Refugee entrepreneurs paying it forward through innovative microloans

Imagine this: You are only 18 years old, with a newborn baby. Your husband leaves you, so you drop out of school to take care of your child. A war breaks out in your home, forcing you to seek refuge in a foreign country. This is the story of Amito, a South Sudanese refugee woman now living in the Bidibidi Refugee Settlement in Uganda.

Uganda hosts the most refugees of any African country. Bidibidi, one of the world’s largest refugee settlements, has a population of around 250,000 people, primarily women, children, and youth. Despite the dense population and potential for business opportunities, 81.9% of Bidibidi’s residents are unemployed, according to UNHCR, the UN Refugee Agency.

In this context, aspiring small business owners don’t typically have access to traditional finance products. So, refugee-led organizations Bridging Gaps and Afri-Youth Network, with the support of UNHCR’s Refugee-led Innovation Fund, are working with the local refugee community to offer a groundbreaking pay-it-forward microloan model. Co-developed with and co-led by refugees in Bidibidi, this model combines mentorship and entrepreneurship training, offering a sustainable path toward financial independence and community empowerment.

Afri-Youth Network, a trusted local community-based organization within the settlement, brings invaluable knowledge of the community and local circumstances, as well as deep-rooted trust from its members. Meanwhile, Bridging Gaps was created to deliver a systemic solution to poverty — one that empowers communities to lead their own change. With expertise in social innovation, (micro)finance, and fundraising, the Bridging Gaps global team worked in close partnership with Afri-Youth Network to design the pilot programme and scale it from there. Together, the two organizations are building a model that creates long-term opportunities for sustainable livelihoods.

An innovative microloan model

The pay-it-forward microloan model is the cornerstone of the Bridging Gaps approach. Traditional microlending can burden entrepreneurs with high interest rates, while grants alone often don’t create sustainable systems. This innovative model addresses these challenges by turning donations into interest-free microloans. Entrepreneurs receive the funding they need to launch their businesses and, once they get off the ground, they pay the initial loan forward to another aspiring entrepreneur in the same community. This creates an ongoing cycle of opportunity.

Beyond financial inclusion, the model fosters a sense of ownership, empowerment, and mutual support, making it a community-driven solution to poverty and unemployment. Given the unique challenges faced by refugees, the terms are intentionally flexible, allowing participants up to two years to pay their loans forward. This approach fosters trust and ensures the sustainability of the programme.

Supported by organizations from the network around Nobel Peace Laureate Muhammad Yunus, the initiative integrated the seven principles of social business into its core work. This approach encourages refugee entrepreneurs to build businesses empowering their communities at large.

Investing in refugee entrepreneurs

The pilot started out working with eight refugee entrepreneurs who aspired to build sustainable livelihoods, soon followed by a second cohort of 17 entrepreneurs. One of them was Amito. She received a microloan and used it to establish a flourishing retail shop that not only supports her family but also donates products to families who couldn’t afford them otherwise. As a result of her successful business, Amito has been able to afford childcare and resume her education. She also became a mentor for other female entrepreneurs in the settlement and is managing to put aside savings to pay her initial loan forward to another Bidibidi entrepreneur.

“The entrepreneurs feel more empowered, and now so many more refugees want to join the programme,” says Malish James, director of Afri-Youth Network and co-founder of Bridging Gaps. “The impact is even bigger than we imagined because it touches so many parts of their lives.”

Supporting self-sufficiency

To date, the initiative has provided 55 microloans in Bidibidi. While three entrepreneurs faced unforeseen circumstances — one used the loan to address urgent hunger needs, and two returned to their country of origin — the remaining 94% of recipients have successfully launched their businesses. Most are already saving and working toward paying their loans forward, while three people have already done so, enabling new community members to launch their businesses.

Entrepreneurs are selected through a community-driven process that ensures inclusivity and prioritizes those most in need. Selection criteria include demonstrated interest in business, commitment to paying the loan forward, and limited access to other financial resources. Priority is given to youth, women, and individuals with greater vulnerability, such as those with disabilities or large families. Applications are gathered with input from refugee welfare councils and community leaders, and successful applicants are expected to attend training sessions and engage in ongoing mentorship.

Steven Adunda, for example, used his microloan to establish a motorbike repair shop, and he now trains local youth in mechanical skills. His initiative not only generates income but also builds vocational skills for the community’s future. “I buy spare parts and tools for the shop, and I make money by selling the parts, repairing motorcycles, and training the youth,” Steven explains. “After they learn, they rent my tools to do their own work. This way, we are all earning and supporting our families.”

Betty Sunday was struggling with her child’s illness, macrocephaly, and had no means to support her family. Thanks to her microloan, she started selling shoes, which now earns her a good monthly income. This has enabled her to afford her child’s medication and has given her much-needed sense of stability in life. Beyond her financial success, Betty ensures affordable prices for her community, enabling families to buy shoes they otherwise couldn’t afford. Betty shares: “Every pair of shoes sold supports my family and helps others access necessities they need in their daily lives.”

Dawa Mauzu became a market vendor, ensuring that families in her neighborhood have access to daily meals closer to their homes, with the vision of enhancing food security in Bidibidi. Using her microloan, Dawa purchased essential food items like groundnuts, onions, simsim, and beans, and covered transportation costs to bring her goods to the market. She buys a bucket of groundnuts for UGX 15,000 and sells it for UGX 22,000, earning a profit of UGX 7,000 per bucket. Similarly, simsim and beans yield her a profit of UGX1,000 per unit. “My business supports my family and helps my neighbors access affordable food,” Dawa says.

Rufas Debu started a refugee farming association. This initiative tackles food scarcity by boosting agricultural productivity and creating jobs for both refugees and the host community. With a farm based in Gboro village, Yumbe district, and plans to supply markets in Yumbe town and Bidibidi, the association leverages Uganda’s progressive refugee policy, which enables refugees to lease farmland from local Ugandan neighbors. The association aims to cultivate a sustainable market for fresh, affordable produce while fostering self-reliance.

 

An endless ripple of opportunity

Having got off to a strong start in Uganda, this microloan initiative has already scaled to Brazil through a partnership facilitated by UNHCR. Working in partnership with refugee-led organization Associação Dos Migrantes Indigenas Roraimö (AMIR) — another grantee of UNHCR’s Refugee-led Innovation Fund — the team provided microloans and training to 12 Indigenous women displaced from Venezuela, empowering them to rebuild their lives and livelihoods. These women are using their microloans to tackle period poverty and other everyday needs with climate-friendly solutions, such as producing reusable menstrual products and eco-friendly storage bags. By prioritizing these urgent issues, they are addressing both the financial and environmental barriers faced by their communities.

 

Additionally, in response to growing demand, Bridging Gaps together with local partner “Remember Youth for Change” extended microloans to 33 refugee women across three camps near Goma in the Eastern Democratic Republic of Congo. With ongoing requests from local community-based organizations, refugee entrepreneurs, and other potential partners to bring the initiative to their countries and communities, the team is aiming to scale it still further.

 

 

Looking ahead, our goal is to turn Bridging Gaps into a global pay-it-forward movement, where refugees and host communities worldwide can access the capital they need to implement their own initiatives, to become social entrepreneurs and to thrive. Each loan that is paid forward empowers another entrepreneur, creating an endless ripple of opportunity.

 

With the Fourth International Conference on Financing for Development (FFD4) taking place this summer, we’re honored to be part of the lead-up discussions, amplifying the voices of refugee entrepreneurs and showcasing how grassroots financial solutions can help achieve global development goals.

 

What vulnerable communities lack is not ambition or ideas, but access to the funding and resources that will allow them to build something. This is why we must prioritize community-driven solutions and ensure that financial inclusion reaches those who need it most. One key learning from our pay-it-forward microloan model is the sense of empowerment it fosters, as recipients transition from “beneficiaries” to “future donors”, enabling their neighbors, friends, and other community members to access the same opportunities. This community-centered approach ensures high accountability because recipients understand the direct impact their success has on their own community. We always consult the local communities to adapt the model if needed, which empowers entrepreneurs to build businesses that are deeply rooted in the challenges and needs of their local contexts.

 

This makes our approach inherently scalable, as communities co-develop solutions that reflect their unique needs. With thriving businesses up and running and promising indications of a high pay it forward rate, this approach could prove to be a powerful driver of sustainable development and community empowerment. As Amito puts it: “The financial support has truly changed our lives. All I needed was the opportunity.”

 

 

Join Bridging Gaps and Afri-Youth Network in empowering refugee entrepreneurs to build a brighter, more inclusive future for all. Find out more about UNHCR’s Refugee-led Innovation Fund here.