The Potential for Microfinance in Stateless Communities

It has already been argued by Jason Tucker on this blog that microfinance could be helpful for stateless communities. My colleague Brian Colgan and I are currently doing research on if, and how exactly, microfinancial schemes could be applied in stateless communities. The answer is not self-evident as there are some necessary conditions that need to be fulfilled in order for microfinance to be viable at all and also some community specifics that would have to be taken into account while designing the programmes.

The basic conditions, for microfinance, have been outlined in a UNHCR guide as reasonable degree of security and safety, cash economy, access to local market, stability of population, and already existing informal financial services. These points should ensure the minimal underpinning framework required for a functional microfinance project.

Even such a modest set of requirements already excludes some groups that could otherwise profit from microfinance. The population of Rohingya in Myanmar is flowing to Bangladesh in large numbers and does not provide a firm base for such a project. Similarly, the stateless immigrants in Western Europe are a dispersed, heterogeneous group that could hardly be united under a single scheme of microcredits.

On the other hand, thanks to the popularity of microfinance in developing countries, there are stateless groups who can already access microcredits. They are, for example, Nubians in the Kibera slum, hill tribes from Northern Thailand, or Haitian descendants living in Dominican Republic. Such cases can serve us as an important source of experience. We intend to follow up on these groups, interview people from inside the communities, and study how the projects operate.

Ultimately, we want to focus on the stateless who cannot yet receive any formal loans or financial services. It has been observed on many occasions that the poor who lack such possibilities can manage the use and repayment of a loan surprisingly well. To some of them small loans would help stabilise their lives by smoothing out the irregularities in their income, to others they could even open up new opportunities such as purchasing materials for weaving baskets.

Whether microfinance would become only a small cushion mitigating the hardship of the stateless or a means for them to thrive despite the negligence of their own governments, cannot be predicted and it might differ between communities. In either case, through our research microfinance, as a sustainable and cheap instrument, might find yet new fields to work on and new communities to help.

Ondrej Kolinsky, Statelessness Programme Research Intern