Improving Outcomes for Economic Migrants and Refugees: A Role for MDBs

Multilateral development banks (MDBs) are increasingly supporting their beneficiary member countries to improve outcomes for economic migrants and refugees. Every year, they provide billions of dollars in grants and loans, as well as technical assistance, policy dialogue, and knowledge exchanges. A new CGD paper with Refugees International, published today, answers what this support looks like, how the issues are viewed internally, and what challenges MDBs face.

Why should MDBs support improved outcomes?

For hosting countries, growing numbers of economic migrants and refugees bring benefits and costs. If well-integrated, economic migrants and refugees can earn a living to support themselves, their families, and their communities back home. Both economic migration and forced displacement are therefore integrally linked with development outcomes.

Yet securing the benefits of this integration requires investments. Increasing the physical capacity of infrastructure such as hospitals, schools, and social protection systems is expensive and therefore difficult to achieve, especially for low- and middle-income countries. Addressing other barriers that prevent integration, such as a lack of documentation, a lack of access to capital, and a lack of social cohesion can be even more costly.

But why should MDBs step up to help their beneficiary member countries meet these costs and improve outcomes? We posit two main reasons. Firstly, the priorities of MDBs are largely driven by member country interest; if beneficiary member countries are increasingly seeking support and if contributing member countries are increasingly considering investments in economic migrants and refugees a strategic priority (as they appear to be), MDBs must respond.

Secondly, MDBs' focus on reducing poverty and promoting prosperity entails the inclusion of the most marginalized populations. If MDBs want to tackle issues of economic growth and fragility in their beneficiary member countries, they must grapple with improving outcomes for the large and increasing number of economic migrants and refugees.

What does this support look like?

In the paper, we looked at the concessional windows, trust funds, and discrete projects that aim to, at least in part, support improved outcomes for economic migrants and refugees.

Concessional windows

Concessional windows create a framework to deliver concessional financing to low- and middle-income countries, including a mix of low-interest loans with long grace periods, and grants, to address a certain priority.

Currently, there are seven concessional windows that support improved outcomes for economic migrants and refugees: the AfDB's Transition Support Facility (TSF); the ADB's Expanded Disaster Response Facility (DRF+); the EIB's Economic Resilience Initiative (ERI); the EBRD's Municipal Resilience and Refugee Response Framework (MR3) and Resilience and Livelihoods Framework (RLF); the IaDB's Grant Facility (GRF); and the World Bank's IDA Window for Host Communities and Refugees (WHR).

Some of these windows have a dedicated focus on improving outcomes for economic migrants and refugees. For example, the ERI, MR3, and the RLF were created to support beneficiary member countries in responding to specific refugee crises. Only one (the WHR) was created explicitly to support refugee outcomes for all low-income countries hosting large numbers of refugees. Other concessional windows might include economic migrants and refugees in their programming, but were created to support broader issues. This is the case of the TSF and the DRF+, which focus mainly on tackling fragility and the impact of disasters, respectively.

The windows are also open to different countries for different reasons. The ERI, MR3, and the RLF are open to a predefined list of countries, while the others maintain more complex criteria. For example, the WHR and DRF+'s criteria include hosting a certain number of refugees, having a protection framework in place, and establishing a strategy to foster long-term integration. Indeed, the WHR even has a Refugee Policy Review Framework (RPRF) to identify reform opportunities and inform investment decisions.

Trust funds

Trust funds are financing arrangements set up between an MDB and either a single or multiple donors. While the MDB can use its financing, operational, and technical capabilities to support or even manage a project, its overall goal, design, and decision-making process can be external to the operating MDB. We found three relevant large trust funds, including the Global Islamic Fund for Refugees (GIFR), the Global Concessional Financing Facility (GCFF), and the Global Knowledge Partnership on Migration and Development (KNOMAD). The GCFF is particularly interesting as it helps middle-income countries access unique concessional financing to support the costs of hosting refugees.

Projects

We grouped projects that support improved outcomes for economic migrants and refugees into five categories. In these projects, they may be the primary beneficiary (e.g., the project is designed to explicitly support improved outcomes) or a secondary beneficiary (e.g., the project is designed to support citizens but there are spillover benefits, such as the improvement of infrastructure in migrant-hosting areas).

1. Improving infrastructure and access to services. This often takes the form of expanding access to energy, water, roads, schools, and health clinics in economic migrant- and refugee-hosting areas. For example, in Sierra Leone, the TSF is funding a project to expand access to energy, water and roads in communities where refugees live.
2. Addressing barriers to integration. Many projects aim to provide employment opportunities to economic migrants and refugees, helping to increase earnings, foster self-reliance, increase tax revenues, and generate development gains. This includes access to regular status, such as the GCFF and IaDB investment for the economic inclusion of Venezuelans through the implementation of the Temporary Statute for the Protection of Venezuelan Migrants (EPTV).
3. Expanding access to financial capital. Most MDBs support economic migrant- and refugee-owned businesses with capital, and some also work on facilitating broader financial transfers such as remittances and diaspora investments. In particular, the EIB and EBRD's windows provide credit lines to small- and medium-size enterprises (SMEs) to support improved outcomes.
4. Developing skills through education and training. This could include providing direct training opportunities to economic migrants and refugees and/or integrating them into national education systems. For example, the EBRD is implementing several training and skill-building programs for Syrian refugees and host communities in Turkey and Jordan.
5. Complementing humanitarian responses. Some MDBs, particularly the ADB, aim to provide beneficiary member countries with access to finance post disasters, while others work on improving infrastructure within refugee camps.

What challenges are MDBs facing?

All interviewees noted that any expansion of support would be hampered by a number of challenges, five of which we discussed in our paper:

1. Beneficiary member country priorities. For some ministries in charge of determining spending priorities, economic migrants and refugees (or, non citizens) are not priorities for government spending. If beneficiary member countries are willing to support improved outcomes for economic migrants and refugees, it is likely they are only willing to do so if they receive grants, rather than loans. In the absence of more concessional financing, it will be difficult to incentivize interest.
2. Funding. Many MDBs are (at least partly) funded by ODA. However, there is an increasing number of crises and a limited amount of ODA. This can constrain MDBs' ability to invest in emerging areas, as more traditional lines of engagement may be prioritized. It can be particularly challenging to get funding to work on economic migration, rather than refugees, as hosting the latter is seen as more of a global public good.
3. Internal capacity and coordination. MDBs maintain different structures to coordinate migration issues internally. Creating a dedicated unit can help elevate the importance of economic migrants and refugees internally and help crowd in specific resources, but may risk siloing the issues. Conversely, creating a more decentralized coordination structure can help mainstream the issues throughout practice areas; however, this still requires financial resources and instruments conducive to stimulating demand and bringing the work to scale.
4. Data and tools. Migration has a notorious lack of disaggregated data, with non-citizens rarely captured by national statistical offices or within administrative data. Without such data, it can be difficult for MDBs to identify target populations; design projects that explicitly support improved outcomes for economic migrants and refugees; and monitor their impact.
5. Defining next steps. All interviewees felt there was widespread internal buy-in for supporting improved outcomes for economic migrants and refugees. Yet they also felt the precise form of this engagement still needed to be refined. In particular, there were outstanding questions about which specific activities MDBs should conduct, and which activities should be left to other actors (such as UNHCR and IOM).

Going forward

Overall, we were impressed with the breadth and depth of MDB support for improved outcomes for economic migrants and refugees. There are a range of instruments available, disbursing large grants and loans, and there is much thinking going on internally and between MDBs about how best to address these issues.

But addressing the challenges listed above will be difficult and will require a strong mandate and buy-in from the top. We hope that the increasing willingness within MDBs to engage on these issues will translate into practical approaches to overcome these challenges, thereby improving the lives of economic migrants and refugees around the world.

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