The Role of Formal and Informal Financing in Refugee Self-Employment: The Case of Urban Kenya

Considering refugees’ employment challenges in their host countries, they often need to create jobs by starting ventures and embracing self-employment. However, this requires financing. This study seeks to assess the roles of formal and informal financing in self-employment while also looking at the drivers of financing decisions and self-employment among refugees in an urban setting. Using the extension of the Blinder–Oaxaca decomposition pioneered by Fairlie, this study found informal financing to be significantly associated with an individual’s decision to be self-employed, while formal financing is not. Male refugees who access informal financing have a higher probability of embracing self-employment than refugee women and Kenyan nationals; this calls for actions that encourage forming community-based organizations that promote affirmative action and steer the use of informal finance.