Resilience, Enterprise and Commitment: Supporting Refugees Through Community Lenders

With the number of forcibly displaced people rising exponentially - surpassing 120 million as of May 2024 - it is increasingly necessary to ensure their economic and financial inclusion. Around the world, microfinance institutions and mission-driven banks respond to this need with products tailored to displaced communities’ challenges and potential. In the United States, Community Development Financial Institutions (CDFIs) - which have long played a crucial role in expanding access to capital in underserved communities - have also become important actors for supporting self-reliance for immigrants and refugees. 

Contrary to common perceptions about newcomers, CDFIs demonstrate that refugees are reliable borrowers. Financial inclusion is an important pathway to their economic self-reliance, and impact investors can help support this pathway by funding refugee-focused CDFIs as part of a Refugee Lens Investment (RLI) strategy.

What are Community Development Financial Institutions (CDFIs)?

In the US, CDFIs are mission-driven financial institutions designed to serve individuals and communities historically excluded from mainstream financial services. CDFIs are funded through a blend of capital from public and private sources such as philanthropic foundations and impact investors. While many CDFIs operate as nonprofit loan funds, they can also include for-profit banks, credit unions and venture funds that meet the community development criteria of the U.S. Treasury. 

According to the Opportunity Finance Network, over 1,400 CDFIs nationwide manage more than $222 billion. CDFI clients are 85% low-income, 66% people of color, 48% women, and 26% rural, advancing economic opportunity for all.  

Adapting financial services for refugees

Several CDFIs focus on refugees and immigrants, supporting their pathways to self-reliance and financial stability. Beyond lending, their services help overcome common barriers for newcomers, such as lack of credit history, unfamiliar documentation and cultural or language differences. These lenders have adapted to address refugees’ unique challenges with flexible underwriting, tailored products and wrap-around services. For example:

• Accompany Capital in New York City offers home-buying support, workshops, insurance protection and mentorship for women entrepreneurs, all offered in 28 languages to clients from 57 countries.
• The Center for Economic Opportunity (IRC-CEO) integrates its lending model with its sister organization International Rescue Committee’s (IRC) services and trusted local partners, ensuring that borrowers are supported with financial education, job readiness training and case management.
• CEDS Finance, based in Colorado, recognized that they needed an Islamic-compliant alternative to traditional loan structures, and became the largest national Murabaha lender in the United States. 

Strong results defy negative perceptions of refugees

These financial services customized for refugees have brought about tangible results - in businesses and jobs created, home purchases, educational opportunities and increased savings. For example, Accompany Capital’s Refugee IDA Savings Program has generated $4.8 million in total savings, and the $68 million they disbursed in small business loans led to 2,751 jobs. IRC-CEO’s 0% credit-building loan helped 66% of borrowers who started out without a credit score establish at least a fair score (660 or higher) in as little as six months of repayment.  

In addition, the repayment rates defy the negative perceptions about newcomers: Over the lifetime of IRC-CEO’s programs, with over 10,000 loans totaling $39 million disbursed, loans have been repaid at an exceptional rate of 96%. The Economic Advancement Fund has seen a loan repayment rate of 98% for its loans of $1.3 million to entrepreneurial refugees across the United States. 

Furthermore, the benefits of CDFIs serving refugees and immigrants extend to entire communities: their small businesses create jobs, pay taxes and often revitalize disinvested neighborhoods, reducing reliance on public assistance and increasing local resilience. Immigrants are highly entrepreneurial, and refugees alone contribute $4.6 billion annually in business income, which can be fueled by greater access to financing through CDFIs. 

CDFIs offer a refugee lens investing opportunity for impact investors 

While CDFIs provide an important source of support for refugees, they face several challenges, including high interest rates, inflation and uncertain public financing. In order to continue to offer their financial services to refugees and other vulnerable communities, attracting new sources of impact capital is essential.

For impact investors adopting a refugee lens investing (RLI) strategy, CDFIs offer an important vehicle for deploying debt capital. For example, in 2020, IRC-CEO and Refugee Investment Network partnered to launch a Social Impact Fund that offered investors a concessional rate of return while directly advancing refugee financial inclusion. Among the investors in this fund was World Education Services (WES), which acts as a catalytic investor, deploying grants and investments to support financial inclusion for immigrants and refugees while attracting other capital to this space. The IRC-CEO leveraged a 2021 investment from WES to unlock an additional $1.25 million in commitments from investors.

In addition to financing, RLI-focused technical assistance can help loan funds and other types of CDFIs to expand their reach into refugee communities, providing support for tracking refugee borrowers and outcomes, designing new financial products, building internal capacity and attracting refugee lens capital.
 

Reaching more refugees: From the “why” to the “how”

The story of refugees is not one of dependence, but of resilience, enterprise and commitment to their new communities, especially when given access to financing. While a relatively small share of CDFIs currently focus on newcomers, the broader sector has enormous potential to scale this impact. CDFIs already understand the “why.” Through RLI, they can have the “how” to reach refugees. Scaling refugee-inclusive community lending is a win for refugees, local communities and financial inclusion as a whole.