Microfinance in protracted refugee situations

Microfinance in protracted refugee situations: Lessons from the Alchemy Project

To wrap up all that I have learned this semester, I want to apply the research I’ve done to a create a model for a local scenario. Throughout the course of this semester the possibility of working with the $40,000 grant Emily Powell received for the refugee women at MVCRC presented itself. The grant was intended to allow these women to continue weaving like they did it their homes countries. I wrote about this earlier in my blog and was under the impression that Emily believed this money really only to be used to help these women out in the sense that it gave them something to do. I have since been told that making this money sustainable (selling items and putting the proceeds back in) is a desirable idea. This will allow the $40,000 to last much longer than it would have and, ideally, allow it to grow.

Until this was decided on as my final project, I had not done much research on refugee populations in particular. I had and continue to believe that a refugee population within the United States is the ideal compromise of third and first world countries. There will be less alterations from the successful third world microfinance model needed and this could be just the step to understanding Microfinance in the US.

I found a paper done by the director, Karen Jacobsen, of the Alchemy Project at the Feinstein International Famine Center at Tufts University, entitled, Microfinance in protracted refugee situations: Lessons from the Alchemy project. This paper was written in June 2004 and has provided me some useful background on the concept of implementing microfinance in refugee communities, specifically Utica, NY.

The Alchemy project is an experimental program in Africa that looks at different ways to support the livelihoods of displaced people. The paper goes through a series of topics relevant to its project and provides many useful and applicable bits of information for the Utica refugee population.

2. constraints to providing microfinance in refugee situations

-insecurities and difficulties with the host community

            all refugees live in different situations- camps, communities with and without host populations.

            Refugee’s “rights in host countries have implications for the kinds of livelihoods that are possible to them, and for program interventions such as microfinance” (5). It may be difficult, considering restrictions of being a refugee, to implement microfinance.

            There are some factors that make refugees more risky for microcredit than host populations including, often exposed to violence or persecution (refugees in Utica have typically moved far enough away from the threats), they may be marginalized and isolated from the host community (cultural and language barriers), refugees can face local crime and/or harassment and finally most refugees are in great need of even basic needs (they need immediate relief in addition to microfinance)

My response to these concerns is that maybe microfinance is a step taken once refugees have been settled a bit, but only if they are going to have an alternative method to receiving basic needs. It may be overwhelming, but beginning refugees immediately with business skills training may be the best thing for them so they can begin microfinance projects as quickly as possible.

            3. adapting Microfinance Best Practices for Refugee Situations

“By increasing their understanding of microfinance, refugee agencies can make their programs more effective” (8). When Stephanie and Emily first met with the women about giving them money so that they could weave again, they were automatically skeptical of their position.  They asked questions like, “how many hours do we have to work?” because they have not had someone offer them something without a catch before. Microfinance is for highly motivated individuals who want to change their situation so to ensure its success, those people involved my truly understand what is going on. You cannot go through the motions (even if someone has set everything up for you) and expect to prosper.

            “But some refugees who could benefit from microfinance, including those labeled as ‘vulnerables’ are less present in programs as a result of self-exclusion” (9). The people being targeted for the microfinance project in Utica are all women who are, by nature, at a disadvantage. Microfinance has from its inception targeted women because they are the ones who are worse off in poverty situations, it is the same within refugee populations.

-“microfinance services for refugees should be designed to reduce poverty, risk and vulnerability”  (9). This process should not in any way be about making a profit for the lender- it should only be considered a wise investment and a charitable investment at the most.

-“like the very poor, refugees need a mix of financial services, including different forms of grants and credit, savings and money transfer services” Emily’s grant is taking the first step in providing the initial capital (so don’t have to worry about getting loan from bank) and then providing the rest of the services from there.. I think that this project is going to be labor intensive to organize and keep track of…

“while it is important that loan amounts are appropriate to meet the special needs of refugees, agencies should not over-estimate the required loan size…large individual loans are more complex and demand greater capacity to manage than small or group loans” Therefore use of the group loaning method (1 women defaults, all are affected). Group loaning works because as previously discussed refugees have the culture for this esp since here in the US together and do not know anyone else= solidarity

“newly arrived refugees are often economically vulnerable as they have lost their property and have to rebuild their livelihood in a new economic environment, often one with few economic resources such as a newly established refugee camp” (10)

lucky to have Utica community although it may be depressed

from above “for new arrivals, interventions should be relatively low risk until the refugee’s creditworthiness [is-sic] determined” pg 10

women buy thread and rent time on the machines = start out with small loans…

“programs for new arrivals might include a ‘starter’ grant, or in-kind loans for activities” (10)

use grant to start (buy initial capital) and then go from there.

What really is left to be determined is how the $40,000 grant will initially be used. It could be use to buy some startup capital and then the women can just use those looms and thread to get going. Another option would be to begin the loan process immediately with the grant. An in-between step would be to purchase the capital for the women who are currently involved and them have them borrow for thread to create products and possibly rent time on the looms.

            In the long-run I want this $40,000 to be sustained and help more women down the line. I think the mid-step option would be the best because it isn’t too large of a loan and then also it is fair to women later on who are not involved in the initial purchase but are reaping the benefits. Over time this fund will grow back to its original $40,000 and possibly larger. There isn’t really any need for it to grow larger than that other than the possibility of it aiding more and more women looking to receive an income to obtain independence and security in the US.

http://nutrition.tufts.edu/docs/prf/famine/MF_Lessons.pdf