Impact blog

Impact blog: Migration – A Force for Progress?

June 20196 min readImpact

While you are reading this, conflict or persecution will drive 150 people from their homes. In total, nearly 70 million are currently displaced according to the United Nations High Commission for Refugees (UNHCR). That’s the entire population of France. And this is just the number that are forced to flee violence or the threat of violence. Many more will be forced to leave due to the effects of climate change, as farmland turns to desert, lakes dry up and natural disasters become commonplace. The UN has estimated that there will be 200 million climate refugees by 2050, almost the population of France, Germany and the UK combined. Of course, nothing occurs in a vacuum: the effects of climate change will spark more conflicts, leading to more refugees. This effect has already been seen across West Africa, as arguments over dwindling resources have contributed to violence in multiple countries.

While refugee numbers are at a thirty year high, refugees are only a minority of migrants overall. Many countries have a long tradition of migrant workers, with remittances representing a major chunk of GDP in the Philippines, Mexico and Central Asia. The UN puts the global stock of migrants at 258 million people at the end of 2017, or 3.4% of the world’s population.

“The UN has estimated that there will be 200 million climate refugees by 2050, almost the population of France, Germany and the UK combined.” 

Paul Hailey, Head of Impact

In other words, the issue of migration is not going away. Yes, some of this is driven by specific crises like Syria or South Sudan, but even if other conflicts don’t replace them (they will), the underlying drivers for migration will persist or strengthen. Add to this a global trend for urbanization, and mobility will become increasingly prominent. The world – governments, civil society, companies, individuals – will have to find a way to usefully harness and engage with this reality.

And here we need to address one of the biggest myths surrounding migrants: where a lot of them go. Putting to one side those moving from one rich country to another (at which point they magically transform into “expats”), the majority of the remaining migration is in less developed countries. Many developing countries have large populations of migrant workers that spend part of every year in neighbouring economies – Tajiks travelling to Russia to work in construction, or Liberians going to Côte d’Ivoire to work on the cocoa harvest. For refugees alone, 85% are currently hosted by a developing country. Meanwhile, 90% of urbanization in 2017 took place in the developing world.

So, dealing with migration will involve a substantial amount of work in the developing world. This brings its own problems, because many developing countries struggle to provide for their own citizens. For refugees, many of their immediate, short-term needs will have to be dealt with by government agencies and NGOs. Yet integrating migrants of any sort in the longer-term will have to involve giving them the means to integrate into the economy. This is difficult though. Migrants of any sort often live in a legal grey zone, making it hard for them to graduate beyond basic, informal work. This limits their ability to enter formal employment, borrow or save, trapping them in poverty.

“The standard profile for a refugee or migrant is very similar to that of the classic microfinance client.”

Paul Hailey, Head of Impact

Of course, this situation is not unique to migrants. Much of the low-income population in developing countries experiences similar problems, regardless of their origin. This means that many of the solutions that have been successfully applied to integrate and include low-income households can also be applied to migrants. For example, the standard profile for a refugee or migrant is very similar to that of the classic microfinance client. Lack of collateral? Check. No land rights? Unlikely by definition. Lack of formal documentation? Often lost or invalid. Lack of formal employment opportunities? Even harder for migrants to access them. A business model like microfinance that boost microentrepreneurs and aims to integrate the financially excluded is ideally placed to not only cater to migrants, but also transform them into an economic power that actively contributes to their new country. And this is without even mentioning migrant-specific services, such as remittance processing and money transfers, provided by many microfinance institutions (MFIs).

One example of this is Equity Bank in Kenya. Equity Bank is one of the biggest banks in Kenya and indeed East Africa. Despite its size, Equity Bank has always had a substantial microfinance portfolio. More recently, in response to substantial refugee flows into northern Kenya from Somalia and other areas, Equity Bank has constructed several branches in the region that provide services to migrants, as well as financial literacy classes and other training. Similar initiatives can be seen in MFIs in Lebanon, Colombia, Bangladesh and many other countries with large migrant populations.

In the longer term, the best way to deal with migration will be to address the root causes. By investing in development, we can seek to reduce the poverty and lack of opportunity that drives whole families to risk their lives crossing the Mediterranean. By helping farmers to be more efficient, we can eliminate the hunger that has forced large swathes of rural Central America into cities or towards the US border. By addressing climate change, we can stop the environmental changes that will create millions more migrants in the next thirty years. In the meantime, we can successfully integrate migrants into developing countries in a way that will benefit their economies as much as they have benefitted ours. And, if you’ve got this far, know that you have lived this effect already: since you started this article, in the US alone, migrants have applied for three patents (nine globally), one migrant has started their own business, and a migrant-owned small business has created three new jobs.

Useful links/data

The author

Paul Hailey

Paul Hailey is Head of Impact at responsAbility Investments and the author of various publications and articles. Previous roles at the company include Senior Research Analyst for the financial sector. He has an MBA from École des Hautes Études Commerciales de Paris (HEC Paris), where he is also a lecturer, and a B.A. (Hons) from Pembroke College, University of Cambridge. 

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