The Opportunity in Refugee Finance (Financial Times)

As the World Bank and other official lenders promote financial inclusion strategies in development programs, specific payment and borrowing needs around refugee communities, particularly in the Middle East and Africa, have started to come into focus. The newly-formed Tent Partnership for Refugees, hosted by yogurt maker Chobani as the successor to President Obama’s private sector call to action last year on the global migrant crisis, organized a working group, together with government and international organization partners, on banking and capital market access that met in January to consider policy input and pilot projects. Big names like Citigroup, Mastercard and Soros Fund Management are members of the panel, along with smaller specialist firms interested in micro-credit and crowdsourcing as well as traditional commercial bank and bond and stock market linkages. The group explored a range of promising business and technology fixes where tens of millions of dollars could be initially deployed, such as a vehicle to invest in major locally-listed financial institutions in exchange for their commitments to grow and adapt refugee finance solutions. This emphasis could help alter the savings and investment landscape for host migrant populations along with doubts about ailing mainstream banks struggling with difficult economic conditions, which have soured fund managers on major frontline state exposure.

Turkey’s sophisticated state-owned, private, and Islamic lenders have been caught in a political and economic morass since 2016’s failed coup attempt. The lira extended its losing streak into January as emerging markets’ worst performer, with the central bank refraining from raising headline interest rates in part for fear of further damaging bank portfolios, which have not yet incorporated the fallout from widespread forced and involuntary company closures. However even with a 10 percent MSCI equity decline last year many analysts continue to recommend Akbank and other sector stalwarts as good value with their franchises. They could potentially deepen footprints among millions of Syrian refugees in border camps and surrounding cities, and

diversify consumer and business outreach to offset existing deterioration. With the sovereign’s ratings downgrade to the BB speculative category, and delays and possible unraveling n the EU’s multi-billion euro aid plan, these intermediaries could also devise and underwrite new influx-specific infrastructure and education bonds if charged with the task and offered regulatory leeway.

Jordan and Lebanon likewise have world-class financial heavyweights on the stock exchange already engaged with refugee products and services and able to expand the delivery and innovation range. Starting with the “Jordan Compact” reached at a Syrian aid conference a year ago, international allies have stressed expanded free trade preferences in exchange for Amman’s relaxation of labor restrictions. The EU recently struck a garment import deal and supported further technical work and special tax-free zone local relocation for European multinationals, while the US Commerce Department led a trade mission there in December with financial services firm representation. Arab Bank could be a channel for greater banking and securities market development there and in neighboring countries, including the West Bank and Gaza, with a refugee presence. Lebanese counterparts in turn, have an historic reputation for functioning in a high-debt extreme conflict environment, and many have continued operating in Syria during the civil war while also serving the fleeing millions at home and abroad. They have created private placement sovereign bonds when external capital markets were relatively closed, and despite fresh access to the World Bank’s concessional borrowing facility, the government announced at last September’s UN Refugee Summit a pressing need for alternative long-term refugee funding sources that its banks could explore under a broad inclusion rationale.

Kenya has hosted one of the oldest and biggest camps for Somalis escaping their decades-long state destruction, and it is considered Africa’s digital payments pioneer with the M-Pesa network which has penetrated a full range of rural and marginalized communities. Almost all listed banks like Equity and Kenya Commercial have joined this revolution, and they were heavily switching from corporate to consumer business, including small traders as omnipresent in the refugee space, before a regulatory crackdown and the introduction of interest rate caps in a pre-election move by the President’s party. The government has threatened to close the camp but many security and economic analysts warn of chaos without a transition period and advise stepped-up financial sector coverage.

Asia would be an additional overlooked region where banks could be further tapped to tackle the

crisis response in their own interest. The Rohingya in Myanmar have escaped to Malaysia by boat, where Maybank and CIMB are among regional giants in both conventional and Islamic lines. A dedicated global refugee finance fund could be originated with Tent Foundation or other sponsorship, and would appeal to both standard emerging market and impact investors recognizing refugee waves as both business and development imperatives.