The missiles and bombs targeting Iran and Lebanon are causing a new humanitarian crisis in a world already grappling with how to stabilize and support more than 122 million people displaced by violent conflict.
“The number of refugees and forcibly displaced people is increasing but there’s only short-term emergency humanitarian funding,” laments Patrick Elmer of iGravity. “There’s a big gap in the market.”
The Swiss impact investing firm is among a growing number of organizations testing creative financing solutions with the aim of ensuring durable and sustainable funding streams for refugees and other displaced people. iGravity invests in businesses and technologies supporting refugee communities in East Africa and the Middle East through an impact fund it launched in 2022 with support from the Danish Refugee Council. Its Refugee Investment Facility provides loans structured with impact incentives to encourage portfolio businesses to serve, train and hire refugees.
“Refugees are often perceived as a burden. We’re trying to change the narrative,” says Elmer. “There’s an opportunity in engaging with refugees because they can become employees, they can sell agricultural products and become suppliers, and they can become clients.”
Major humanitarian NGOs including UNICEF, Save the Children and Mercy Corps are experimenting with investment models to stretch increasingly scarce global aid dollars for people affected by conflict and climate change.
The International Rescue Committee, for example, this year launched Airbel Ventures to invest in new technologies like predictive analytics for food insecurity, and locally-adapted, voice-based AI to improve data collection on the ground. The venture fund is the culmination of five years experimenting with innovative refugee finance approaches.
The United Nations High Commissioner for Refugees developed a climate resilience fund to support refugees facing climate-related shocks. UGAFODE in Uganda, home to the largest number of displaced people in Africa, provides collateral-free loans to women and refugees. UK-based RefuAid leverages donor funding and other types of capital to lend to refugees seeking to acquire new skills.
“We’re showing the opportunity and the economic case for inclusion,” says Elmer.
Impact incentives
Human displacement from conflict and climate change has risen significantly over the past decade. In Lebanon, more than 700,000 people – 12% of the country’s population – have been forced from their homes since the latest war began in the Middle East.
Add to that that a staggering 90% of Gazans are now internally displaced. There are nearly 15 million displaced Sudanese since renewed fighting between militias and the government began in 2023; 8.2 million displaced Congolese; 13 million displaced Syrians.
Refugees from many conflict zones may never be able to return home. iGravity designed its Refugee Investment Facility to funnel capital to businesses helping displaced people find stability and economic opportunities in their host communities.
The firm started four years ago with a pilot fund of $8 million that provides low-cost loans to local businesses providing job opportunities and training or delivering essential goods and services like microcredit, clean energy and healthcare to vulnerable and displaced communities. It offers loans of $150,000 to $800,000 at below-market rates of 6% to 8% to businesses in Uganda and Jordan.
“It’s costly to set up a fund, and it takes a lot of time to get it up and running,” Elmer says. “We had the wise idea to go to the ground first and see what these businesses actually need.”
iGravity works with portfolio borrowers to establish impact targets, such as expanding services to refugees; increasing the number of refugees accessing affordable loans; or hiring and training refugees. If the targets are met, it reduces its interest rate.
One of its portfolio companies is Omia Agribusiness, a provider of smallholder farmers with access to agricultural inputs. Its $300,000 loan is designed to incentivize Omia to offer smaller and more affordable farm input packages to refugee farmers, and also hire more refugees for its operations. Omia met these metrics within the first year.
The portfolio also includes OMIPA, a savings and credit cooperative organization or SACCO in Uganda; and Finca Microfinance in Uganda for which iGravity issued its first local currency loan for on-lending to refugees.
Female-founded Byeffe Foods, a fortified foods producer whose suppliers include refugee farmers, is the latest addition to the Refugee Investment Facility’s Uganda portfolio.
Last year, iGravity made its first loan outside of Uganda, supporting Ali Dates in Jordan, a date farm employing Syrian and Palestinian refugees. The loan was structured to be compliant with Islamic law, which forbids charging interest. Instead, iGravity purchased farming equipment and offered it to Ali Dates with a markup, which can be reduced if Ali Dates meets specified refugee hiring targets.
iGravity secured financial support for the pilot facility from the European Commission’s humanitarian aid department ECHO, the Conrad N. Hilton Foundation, Novo Nordisk Foundation, the Danish Ministry of Foreign Affairs, IKEA Foundation and another undisclosed faith-led organization in the US.
Redefining returns
In the UK, nonprofit RefuAid is working to channel more capital to refugee communities by encouraging investors to reconsider how they think about returns.
RefuAid provides interest free loans of up to £10,000 to refugees to help them cover costs of skills training programs and integrate into the UK workforce. The loans are based on a borrower’s career trajectory and future earning potential. It also offers credit to help refugees cover family reunification costs, and cover upfront housing expenses.
An impact study by the London School of Economics found each £1 loaned from RefuAid’s £2.4 million ($3.2 million) portfolio has generated £5.66 for the UK economy. Its default rate, meanwhile, is just 1.4%, says co-founder Anna Jones.
“The impact investors we worked with understood that the return to their portfolio is not five times [their investment], but the return to the UK is,” she says. “Their primary indicator of success for their investments is the impact.”
Most of the capital RefuAid lends is from UK-based donors, most of which provided interest-free loans. Funders include the Joseph Rowntree Foundation, the Esmée Fairbairn Foundation, Barrow Cadbury Trust, the Clothworkers’ Foundation and Comic Relief. US-based Draper Richards Kaplan Foundation also invested.
In Uganda, UGAFODE is taking a more traditional approach, providing microloans to refugee communities. The organization began lending to refugees in 2019. UGAFODE works with KIVA to buffer investors’ risk concerns with partial loan guarantees.
“There is a risk in lending refugees, but it is also a business that you can shield with guarantees,” says UGAFODE’s Florence Mutonerwa.
The organization has drawn support for its refugee work from Oikocredit, Opportunity International, Habitat for Humanity Uganda and Accion among others.
Scaling the model
For iGravity, being in the final stage of lending through its pilot fund has the firm focused on widening its geographic footprint. The firm is looking to raise $20 million to $25 million to reach refugees in other parts of East Africa and the Middle East, as well as Latin America, where Colombia in particular has taken in large numbers of economic migrants and refugees from Venezuela.
“What we are doing today is only a small drop in the ocean,” says Elmer. “The ambition and the success of what we do can only be achieved through scale.”
iGravity is looking to build a heavily layered blended-finance stack to attract that much more capital. Grants will be used as the highest-risk equity layer. Senior debt will be cushioned by a layer of subordinated debt.
It’s hoping to bring on family offices and development finance institutions as new LPs, Elmer says. “The only way we can actually attract family offices and development financiers is by giving them comfort that the risk is limited.”
Correction: A prior version of this article stated that Roots of Impact was involved in the design of iGravity’s Refugee Investment Facility. Roots of Impact was not involved.
