From Displacement to Development: How Kenya Can Create Shared Growth by Facilitating Economic Inclusion for Refugees

By Sarah Miller , Jimmy Graham | November 19, 2021

Preface

In most low- and middle-income countries, refugees and forced migrants face a range of legal, administrative, and practical barriers that prevent their economic inclusion. Removing those barriers would enable displaced people to become more self-reliant and more fully contribute to their host communities.

Such efforts are even more important as the world looks to recover economically from COVID-19. While the pandemic has created unprecedented challenges for low- and middle-income countries around the world, it has also highlighted the importance of expanding economic inclusion. Refugees and forced migrants can, and do, play a crucial role in labor markets. Given the opportunity, they can help their host countries recover from this crisis.

This case study is part of the “Let Them Work” initiative, a three-year program of work led by the Center for Global Development (CGD) and Refugees International and funded by the IKEA Foundation and the Western Union Foundation. The initiative aims to expand labor market access for refugees and forced migrants, by identifying their barriers to economic inclusion and providing recommendations to host governments, donors, and the private sector for how to overcome them. The initiative focuses primarily on refugees and forced migrants in Colombia, Peru, Kenya, and Ethiopia, with other work taking place at the global level.

Acknowledgments

The authors are grateful to Abdikadir Mohammed Abdalla, Elie Bafuliru, Abdirahman Daar, Enock Nsengumuremyi Enock, Michael Makokha, Rebecca Mmbone, David Kaloki Kitenge and others for their work in organizing, conducting, and transcribing interviews in the refugee camps. The authors are also grateful for the time the refugees and hosts donated to the interviews. Finally, we are thankful to Martha Guerrero Ble, Thomas Ginn, Hardin Lang, Kellie Leeson, Gyude Moore, Caroline Njuki, and Eric Schwartz for their insightful feedback on the case study.

Executive Summary

As one of the world’s largest refugee-hosting countries, Kenya has the potential to lead on the economic inclusion of refugees. The recent passage of the new Refugees Bill could provide new opportunities for this. Yet, refugees in Kenya continue to face many obstacles to economic inclusion. These include policy barriers, which limit their right to work, move freely, and access financial services; political barriers, such as negative perceptions of refugees that limit the political will for change; and economic barriers, such as limited job opportunities and a difficult climate for private-sector investment in host areas.

Perhaps the most severe restriction is the encampment policy, which requires all refugees to live in camps in one of two designated areas in the country. In practice, many refugees live outside of camps in urban areas like Nairobi, but they face a precarious legal situation that likewise hinders their economic inclusion. Other major barriers include a lack of work permits and identification, which forces most refugees to work informally (in or outside camps) and restricts their access to services. As a means to bypass the administrative difficulties of obtaining work permits for refugees, many nongovernmental organizations (NGOs) hire refugees as “incentive workers.” The practice is legal, but the government mandates that incentive workers be paid very little, even below minimum wage.

These policy barriers are perpetuated by political factors, including perceptions of refugees as security threats, scapegoating rhetoric by politicians, and fears of competition over land, resources, and jobs. Refugees also face economic barriers to inclusion, including limited job opportunities in host areas, a lack of education and skills, and limited access to financial capital.

As a result of such barriers, refugees earn lower incomes and face much higher rates of poverty and much lower rates of employment than the average Kenyan. These challenges, in turn, translate into food insecurity and a range of protection concerns. At the same time, some groups in refugee host communities face similarly high rates of poverty. This underscores the need to facilitate economic progress for hosts as well as refugees.

Overcoming such barriers could generate many benefits for refugees and host communities alike. With greater economic inclusion, refugees could earn far greater incomes, which would in turn alleviate many of their protection needs. Greater inclusion and fewer regulatory restrictions could also lead to an expansion of economic activity in host areas, greater private-sector investment, and an increase in job opportunities. To ensure that benefits are maximized, NGOs and international organizations providing humanitarian and development aid must increase support for hosts, as well.

Recently, some progress has been made to facilitate greater economic inclusion for refugees. In 2016, the government allowed for the creation of a refugee settlement (also known as an integrated settlement), Kalobeyei, that provided a more enabling environment for refugee and host community livelihoods, resilience, and self-reliance by setting aside land for agricultural use, facilitating a more cash-based economy, and establishing designated areas for businesses. In some areas, investors are prioritizing host communities to improve economic opportunities; development organizations are building markets and teaching marketable skills to refugees and Kenyan citizens; and the private sector is becoming more involved around the camps. However, despite these initiatives, there is still a long way to go to achieve economic inclusion.

The Kenyan government has recently become more open to policies designed to improve the economic inclusion of refugees. On November 17, 2021, President Kenyatta signed the Refugees Act, which creates some positive changes and could be a foundation for further policy dialogue. The government has also signaled willingness for greater economic inclusion by signing onto the Comprehensive Refugee Response Framework (CRRF) process and publishing a CRRF document that outlines progressive goals. Steps have also been taken at the local level to localize the CRRF through an area-based program called the Kalobeyei Integrated Socio-Economic Development Plan (KISEDP) in Turkana county and the Garissa Integrated Socio-Economic Development Plan (GISEDP) in Garissa county. Both programs promote strategy plans that align with Local County Integrated Development Plans (CIDP) and demonstrate a paradigm shift toward the inclusion of refugees in national and local planning processes.

But political will for change is far from certain. In contrast to recent progressive moves, in March 2021 the government ordered the closure of refugee camps. Considering that similar orders in the past have not led to closures, few expect the Kenyan government to implement the order. Rather, the order may be a way for the government to signal that it needs greater funding and support from the international community to continue hosting. As such, the move may indicate limited political will for progressive change—at least without an increase in support from donors. It also reminds refugees how precarious their standing is in Kenya and creates fear, frustration, and even panic for some refugees.

If the right policies are implemented, greater economic inclusion could be achieved, and that could in turn translate into a wide range of benefits for refugees and Kenyan citizens alike. Already, the presence of refugees (and their limited economic inclusion to date) has brought many widely recognized benefits, including the growth of markets around camps, an expansion of employment opportunities, and an increase in consumer demand that benefits businesses. Greater inclusion would amplify these benefits, pumping more money into local economies and generating new jobs for both hosts and refugees.

To overcome the barriers to inclusion and realize the aforementioned benefits, the government should create policy and regulatory changes that are both impactful and feasible within the current political climate. Such changes could include the broader implementation of the current policy that allows some refugees to receive work permits but that is very rarely applied in practice. They could also include a reduction in the backlog of refugee status determination (which would facilitate the provision of identification), greater provision of movement passes for economic purposes, and changes in regulations to allow refugees to access mobile money.

To facilitate this process, the international community should create incentives for policy change, such as funding to the government for its broader development agenda (which could be modeled on the Ethiopia Compact, discussed later in the case study) and commitments to include host communities in livelihood projects and services. International organizations and NGOs can also facilitate economic inclusion by directly hiring refugees as employees, focusing livelihood support on women, elevating the role of refugee-led organizations in coordination and planning, and facilitating greater private-sector investment. Likewise, the private sector can play an important role by investing in host areas, advocating for policy change, and directly hiring refugees and Kenyan citizens.

This case study dives deep into refugee economic inclusion in Kenya. We first lay out the profile of refugees and hosts in the country, describing the demographics of refugees and gaps in outcomes between refugees and hosts that result from barriers to economic inclusion. Next, we analyze the main barriers to greater economic inclusion. We then describe the benefits, for both refugees and hosts, of overcoming those barriers. In the penultimate section, we offer recommendations for how to overcome the barriers. They include:

Urging the government to expedite and clarify its refugee status determination processes; clarify and expand the provision of movement passes; simplify the procedures for work permits for refugees; facilitate the process of business license provision; and further allow refugees to access mobile money platforms.
Urging donors, international organizations, and NGOs to tie funding to concrete policy progress; sponsor refugees as employees; focus on livelihood support for women; increase assistance to host communities; elevate the role of refugee-led organizations in planning and coordination; expand support to private-sector investors; and launch an information campaign on registration, movement passes, work permits and business licensing.
Urging the private sector to invest in host areas; hire refugees; support refugee-owned businesses; and advocate for policy progress.

Although governments are always affected by political constraints, recent shifts in the Kenyan government’s willingness for change, as signaled through its buy-in to the CRRF process, suggest that there may be some openings for progress on the economic inclusion of refugees—especially if international organizations create the right incentives to further encourage Kenya. For example, the government could and should certainly expand the provision of work permits through its existing policy structure. And the international community can incentivize such actions by providing funding for the government’s priorities. Working together, the government and international organizations, as well as NGOs and the private sector, can make substantial progress toward refugee economic inclusion in Kenya.

Cover Photo Caption: 33-year-old Apeleo Rose Ihisa makes jewelry at the business center in the Kalobeyei Settlement in Kenya. © UNHCR/Loduye Ghaisen