Investing in refugee settings can have real impact: Here are 3 lessons from Kenya

Attracting private sector support for development in communities hosting refugees can be challenging — but Kenya offers us a case study on how to make this happen. The result is investments that intersect humanitarian aid, job creation and the improvement of lives.

Small-scale entrepreneurs, both in the host community and among refugees, have long provided goods and services to refugees here. But more recently, bigger, formal businesses are finding markets in these environments – and creating jobs and opportunities in the process.

With government budgets and aid agency funding increasingly stretched, there is a growing body of evidence and examples to follow in how private sector interventions can offer sustainable solutions for populations historically dependent on humanitarian support.

One example is the Kakuma Kalobeyei Challenge Fund (KKCF) in northwest Kenya’s refugee hosting area. Following KKCF’s example can help other development partners and businesses transform how they work in forced displacement settings.

Here are three key lessons to learn from its work:

Prospective investments need to be identified, nurtured and developed. Access to reliable market data for investment decisions is crucial for sustainable investments.

Organizations must come in with realistic expectations around costs and the time it takes to develop projects. There are potential opportunities for investment and sustained economic development in communities hosting refugees, but there are generally no investment-ready deals waiting for investors or private sector partners.

Investing in good, reliable data that is relevant for the private sector is an essential first step in understanding the market and identifying the current opportunities that are available as well as latent opportunities that can be created.

KKCF’s 2018 study found that the Kakuma refugee hosting area, home to more than 270,000 refugees and asylum seekers from across Africa and a host community population of more than 60,000, could benefit greatly from private-sector interventions. It was the catalyst for the KKCF project and helped us drive interest from the private sector to invest in the Kakuma area.

The separation in the humanitarian sector between populations in refugee camps and their host communities doesn’t necessarily reflect the reality on the ground. In Kakuma, for example, the two communities interact daily through trade and business activities.

The private sector must understand the whole market – refugees and their hosts – and their services must cater for both.

For example, KKCF supported K De Igratium International, a woman-owned business that produces and supplies hygiene products to women from both refugee and host communities, and Steven’s Bakery, which employs about 50 refugees and host community members. KKCF also financed the solar mini-grid company Renewvia Energy to expand in the Kalobeyei settlement area, providing stable and green electricity to over 15,000 refugees.

Local resources are critical for managing relationships with local stakeholders, identifying and leveraging opportunities and managing risks specific to more challenging environments, such as conflict or integrity risks.

The KKCF project team based in Kakuma has supported businesses seeking to invest in the camp and community on travel logistics, scoping trips, community relations and the mapping and management of client and stakeholder relationships. In addition, the International Finance Corporation invested in specific conflict analyses and designed grievance mechanisms for local communities that have proved essential in helping to manage these non-financial risks.

Don’t underestimate the need for this operational support – for many private sector companies, investing in refugee settings is a new environment and presents many real and perceived risks.

Refugee communities are vibrant, dynamic marketplaces that have the potential to contribute to their countries’ economies. By generating new partnerships and making private investment work for these settings, it is possible to make a real difference.

Through financing and technical support, KKCF has supported the creation of more than 370 direct jobs and helped deliver vital services like renewable energy, healthcare and pharmacy access to more than 100,000 refugees and host community members. This has facilitated the expansion of major businesses into the area for the first time.

Through the fund and its partners, KKCF has seen and supported other initiatives that seek to leverage the private sector for impact in refugee and host community settings. The International Finance Corporation is working with UNHCR globally to do this in projects across Latin America, the Middle East and other parts of Africa. It is a signatory to the World Economic Forum’s Humanitarian and Resilience Investing Initiative’s Call to Action for transitioning from aid to investments in frontier markets.

We need these innovative approaches now more than ever. As of September 2023, 114 million people had been forcibly displaced worldwide, with most hosted in low- and middle-income countries such as Kenya. Increasing investment in these areas and these people is the right thing to do — and following these three key lessons can help get it done in a sustainable, holistic and mutually beneficial way.