Inside the semi-formal economy of a Kenyan refugee camp

In the heart of Turkana County, near Kenya’s northwestern border with South Sudan, lies Kakuma Refugee Camp - home to 299,884 refugees. This sprawling settlement is a landscape not just of displacement but of resilience and enterprise, as beneath the dusty skyline and corrugated rooftops, refugee-run businesses are quietly transforming the social and economic fabric of the camp.

Beauty salons hum with customers. Electronics shops brim with imported gadgets. Tailors stitch clothing with dexterity and flair. In one of the world’s longest-standing refugee settlements, life is not only continuing, it is being shaped by those who have taken it upon themselves to build, sell and create.

Hassan Abdi, a 27-year-old Somali refugee residing in Kakuma, recounted the growth of his electronics and footwear shop. He also operates a mobile money transfer service. 

"Doing business here demands persistence, but I am happy," he told FairPlanet. "There are challenges," he added," such as lack of capital and low purchasing power among refugees, but we are doing well."

Abdi fled to Kenya with his family in 2009 from conflict-torn Somalia. His business journey began small, more as a hustle after his family was unable to raise the fees to take him to university. With some training from Inkomoko - a local NGO supporting refugee businesses - he was able to scale. Today, his shop is a social hub in the neighbourhood.

Thriving in unlikely places

29-year-old Awori Maendeleo, a refugee from the Democratic Republic of Congo, shared a similar story. His beauty salon and cosmetics business caters to fellow refugees and local residents alike. "Business in the camp may not boom like outside, but I’m content. It supports all my needs," said Maendeleo, who saved startup capital from doing odd jobs in the camp and has now run his salon for three years. He said the business earns him approximately Ksh 5,000 (EUR 34) monthly and provides more stable revenue than the odd jobs, which were not consistently available and paid as low as Ksh 50 (EUR 0.34) a day.

"This business gives me independence. I’m planning for the future."

Formal employment in refugee camps is rare. Refugees often rely on limited roles paid by various local NGOs, such as teachers, guards, translators and community mobilisers. Some refugees have turned to entrepreneurship to meet daily needs. Support for such enterprises often comes from NGOs like Inkomoko, which provide training, mentorship and microloans. 

With the camp’s population swelling over the years, from 185,624 in 2018, according to UNHCR and Kenyan government figures, to current numbers of 299,884 as of January 2025, the demand for services and products has grown, which in turn has fostered a semi-formal economy.

The evolution of microeconomies

Microfinance experts argue that for refugee enterprises to be viable in places like Kakuma, financial models must adapt to the local context.

"You need hyper-local, trust-based lending systems," said John Maina, a Nairobi-based microfinance and small business development expert with Cemes Ltd., a Kenyan financial services firm. "The businesses are often small and informal, such as tailoring, kiosks, and phone charging. They need low-risk, flexible financial products."

Maina added that digital platforms are a game-changer. "Mobile money has deep penetration in Kenya. It makes loan disbursement and repayment more efficient. But purely commercial lenders won’t work here. What’s needed is blended finance, combining donor grants with small-scale lending to subsidise risk and ensure sustainability."

Maina explained that traditional lenders often shy away from situations where incomes are irregular and where businesses operate without formal records or collateral, which is common among refugee enterprises. Blended finance tried to bridge that gap, he claimed, by absorbing risk and enabling smaller, flexible loans tailored to these realities of refugee entrepreneurs. 

"If coupled with trust-based lending models, local guarantors and digital payment systems, this approach is quite viable," said Maina.

The Communications Authority of Kenya puts mobile money penetration at 40 million subscriptions, out of the country’s population of 52.5 million. Mobile money services in Kenya are offered by the mobile service providers. This has revolutionised financial inclusion and everyday transactions, allowing users to send, receive, and store money through their mobile phones. A 2018 study by the International Finance Corporation (IFC) revealed that about 69 per cent of camp residents had a mobile phone, although only about 31 per cent were subscribed to mobile money services. 

The legal landscape

Still, refugee entrepreneurs often encounter legal and regulatory hurdles. Kenyan Human rights lawyer Damaris Bonareri explains, "The Refugee Act gives refugees the right to work and open businesses, but the systems to access permits are not tailored to their unique situations. Many refugees don’t even know the process, and even when they do, the requirements can be prohibitive."

Section 28(5) of Kenya’s Refugee Act of 2021 affirms that refugees have the right to engage in wage-earning and self-employment. However, as Bonareri explained, the systems designed to implement this right are not adapted to the realities of refugee life. The current systems assume a level of legal, financial and logistical stability that most refugees do not have. These assumptions appear to create entry barriers that effectively lock refugees out of the formal economy despite their legal entitlement.

Bonareri pointed to the need for legal reforms and better policy coherence. 

"We have treaties, statutes and policies, but they don’t always align. We need a more harmonised framework that acknowledges refugees as economic actors, not just aid recipients."

Financial inclusion and new partnerships

Several financial institutions are stepping in, driven by both social responsibility and strategic business interests. Firms and development partners are piloting finance models tailored to informal entrepreneurs. These efforts often include small-scale credit and savings products, as well as financial literacy training, designed to accommodate volatile incomes and limited documentation.

In one of the ventures, IFC and Equity Bank of Kenya partnered to boost financial inclusion for individuals and small businesses in Kenya’s underserved regions, including the refugees, a move the partners said was focused on "transforming lives, giving dignity and expanding opportunities for wealth creation". 

In another refugee-focused venture, a Kenyan firm enables refugees to access credit through their mobile phones. The early impact of these initiatives is promising, although it is still unfolding. Anecdotal reports suggest that beneficiaries have enjoyed access to smooth cash flow and can stock businesses more reliably.

However, significant gaps remain in these initiatives. For instance, poor documentation may still prevent many refugees in Kenya from accessing services. Reports from the East African estimates suggest that only around 40 per cent of refugees possess refugee ID cards or PIN numbers from the revenue authority, which are essential for accessing formal financial services.

Persistent vulnerability has been cited as a challenge that hinders refugees from fully actualising their financial potential in enterprise. A Forced Migration Review study found that most refugee households remained vulnerable to economic shocks, which limits their access to formal financial services until their incomes stabilise.

Image by Imani Manyara.