Executive summary

As of 2022, an estimated 108.4 million people were forcibly displaced worldwide. While humanitarian aid addresses short-term needs, sustainable solutions for refugees’ economic inclusion are crucial. Refugee-related investment, a subset of impact investing, offers a commercial approach to this challenge by investing in companies with a refugee focus. This can provide formal work, goods, and services, improving the lives of refugees and host communities.

Recent years have seen a rise in refugee-related investment, although most investors incorporate some concessionality. Various stakeholders are exploring investment strategies, often mixing concessional and commercial financing. Some are establishing innovative funds, while others are developing a pipeline of refugee-led firms for future investment.

The field faces challenges, including a lack of robust investment pipelines, limited commercial investors, scarce data and knowledge sharing, and political and regulatory hurdles. The international community can support refugee-related investors by improving the ecosystem through accelerators, mentorship, and research. Partnerships between commercial and development actors can also be beneficial.

Despite obstacles, refugee-related investments hold potential for growth. The business case for investing in refugee-focused companies is emerging in various regions. Increased grants and concessional financing are needed to prove models and attract commercial financing.

Defining refugee-related investment

The World Bank’s Private Sector for Refugees (PS4R) platform defines “refugee-related” companies as those that create economic opportunities for forcibly displaced populations (FDPs). These companies can be owned or led by FDPs, provide goods and services to them, or operate in areas affected by displacement.

The Refugee Investment Network (RIN) further defines refugee-related investments based on ownership, leadership, and support provided to refugees. Investments must meet specific criteria to qualify as refugee-related, such as being refugee-owned, refugee-led, or refugee-supporting.

Why is refugee-related investment needed

Low- and middle-income countries host 85% of the world’s refugees, often with limited resources. As refugee situations become protracted, sustainable solutions for employment and income generation are crucial. Humanitarian aid, while essential, cannot fully address the growing needs.

Refugee-related investment offers a way to tap into global capital markets to provide sustainable economic opportunities for FDPs and their host communities. It aims to leverage the financial system to improve the lives and livelihoods of refugees through formal work and access to goods and services.

The state of play

The refugee-related investment landscape is diverse, with various stakeholders and organisational models. Most organisations have a development or humanitarian aspect, and there is limited purely commercial investment activity.

Organisations like Kiva, Developing World Markets (DWM), and the Danish Refugee Council (DRC) are raising funds or preparing to launch refugee-focused financial products. While the total value of current investments is difficult to estimate, these organisations combined could manage over US$150 million when fully operational.

Investment activity is also increasing in countries hosting large refugee populations, such as Türkiye, Colombia, and Pakistan. This could lead to future refugee-related investment opportunities as refugees become more integrated into local economies.

Barriers and obstacles

Several challenges hinder the growth of refugee-related investment:

• Lack of a robust pipeline of investment opportunities: Identifying refugee-led or refugee-serving businesses and innovative financial products is difficult. Building the pipeline requires concessional capital and efforts to improve the regulatory and legal environment.
• Limited engagement with commercial investors: Few commercial investors are actively involved due to a nascent business case, misaligned incentives, perceived high risk, and few scalable financial products.
• Knowledge-sharing challenges: Limited knowledge-sharing and data gaps hinder the development of a business case and best practices. There is a need for more transparency and information sharing about successful and unsuccessful investments.
• Regulatory hurdles: Varying regulations across countries create challenges for refugees to access employment, financial services, and business ownership. These barriers also contribute to the perception of risk associated with refugee-related investments.

A way forward and recommendations

The refugee-related investment field is showing progress, with some models transitioning from grant-based to concessional or commercial financing. Recommendations to further develop the field include:

• Strengthen the ecosystem: Revise the refugee investment lens to capture nuances of different strategies and streamline monitoring and evaluation (M&E) to prove impact.
• Build the pipeline of refugee-related opportunities: Encourage pro-refugee regulatory reforms, invest in pipeline development for refugee-led businesses, and build the capacity of financial intermediaries to work with refugees.
• Build the business case and strategies for refugee-related investment: Foster dialogue between capital providers and humanitarian/development agencies, tailor business cases to different contexts, adopt hyper-localised approaches, and use sectoral strategies to target efforts.
• Set appropriate expectations around returns: Build transparency and trust around the spectrum of potential returns, including non-financial returns like social impact and sustainability.