“My plan is to become a very powerful businesswoman,” says Pascaline Uwamahoro, a refugee from the Democratic Republic of Congo, and an entrepreneur who is learning about savings, income-generating activities, record-keeping and joint decision-making. Photo: HFU-Humprey Nahurira.

By mid-morning in Nakivale Refugee Settlement in southwestern Uganda, the market is beginning to hum. Traders sweep dust from their stalls, unpack sacks of grain and cooking oil, and greet the first customers of the day. It is a familiar rhythm across communities in Uganda, where millions of small businesses quietly sustain families and local economies.

Yet many of these businesses struggle to access the kind of financing needed to grow from one stage to the next. For refugees, the challenge is even greater. Entrepreneurs who have fled conflict often lack collateral, formal records, or credit histories. As a result, they are frequently perceived as too risky for formal financial institutions.

But what happens when that assumption is challenged? Can refugees become trusted clients of the financial system?

For Pascaline Uwamahoro, the answer begins under a tarpaulin sheet that houses her small grocery stall.

“My plan is to become a very powerful businesswoman,” says the 27-year-old refugee from the Democratic Republic of Congo.

Uwamahoro arrived in Uganda in late 2024 with no income and no assets. As a woman with a disability, opportunities to earn were even more limited.
Today, her small stall sells rice, cooking oil, sugar and salt. Everyday essentials for families in the settlement.

From risky to investment-ready businesses

With a population of more than 1.9 million, refugees in Uganda like Uwamahoro play an active role in the society. They contribute with ideas, skills and businesses. Some are active traders, farmers and service providers. Under the country’s refugee policies, refugees have the right to work, move freely, and establish businesses. Markets inside settlements like Nakivale, Africa’s oldest refugee settlement with a population of about 180,000 people, have grown into vibrant commercial hubs where refugees trade alongside Ugandan host communities.

Although bank branches and agents operate in Nakivale, they have long functioned mainly as channels for delivering humanitarian assistance rather than full service financial outlets. Access to credit, insurance, and investment products remains limited. Low financial and digital literacy, lengthy documentation processes, and the absence of business records often reduce refugees’ confidence to engage with formal finance, leaving many enterprises perceived as not yet investment ready.

From the perspective of lenders, refugee led businesses frequently lack collateral, have thin credit histories, and generate irregular incomes. Lenders are often uncertain about refugees’ long-term residence, further constraining access to finance. As a result, many entrepreneurs have relied on informal savings groups or high interest moneylenders.

What if we turned this idea on its head?

Across Uganda’s refugee hosting areas, a shift is underway. What happens when refugees are seen not as too risky to lend to, but as entrepreneurs and responsible borrowers?

With an investment of 1.5 million Euros from the European Civil Protection and Humanitarian Aid Operations (ECHO), UNCDF is working with Hunger Fighters Uganda, Opportunity Bank Uganda, and Equity Bank Uganda to test that question. The approach mixes technical assistance for product design, interest rate subsidies and grants to derisk lending and enable partner financial institutions to provide loans ranging from UGX 100,000 (€24) to UGX 1,000,000 (€238) to refugees. With this initiative, UNCDF aims to reach more than 11,0400 refugees and host communities in two refugee settlements in Southwest Uganda, Nakivale and Kyaka II by the end of 2026. Established in 2003, Kyaka II Refugee Settlement is located in Kyegegwa District in Western Uganda and currently hosts approximately 113,000 refugees.

Uwamahoro is among the first entrepreneurs to receive financial literacy and business development training delivered to her savings group by Hunger Fighters Uganda. She learned about savings, record keeping, and income generating activities. Later, when her household received cash assistance from the World Food Programme, she and her husband agreed to invest UGX 100,000 to start a small grocery stall selling food and everyday household items.

Pascaline Uwamahoro, a refugee from the Democratic Republic of Congo, now manages her grocery stalls and keeps daily records of her every sale, paving the way for her business’ growth. Photo: HFU-Humprey Nahurira.

Today, Uwamahoro manages the shop while her husband works on a farm. Drawing on the training, she keeps daily records and tracks every sale. The records have changed how she plans purchases, manages stock, and understands her earnings.

“I feel like a businesswoman now,” she says.

In another step toward resilience, the couple diversified their income by purchasing a small plot of land, planting beans, and planning to reinvest the proceeds into expanding their business after harvest.

Still, borrowing remains a step she has yet to take.

“There is always that fear,” she admits. “What if the business fails?”

That uncertainty once shaped Emmanuel Nsenga’s thinking as well. A refugee from Rwanda and father of three living in Nakivale, Nsenga runs a small retail shop.

“Before the training, I didn’t know refugees can also borrow money from the bank,” he says.

Nsenga Emmanuel, a Rwandan refugee and shop owner in Nakivale, is showing what confidence and knowledge can unlock. Through financial literacy training, he learned that refugees could borrow from banks. With a UNCDF-backed grant, Opportunity Bank has given him a loan, and he is already planning his next step. Photo: HFU-Humprey Nahurira.

Through financial literacy sessions, Nsenga learned how to prepare a business plan, manage loans, and understand interest rates and repayment schedules. When his Village Savings and Loan Association became eligible to access a small loan through Opportunity Bank, he and his wife carefully discussed the risks before applying for UGX 500,000 (€120) to increase stock.

Supported by an interest rate subsidy and UNCDF’s blended finance instruments, the loan was approved. It allowed Nsenga to restock quickly.

“Customers find more items now. Sales have improved,” he says.

What happens if things go wrong?

Responsible lending is central to the programme. Borrowers are carefully guided through loan conditions and repayment expectations before taking credit. If a repayment is missed, the bank notifies the client and allows time to catch up. Since most borrowers belong to savings groups, members sometimes support one another to cover temporary shortfalls. If payments remain overdue, borrowers may be restricted from accessing additional loans until all arrears are cleared.
If a business fails entirely, the client exits the programme and the bank follows its standard recovery procedures. These safeguards are designed to balance opportunity with responsibility. At the heart of the initiative is financial literacy and business training, which helps first time clients understand how to borrow responsibly and manage their enterprises.

Sharing risk, unlocking opportunity at the last mile

Behind Uwamahoro and Nsenga’s personal stories is a deliberate effort to change how risk is shared.

Through this initiative, UNCDF demonstrates how blended finance can catalyse stability and growth. Instruments like guarantees, interest rate subsidies and grants give confidence to local banks and microfinance institutions such as UGAFODE, Opportunity Bank and Equity Bank so they can serve a vulnerable population that is largely overlooked by the financial ecosystem: refugee and host community members like Uwamahoro and Nsenga.
Early lessons are emerging. Simplified documentation and reduced collateral requirements have improved uptake. Small ticket loans have reached micro entrepreneurs effectively, with low default rates. Guarantees have encouraged financial institutions to test new products, while training has strengthened borrowers’ confidence and financial discipline.

The initiative seeks to improve the financial health and livelihoods of refugees and host communities by enabling access to affordable finance. By piloting guarantees, interest rate subsidies, tailored products and financial literacy support, the project is building the evidence and market confidence needed to unlock new and sustainable finance models for refugee-inclusive lending. If successful, these models will continue beyond the project, enabling financial institutions to serve refugees as viable customers.

Editor's note: This story was originally written and published for the European Civil Protection and Humanitarian Aid Operations (ECHO) and is republished here.