Mustafe Farah (left) and Khadar Arab (right), refugees from Somalia, used Aisha product to scale up their mobile maintenance shop.

Financial inclusion

Trust becomes collateral: Inclusive finance empowers refugees and hosts in Ethiopia

In Ethiopia’s Somali region the ILO and Shabelle Bank are dismantling cultural barriers to improve access to finance enabling refugees and host communities to build sustainable livelihoods.

25 November 2025

Kebribeyah, ETHIOPIA (ILO News) – For decades, financial exclusion has been a significant hurdle for entrepreneurs in Ethiopia’s Somali region. However, a transformative partnership between the International Labour Organization (ILO) and Shabelle Bank has introduced "Aisha" – a dedicated Sharia-compliant financial product.

By aligning financial services with the cultural and religious values of the community, this initiative is empowering refugees, and host members in the to build sustainable livelihoods and dignified futures.

Breaking barriers to financial inclusion

For many entrepreneurs, securing the necessary business capital through standard banking process is incompatible with Islamic principles. The Aisha product, developed with ILO’s technical support, was designed to address this specific challenge.

“Aisha” utilized group collateral – replacing community trust with physical assets as a security and offered interest-free loans ensuring that refugees and host communities in the area can access credit without compromising their faith.

Resilience in action

Fadumo Abdisalam, from the host community in Kebribeyah, used Aisha product to buy more stock for her clothing business.

Fadumo Abdisalam Ahmed, a mother of five, returned to Ethiopia in 2021 after spending 30 years in Somalia. Determined to rebuild her life she started her retail clothing business with 30,000 Birr (US $200). However, scaling up proved difficult until she accessed a loan worth 50,000 Birr (US $300) through Aisha.

"This loan allowed me to buy more stock attracting more customers and increasing my margins. I have repaid the loan well and I am ready to take more to expand my business further,” shared Fadumo with confidence in her voice.

Strengthening social cohesion

Kaynun Mahdi, a grocery shop owner from the host community in Kebribeyah, used Aisha product to add high in demand inventories to his shop.

The impact of the Aisha product extends beyond individual success; it fosters solidarity between refugees and host communities.

Kaynun Mahdi Ahmed, a 26-year-old grocery shop owner from the host community in Kebribeyah, availed “Aisha” by forming a collective with four of his friends, using group collateral mechanism.

"We acted as a collateral for each other. All group members paid their monthly loan repayment on time," said Kanyun with a pride.

With the 50,000 Birr loan, Kaynun, added high in demand inventories like spaghettis, rice, water, sugar and oil.

The success of Kanyun’s group reflects the collective ambition and commitment of the borrowers. They are now ready for second round of financing to grow their operations.

Expanding horizons for refugees

The programme is also driving innovation and job creation among refugees. Mustafe Farah Arab (22) and his uncle, Khadar Arab Hashi, refugees from Somalia, co-own a mobile maintenance shop in Kebribeyah.

Each took 75,000 Birr through the “Aisha” to procure electronics accessories and gadgets. "We started the business in 2018, and this loan helped us scale up significantly," says Mustafe.

Demonstrating exceptional financial discipline, Mustafe added, "I even made my monthly payments two months ahead of the due date."

The duo represents a blend of practical skill and academic ambition. Khadar holds a BA in Social Science, and Mustafe, who is educated till high school, brings technical expertise. With savings accounts now open at Shabelle Bank, their vision is to open a second branch in Kebribeyah and create employment opportunities for others in their community.

Relevance of the intervention

Ethiopia’s Makatet roadmap aims to move refugees and host communities from aid dependence to economic integration and self-reliance. Financial inclusion is a critical link – without access to working capital, savings and tailored risk-management tools, refugees cannot seize livelihood opportunities, even when they have skills, markets and a legal space to work. This piece of work is directly contributing to Ethiopia’s Maketet Pillar two which focuses on promoting self-reliance and inclusion of refugees by integrating them into the national systems and fostering socio-economic integration alongside host communities and Global Refugee Forum (GRF) pledge 3 on inclusion of refugees into national existing systems, and 4 on Private Sector Engagement, specifically economic inclusion and expansion of financial services to refugees and host communities.

Stephen Opio, Chief Technical Advisor of ILO PROSPECTS in Ethiopia and Sudan underscores this, "Through this partnership, we are supporting Ethiopia to realize the Makatet aspirations while ensuring that refugees and host communities can access the financial tools they need to participate in the economy. The Sharia-compliant financial services are also aligned to Ethiopia’s GRF pledges on system inclusion and private sector engagement and we are proud to see sustained interest from Shabelle Bank including on formal adoption and expansion of refugee inclusive financial products.

This work is made possible through the support of the Government of the Netherlands, whose commitment to economic inclusion continues to unlock opportunities for thousands of people striving for self-reliance.

About the PROSPECTS Programme

This initiative is supported through PROSPECTS partnership supported by the Government of the Netherlands. It aims to improve the access of refugees and host communities to education, social protection, and decent work. By addressing the specific nuances of the local financial ecosystem, the ILO and Shabelle Bank are proving that financial inclusion is a key driver of peace and stability.