in its portfolio. The RIF has approved four investments contributing to job creation, livelihoods support, skills development and financial inclusion for refugees and their host communities.

This includes Omia Agribusiness, a company providing agricultural inputs, equipment and training in Uganda’s West Nile sub-region. The RIF loan enables Omia to expand its operations in the area and reach over 10,000 new refugees and host community members with agricultural inputs and training, while developing a more refugee-inclusive business model, directly supporting the livelihoods of smallholder farmers and their families. This collaboration opens pathways for private investment into communities affected by forced displacement and contributes to mainstreaming investment practices, aiming to develop a sustainable model at scale.

Acumen
In 2023, Acumen, an impact investor solving poverty problems, launched a three-year pilot investment initiative aimed at supporting small and medium enterprises (SMEs) including forcibly displaced people as employees, suppliers and customers. The initiative aims to help them grow their businesses with access to finance and targeted support. Acumen will invest USD 1.5 million into three to five social enterprises operating in displacement-affected communities, benefiting over 10,000 forcibly displaced people and their hosts. The focus is on early-stage, scalable agribusinesses seeking pre-seed and seed funding, and helping displacement-affected communities adapt to climate change. Acumen’s first investment under the initiative was made into Kenyan aquaculture company AquaRech.

Between 2008 and 2022, over 1.4 million Kenyans were internally displaced by floods,[4] AquaRech provides 2,700 small-scale fish farmers in the Lake Victoria region with top-quality feed and a ready marketplace, resources farmers need to run successful businesses. In a sample of farmers surveyed, 90% reported improved operations after working with AquaRech. They also cited increased quality in the size and weight of fish, increased income, increased quantity sold and reduced production cycles. In building the infrastructure for fish farming, AquaRech is contributing to more resilient communities in the face of climate change.

A growing movement
A growing number of funds are focused on RLI both in emerging markets and in more developed economies. For instance, Kiva’s Refugee Investment Fund that provides debt financing to refugee-supporting microfinance institutions and the International Rescue Committee Center for Economic Opportunity’s Social Impact Fund that provides low-interest loans to refugees. Other refugee-supporting private equity funds more recently entered the market, including Launch Capital Partners, Whitestone & Co. Fund IV and Courage Housing, plus new SME equity funds, like the Impact Newcomer Fund in France and The Entrepreneurial Refugee Network Refugee Venture Fund in the UK.

Challenges

Strengthening the capacity of companies that work with refugees
If designing new and innovative financing mechanisms and collaborations addresses the supply side (the availability of appropriate financing), there is an equal need to strengthen the demand side (the ability of potentially impactful companies to absorb financing and use it to create the desired impact). Many companies that work directly with refugees are small, inexperienced in accessing financing, and have weak systems for tracking impact and performance. These companies need technical assistance, advice, mentoring and access to networks.

Measuring impact
Finding the right level of impact ambition and measurement can be challenging. When different partners – humanitarian organisations, impact investors and donors – come together, different logics, incentives and metrics must be aligned. This is not straightforward. Humanitarian organisations take a needs-based approach, targeting the most vulnerable; their donors require these organisations to report on the outputs and impact of their funding. Commercial enterprises seek to grow their business and become sustainable. Investors have their own set of indicators and requirements, including loan repayments, that must be met. Compromises are required, and finding a balance between refugee impact ambitions and business growth potential is a delicate and iterative process.

Specificallly, traditional humanitarian donors often require programme data on individuals that is disaggregated by migration status, as is commonly tracked by NGOs working in displacement contexts. However, not many investors and companies are currently able to track and report things like migration status for each customer or supplier benefiting from an investment. Given the nascent nature of RLI, there are still questions around the effectiveness and costs related to potentially complicated metrics imposed by traditional donors. It is important to continue the conversation on what metrics are necessary and sufficient to measure impact on forcibly displaced populations, but are not so cumbersome to collect that they impede investments and investment pipeline creation.

Host country policies and regulations
Host country policies and regulations can not only directly and negatively impact the overall lives and livelihoods of refugees but also act as a barrier to impact investments. In many emerging markets, including refugee-hosting countries, there are prohibitive foreign investment policies and regulations, such as those related to taxation and (the lack of) investor protections. In addition, in many refugee-hosting countries, refugees are unable to realise their rights to work, start a business, own property, access banking and move about the country freely.

Even in countries where there are more progressive policies that support the economic inclusion of refugees, there may be other regulatory challenges that hinder refugee-owned and refugee-serving businesses from accessing capital. Take for example Ethiopia, where refugees are categorised as foreigners under foreign direct investment laws; this means refugees are subject to specific requirements if they want to start a business, such as that they must raise $100,000 in investments – a sum often far too large for them to raise.

Policy and regulatory barriers must be identified and overcome for RLI to succeed. In identifying these challenges, impact investors can help support and even incentivise governments to make policy and regulatory reforms that can spur economic growth and drive social outcomes for refugees and host communities.

Insights

Technical assistance
There is a dearth of investment capital in emerging markets, especially in Africa, and especially for SMEs led by local founders. This is magnified for SMEs operating in marginalised areas, that are refugee-owned, serving refugee populations or significantly employing refugees. Providing technical assistance is crucial to the success of RLI – both before investment and post investment.

Large companies and financial institutions that are working at scale in, or want to expand to, areas that host significant forcibly displaced populations need to be equipped with the knowledge, linkages and practices to engage communities affected by forced displacement. This type of focused advisory support builds the pipeline of enterprises that specifically align with RLI, attracting new capital, which in turn provides incentives for additional businesses to participate, ultimately growing the RLI ecosystem. Furthermore, it provides a roadmap for similar technical support from RLI investors.

Refugee representation
Refugee representation and voice are as important for investment and private sector-led approaches as they are for humanitarian programming. This means actively engaging displaced people as employees, customers and suppliers across core business processes and design, including recruitment, product development, sales strategies, measurement, due diligence, data collection and market assessments. It also involves working with refugee-led and refugee-serving organisations to support investment efforts and technical assistance where relevant and making strong efforts to ensure refugee representation across different leadership levels. However, knowledge of investment language and due diligence processes are technical fields. It is not the easiest world to enter for any outsider, let alone for humanitarian workers or most refugees. Those working to develop businesses in displacement-affected communities have a responsibility to create meaningful pathways for inclusion and participation.

Better understanding and framing climate vulnerability
As climate-related crises escalate, the impacts on migration, food security and the likelihood of conflicts will only intensify. This, in turn, heightens the needs and vulnerabilities of displaced populations and the communities hosting them. Within this dynamic, defining displacement, determining migration status and assessing the duration of displacement can present considerable challenges. Adopting flexible investment approaches that target marginalised areas and respond flexibly to the diverse challenges faced by these communities is essential.

Business models that provide solutions to enhance community resilience to climate change, such as solar irrigation, agricultural insurance and access to markets, not only foster economic integration in displacement-affected communities but also fortify them against future shocks. By grasping the intricate interplay of fragility, climate and displacement, investment should prioritise solutions that deliver both immediate economic benefits and lasting resilience.

Recommendations

The authors have a few key next steps and recommendations they would like to encourage readers in the refugee finance space to participate in and support:

1. An RLI community of practice
   With the growing adoption of RLI and adjacent investment approaches around the world, we see the need for ongoing thought leadership for the investment community, where new ideas can be cross-pollinated, learning and data can be captured and disseminated, and the overall ecosystem can be broadened. We propose the creation of an RLI community of practice where global stakeholders can share experiences, answer questions and learn about this exciting new field of impact investing. Regional gatherings drawing together interested capital partners (e.g. asset managers, foundations and family offices) and successful RLI investees will help crystalise and grow the field, while timely interventions, storytelling and reporting will help provide the data and evidence-base to enable RLI investors to make investments.
2. Fund and invest creatively
   Financial innovation in unproven contexts requires patient and flexible donor funding. At this early stage of field development, we believe public and/or philanthropic sources with patience and open minds are necessary to allow for iteration, creativity and innovation. Pioneers are working to prove the impact of investments on forcibly displaced populations and to analyse how much concessionality (provision of capital on favourable terms) is needed. Ideally, a mix of grants and commercial return-seeking capital can be used to scale these approaches. We encourage donors and investors to think outside the box and draw on multiple financial tools and capital that are focused on both financial and social returns, such as grants, impact investment, private equity and guarantees. Lessons and experiences from utilising this mix of tools and capital should be shared to support scaling up RLI.
3. Open-mindedness on impact and metrics
   If investment strategies and funds remain narrowly focused on specific metrics relating to individual displaced people only (like number of jobs created for FDPs per investment), they risk becoming entangled in complex and time consuming definitional and validation processes that can lead to restrictive criteria for investment. Donors and investors in other sectors, are already broadening their understanding of impact and using more flexible metrics that measure things like adaptation or resilience to shocks, or taking an area based approach with a wider view of outcomes. Incorporating a less rigid approach to measuring impact for FDP populations will allow funds to broaden the pipeline of investments that will ultimately impact and benefit displaced people and host communities. We encourage the adoption of a broad but well-defined impact and measurement framework that accounts for a range of investment potentials beyond standard livelihoods programme metrics.
4. Broaden the conversation and widen the tent.
   As the RLI lens evolves, we advocate for the integration of displacement considerations across impact strategies in emerging markets, including areas like climate-smart agriculture, productive use of energy and other economic development themes. We need to broaden the comprehension, conversation and engagement of stakeholders. This entails forging new partnerships and extending beyond humanitarian and multilateral organisations to incorporate the private sector, investors, climate financiers and policymakers. We propose bringing the topic of displacement to other general investment and climate fora to educate and include more actors in this conversation.

 

Barri Shorey
Senior Program Officer for Refugees and Disasters, Conrad N. Hilton Foundation

Lauren Post Thomas
Senior Advocacy Officer for Refugees and Safe Water, Conrad N. Hilton Foundation

Lindsay Camacho
Government Partnerships Manager, Acumen

Kate Montgomery
Director, Acumen

Tim Docking
CEO, Refugee Investment Network

Selen Ucak
Refugee Entrepreneurship Lead, Refugee Investment Network

Morten Schacht Högnesen
Director, Program Innovation and Business Engagement, Danish Refugee Council

 

[1] Institute for Economics & Peace (2020) Ecological Threat Register 2020 reliefweb.int/report/world/ecological-threat-register-2020

[2] RLI defines ‘refugees’ and ‘forced migrants’ broadly and is inclusive of those forcibly displaced across borders (by violence, persecution, climate change, natural disaster), as well as internally displaced people (IDP).

[3] Refugee investment network (2018) Paradigm Shift: How investment can unlock the potential of refugees refugeeinvestments.org/resources/paradigm-shift/

[4] IDMC Kenya country profile: www.internal-displacement.org/countries/kenya/

 

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