The Economics of Displacement: How Refugee Entrepreneurship Is Reshaping Host Economies

By Saanvi Patel Oct. 30, 2025

When policymakers discuss refugees, the conversation usually revolves around cost: the fiscal strain on welfare systems, housing, or border control. Yet, the economic narrative of displacement is far more complex. Across Africa, the Middle East, and Europe, refugee entrepreneurs have begun turning humanitarian crises into engines of local growth. According to the World Bank, forcibly displaced people would collectively form the world’s 17th-largest economy, with annual economic activity surpassing US$130 billion. Despite this, public policy continues to view refugees primarily as recipients of aid rather than participants in production. This outdated framing obscures one of the most under-appreciated economic phenomena of the decade—the rise of refugee entrepreneurship as a stabilizing, growth-driving force within host nations.

Refugees as Economic Actors, Not Fiscal Burdens

Contrary to public perception, refugees are not passive beneficiaries of assistance. In Uganda—home to over 1.6 million refugees, the highest in Africa—government surveys show that 21 percent of refugee households operate a non-farm business, compared with 17 percent of local host households. These enterprises contribute up to US$1.1 billion annually to Uganda’s GDP, according to a 2019 UNHCR-World Bank joint study. In Kenya’s Kakuma settlement, a self-contained urban economy has emerged: over 2 000 registered businesses, ranging from mobile-money kiosks to construction firms, circulate an estimated US$56 million in annual transactions.

Economic dynamism among displaced communities arises partly from necessity. Cut off from formal labor markets, refugees create micro-businesses in trade, tailoring, and agriculture. Over time, these ventures integrate into domestic supply chains, purchasing goods from local producers and hiring citizens. The OECD finds that each refugee entrepreneur generates, on average, 1.4 jobs for locals—a small yet compounding multiplier effect that contradicts the “job-taker” narrative pervasive in host-country politics.

The Structural Barriers to Capital and Credit

Despite clear evidence of productivity, refugee entrepreneurship remains throttled by financial exclusion. Globally, less than 10 percent of refugees have access to regulated banking, according to the World Bank’s Global Findex Database. Risk-averse institutions classify them as “high-risk” clients due to absent documentation or credit histories. As a result, most rely on informal savings groups or unregulated mobile-money networks. In Lebanon, 75 percent of Syrian refugees surveyed by UNHCR and Mercy Corps reported using mobile wallets, yet fewer than 3 percent possessed a bank account.

This credit vacuum curtails business scalability. Micro-loans offered by humanitarian programs are rarely sufficient to expand beyond subsistence operations. A 2022 International Finance Corporation study in Jordan’s Zaatari Camp revealed that average micro-credit size was US$350, compared with US$4 000 for local small-business loans. Predictably, only 7 percent of refugee-owned firms survive beyond two years. The constraint is not entrepreneurial capacity but institutional design: regulatory frameworks treat refugees as humanitarian liabilities rather than emerging market participants.

Some reform efforts show promise. Rwanda’s Inkomoko Entrepreneurship Development program provides collateral-free financing paired with business training; participating refugees increased average monthly profits by 43 percent within a year. These data underscore that policy liberalization, not perpetual aid, determines long-term self-sufficiency.

The Macro-Economic Dividend of Inclusion

Host governments frequently underestimate the macro-economic returns of refugee inclusion. The International Monetary Fund estimates that integrating refugees into the formal labor market can lift host-country GDP by up to 2 percent within five years, driven by higher consumption and labor supply. Germany’s experience after the 2015 Syrian refugee influx illustrates this effect: by 2022, roughly half a million Syrians were formally employed, contributing more than €10 billion annually in taxes and social-security payments. The fiscal burden incurred during the first two years of resettlement was fully offset by year seven.

Furthermore, refugee entrepreneurship fosters trade diversification. Research from the Center for Global Development shows that diaspora and refugee networks expand export channels to origin countries once conflicts subside. Ethiopia’s Somali-region refugees, for instance, have become conduits for cross-border livestock and textile trade with Somaliland, generating an estimated US$65 million in annual commerce that benefits both sides of the border.

Why Policy Remains Stagnant

If evidence overwhelmingly supports economic inclusion, why do most policies remain restrictive? The answer lies in a misalignment of incentives. Humanitarian agencies operate under annual grant cycles focused on short-term relief metrics—shelter, food, and education—rather than long-term productivity. Meanwhile, ministries of finance often lack legal jurisdiction over refugee affairs, which fall under interior or security ministries. This bureaucratic siloing fragments economic planning.

International donors share part of the blame. Only 1.2 percent of global aid in 2023 targeted refugee livelihood programs, according to OECD DAC data, compared with 42 percent for immediate humanitarian response. Even flagship initiatives such as the Global Compact on Refugees remain voluntary, producing little enforceable commitment. Without fiscal reclassification of refugees as economic assets, structural reforms—like tax incentives for refugee-employing firms or access to government credit guarantees—will remain politically fragile.

The Role of the Private Sector

The emerging involvement of private finance could change this calculus. Institutions such as Goldman Sachs’s 10 000 Women Initiative and Mastercard Aid Network are pioneering blended-finance models that combine philanthropic seed capital with commercial micro-lending. In Kenya, Mastercard’s partnership with Equity Bank enabled over 30 000 refugee entrepreneurs to receive digital credit lines averaging US$800, tied to mobile transaction data rather than traditional collateral. Default rates stayed below 4 percent, lower than national averages.

These successes prove that refugees can be both creditworthy and profitable clients. If replicated at scale, such programs could unlock billions in idle human capital while reducing donor dependency. The challenge now is coordination—linking private-sector capital with public-policy frameworks that legalize refugee enterprise ownership and financial access.

A Framework for Policy Re-Engineering

A sustainable refugee-economy policy should rest on three pillars:

1. Legal Recognition: Grant refugees the right to register businesses and open bank accounts, as Uganda and Rwanda have done.

2. Financial Inclusion: Develop credit-scoring models based on mobile-money data and consumption patterns rather than formal employment histories.

3. Investment Partnerships: Encourage host-country investment agencies to classify refugee ventures as small- and medium-enterprise (SME) projects eligible for national grants and tax relief.

Implementing these reforms could generate a cumulative US$60 billion in additional economic output across low- and middle-income host nations by 2030, according to UNHCR’s Refugee Livelihoods Report (2023). This figure exceeds the total humanitarian aid budget of the same period—proof that enabling refugees to earn is fiscally wiser than paying for their survival.

Conclusion

The economics of displacement is no longer a marginal issue of compassion; it is a central question of growth strategy. Treating refugees solely as humanitarian dependents wastes enormous human and financial capital. When empowered with legal recognition and access to credit, displaced people become net contributors to their host economies—producers, taxpayers, and employers. The evidence from Uganda, Germany, and Kenya demonstrates that inclusion yields measurable returns. As global displacement surpasses 114 million people in 2024 (UNHCR), the debate must evolve from one of burden-sharing to one of investment optimization. The world can either continue funding camps or start financing economies. The choice is not merely moral; it is economically imperative.

Works Cited

“Global Compact on Refugees.” United Nations High Commissioner for Refugees (UNHCR), 2018, https://www.unhcr.org/global-compact-refugees.html.

“Global Findex Database 2021: Financial Inclusion, Digital Payments, and Resilience in the Age of COVID-19.” World Bank Group, 2022, https://www.worldbank.org/en/publication/globalfindex.

“Impacts of Refugees on Host Economies: Evidence from Uganda.” World Bank – UNHCR Joint Data Center on Forced Displacement, 2019, https://www.jointdatacenter.org/uganda-refugee-economy-report/.

“Integrating Refugees into the Labor Market: Lessons from Germany.” International Monetary Fund (IMF) Working Paper, 2023, https://www.imf.org/en/Publications/WP/Issues/2023/05/17/Integrating-Refugees-into-Labor-Markets.

“Jobs Make Refugees Self-Reliant in Uganda.” United Nations High Commissioner for Refugees (UNHCR), 2021, https://www.unhcr.org/news/stories/jobs-make-refugees-self-reliant-uganda.

“Kakuma as a Marketplace: A Consumer and Market Study of a Refugee Camp and Town in Northwest Kenya.” International Finance Corporation (IFC) and The World Bank, 2018, https://documents.worldbank.org/en/publication/documents-reports/documentdetail/482761513335384331/kakuma-as-a-marketplace-a-consumer-and-market-study-of-a-refugee-camp-and-town-in-northwest-kenya.

“OECD Development Co-operation Report 2023: Debating the Aid System.” Organisation for Economic Co-operation and Development (OECD), 2023, https://doi.org/10.1787/dafed64c-en.

“Refugee Entrepreneurship and the Global Economy.” Center for Global Development, 2022, https://www.cgdev.org/blog/refugee-entrepreneurship-global-economy.

“Refugee Livelihoods and Economic Inclusion 2023 Annual Report.” United Nations High Commissioner for Refugees (UNHCR), 2023, https://www.unhcr.org/publications/refugee-livelihoods-and-economic-inclusion-2023-annual-report.

“The Role of the Private Sector in Supporting Refugee Economies.” International Finance Corporation (IFC), 2022,

 https://www.ifc.org/en/publications/2022/the-role-of-the-private-sector-in-supporting-refugee-economies.