A new study released by the International Finance Corporation, the World Bank’s investment arm, contends that refugee camps can be prime markets for the private sector.
The study, conducted in Kakuma refugee camp in northern Kenya, highlighted the rapid circulation of trade within the camp, which currently houses roughly 180,000 refugees, all of whom require goods and services that are much easier provided by the private sector than already-overburdened humanitarian organisations.
The emphasis on this opportunity for private businesses comes at a time when refugees in Rwanda are confronting deep cuts to aid by the World Food Programme, which reduced food rations by 25 per cent earlier this year.
“Refugee communities have been depending on humanitarian assistance for so long,” said Jean-Claude Rwahama, the director of the refugee affairs unit at the Ministry of Disaster Management and Refugee Affairs (MIDIMAR).
“I think it’s a matter of changing the mindset,” he added. MIDIMAR is collaborating with partner organisations to bring businesses to refugee camps in Rwanda to spur economic activity in these camps.
“We have started working with UNHCR to introduce some partners who are involved in doing business so that they can start small businesses within the refugee communities,” said Rwahama.
Business ventures in refugee camps are currently being initiated primarily by non-government organisations (NGOs) and social enterprises such as local organisations Inkomoko and Inyenyeri and the German organization Corporation for International Cooperation (GIZ), according to Rwahama.
Inkomoko conducts entrepreneurship training sessions in refugee camps, Rwahama told The New Times.
Inyenyeri works in Kigeme Refugee Camp in Nyamagabe District, employing refugees in its alternative fuel social enterprise. Inyenyeri’s fuel pellets – sold at Rwf200 per kilogramme – provide an energy alternative to firewood.
“Two years ago, President Kagame made a statement to a UNHCR representative that he wanted three things to be accomplished quickly,” said Inyenyeri founder and CEO Eric Reynolds.
One of them was to end the usage of charcoal and wood as cooking fuel due to the severe depletion of trees in Rwanda.
The UNHCR immediately began looking for alternative solutions to the dependency within the camp on charcoal and wood and eventually selected the solution offered by Inyenyeri.
“We established a shop in the centre of the camp in September 2016,” said Reynolds, “we have an employee from outside the camp who’s the overall manager of the project and inside the camp we originally hired four or five employees. We put up a posting, people applied for jobs.”
Now, Inyenyeri employs five refugees in Kigeme camp, with the goal of expanding to the whole camp, which will require over 30 employees and service just under 4,000 households.
“Other than the camp manager, everybody working in the shop is from the camp population.” And the company, which also has several shops in and around Gisenyi, plans to expand to all the refugee camps in Rwanda.
“I generally have a point of view that private sector actors, by the nature of the competition of the marketplace, are required to be very efficient or else they go out of business,” Reynolds told The New Times.
“Whereas organisations that are government entities or NGOs don’t have quite the same incentives and we rarely have seen those sorts of entities solving problems and going out of business, if you will, because they succeeded in solving the problem.”
But as Jean-Claude Rwahama, from MIDIMAR, posits bringing private businesses to refugee communities requires a variety of approaches from diverse partners.
MIDIMAR is undertaking a USD6.6 million (Rwf5.64 billion) in collaboration with GIZ to construct a pipeline that Rwahama predicts will sustainably employ 1,500 refugees. He said it will be a five-year project starting this year.
“We want refugees to be actively involved in developing the host country,” Rwahama said.
“The Comprehensive Refugee Response Framework [signed by member states in September 2016] is a new concept of involving not only humanitarian actors but also development partners, such as the World Bank and other financial institutions,” said Rwahama, explaining that they can invest in the refugee and host communities with the aim of enabling them to become self-reliant in the future.
Starting a business is no simple task for anyone, and it is significantly more difficult for a refugee living in a camp.
According to the IFC study, refugees in Kakuma camp cannot gain formal employment, move, or own property. In Rwanda, other challenges inhibit the economic independence of refugee communities, such as limited land and capital.
With support from humanitarian organisations such as UNHCR and MIDIMAR, however, entrepreneurship and economic independence is highly feasible among refugee communities.
The largest obstacle for entrepreneurs is lack of capital, according to the IFC study, which can be alleviated by cash transfers.
Weekly cash transfers to households as an alternative to such aid resources as fuel and food rations are being introduced by the UNHCR with support from foreign partners, according to Inyenyeri’s Eric Reynolds and a UNHCR press release.
The IFC study also emphasised the length of time required in strengthening refugees’ financial independence. In the first months following relocation, refugees spend little to none of their own money on food and supplies, according to the study.
The longer refugees settle in host countries, however, the more financially independent they can become and, as a result, the more they spend money at local businesses.
Rwanda, which hosts around 178,000 refugees, many of whom have been here for more than a decade, would seem the perfect environment for bringing private investment into refugee camps.
Foreign and internal investment into the country’s economy remain a high priority for the government and investing in business is easier in Rwanda than nearly any other country in Africa, according to the World Bank.