Exclusion from Formal Banking Creates Fertile Ground for Exploitation

NAIROBI, EAT – A prominent refugee rights organization has issued a stark warning that refugees and asylum seekers in Kenya are being systematically targeted by predatory lenders, driving them into crippling debt cycles. The Refugee Consortium of Kenya (RCK) stated on Thursday, November 13, 2025, that a lack of official documentation prevents most refugees from accessing regulated financial services, forcing them into the arms of informal and often punitive credit providers.

Addressing the Turkana County Assembly, RCK Executive Director Barlet Colly Jaji explained that this financial exclusion perpetuates poverty and inequality among displaced populations. "Access to financial services and credit due to a lack of documentation exposes many communities to predatory lending practices," Jaji said, highlighting a critical barrier to economic self-sufficiency for a population striving to rebuild their lives.

A Nation of Refuge, A Market for Predators

Kenya hosts one of the largest refugee populations in Africa, with the United Nations High Commissioner for Refugees (UNHCR) reporting 853,074 refugees and asylum seekers in the country as of February 2025. The majority originate from conflict-ridden neighbors such as Somalia, South Sudan, and the Democratic Republic of Congo. Most reside in the sprawling Dadaab and Kakuma refugee complexes, while a significant number—over 114,000—live in urban areas like Nairobi.

For these refugees, securing capital to start a small business, pay for medical emergencies, or cover daily expenses is a constant struggle. Barred from traditional banks due to strict Know-Your-Customer (KYC) requirements they cannot meet, many turn to digital loan apps and local moneylenders. These lenders often operate in a regulatory grey area, charging exorbitant interest rates and employing aggressive debt collection tactics, including public shaming and threats—practices that have drawn widespread condemnation when used against Kenyan citizens.

Policy vs. Reality: A Widening Gap

The exploitation detailed by the RCK stands in sharp contrast to Kenya's progressive legal framework on refugee affairs. The Refugees Act of 2021 is designed to enhance refugee rights, granting them access to work, freedom of movement, and inclusion in national services, including finance. This is complemented by the government's ambitious 'Shirika Plan,' a multi-year initiative to transform refugee camps into integrated municipalities, fostering economic self-reliance for both refugees and host communities.

However, implementation has been slow. The reality on the ground is that administrative hurdles and a lack of recognized identification documents continue to lock refugees out of the formal economy. This policy-reality gap creates a vacuum filled by predatory actors, directly undermining the goals of the Shirika Plan and Kenya's international commitments.

While some formal institutions are making efforts—such as a $20 million risk-sharing facility launched by Equity Bank and the International Finance Corporation (IFC) in February 2025 to support lending to refugees—these initiatives have yet to reach the scale needed to displace the exploitative informal market.

The Human and Economic Cost

The consequences of predatory lending are severe, leading to psychological distress, loss of assets, and the erosion of household stability. It traps entrepreneurial refugees in a cycle of debt, preventing them from contributing fully to the local economy. This is a missed opportunity, as studies have shown that refugees are significant economic actors. Research cited by RCK indicates that the presence of refugees boosts Turkana County's Gross Regional Product by over 3% and increases local employment.

"Refugees are not just aid recipients; they are economic actors who contribute to local markets, create jobs, and drive trade," Jaji emphasized. The RCK is calling for urgent action to bridge the gap between policy and practice. Their recommendations include streamlining the issuance of documentation that financial institutions can recognize, expanding financial literacy programs within refugee communities, and enforcing existing consumer protection laws to crack down on predatory lenders targeting any vulnerable population in Kenya.

As Kenya continues to position itself as a leader in refugee affairs through initiatives like the Shirika Plan, addressing the silent threat of financial exploitation is critical to ensuring that the promise of dignity and self-reliance becomes a reality for the hundreds of thousands who have sought sanctuary within its borders.