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The New Financial Instruments for Refugees: A Win-Win or a Risky Bet?

  • PABLO PASTOR VIDAL

Introduction 

For decades, refugee support has meant donations and humanitarian aid. But as global needs outpace funding, a new model is emerging that borrows its strategies from financial markets. This shift from "handouts" to "investments" is reshaping how we respond to displacement in Mediterranean host countries like Jordan and Lebanon. This post explores the rise of refugee finance, a revolutionary approach that promises efficiency and self-reliance. But does it truly deliver on its promises, or does it introduce a new set of risks for the world's most vulnerable? 

MYA blog introduction 

Main Content 

Did you know that by mid-2024, the UN's refugee agency had only received 35% of its required budget? The traditional model, reliant on donor governments, is often seen as inefficient. My research dives into an alternative: refugee finance. This new field moves away from grant-based aid towards market-led solutions that aim to provide long-term, sustainable support, bridging the humanitarian-development gap. It’s a fascinating and urgent area because it sits at the crossroads of finance, geopolitics, and human rights, offering a new lens through which to view one of the defining challenges of our time. 

 

Infographic 1 

📈 At its core, refugee finance uses private or blended capital to achieve social good. Instead of relying solely on donors, it uses tools like Social Impact Finance to attract investors who fund projects helping refugees become self-reliant—for instance, by starting a business or learning a new skill. It’s a model built on the promise of a win-win: refugees gain independence, host countries get economic support, and investors make a social and financial return. 

 

Infographic 2 

 

Key Findings and Insights 

My research highlights two ways this financial model is taking shape: 

A prime example comes from Jordan, a country at the heart of the refugee challenge. The Refugee Impact Bond, launched there, offers a powerful illustration. Private investors provide upfront cash for programs that help refugees and locals launch small businesses. Imagine a Syrian refugee in Amman, a skilled tailor, finally getting the capital and training to open her own workshop. If her business, and others like it, hit specific profitability targets, then outcome funders—like the IKEA Foundation—repay the initial investors. If the programs fail to meet these metrics, investors bear the loss. This "pay-for-success" model aims to drive efficiency and ensure every euro spent directly translates into tangible outcomes for individuals and communities. 

🤝🏼 This isn't just about individual projects; it's a profound shift in Euro-Mediterranean geopolitics. Recently, the EU has signed multi-billion euro investment packages—often including substantial loans—with southern Mediterranean countries like Egypt, Jordan, and Lebanon. These deals increasingly bundle economic investment with migration control, creating a transactional relationship where financial support is linked to cooperation on border management.  

 

Infographic 3 

 

Conclusion and Call to Action 

However, this shift raises critical questions. While it promises efficiency and accountability, does focusing on financial metrics and profit risk overlooking human rights and decent work? Critics worry that programs might prioritize easily measurable outcomes, potentially creating low-wage or precarious jobs just to hit targets. By turning migration support into a market, we risk seeing refugees primarily as economic units rather than individuals with inherent rights and aspirations. 

💡What are your thoughts on this new model? Does the promise of efficiency outweigh the potential risks? Share your perspective in the comments below or learn more by reading the full policy brief on ALF’website   

This research was developed as part of the Mediterranean Youth in Action programme, implemented by ALF and co-funded by the EU. 

#MYAction  

About Author

  • PABLO PASTOR VIDAL
  • PABLO PASTOR VIDAL is a PhD candidate in Human Rights in Lund University, Faculty of Law, where he focuses on humanitarian financing for refugees under the ERC-funded REF-FIN (Refugee Finance) project. He also holds a Double Bachelor of Law and Political Science from Universidad Carlos III de Madrid (2022), and a Master of Arts in European Interdisciplinary Studies from the College of Europe in Natolin (2023), where he obtained a prize distinction for the best thesis on EU-Middle East relations. Pablo has worked as an Academic Assistant in the College of Europe in Natolin. He participated in the network of EuroMed Young Researchers Forum of the IEMed and he forms part of the Swedish Middle East and North Africa (SWEMENA) network. Pablo has also acted as the copresident of the Mediterranean Youth Council since September 2023.

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