Abstract
This article examines critically the support systems necessary for economic integration of refugees by analysing the economic, social and policy context of refugee entrepreneurship in Germany and the UK. Current economic integration policies in both countries focus primarily on assisting refugees to find employment while appearing to neglect the value of refugee entrepreneurship as a viable option for integrating refugees into the destination country’s economy. Assuming economic integration of refugees is a fundamental socio-economic goal in both countries, our aim was to examine the challenges that could be addressed with regard to future policies for targeting refugee entrepreneurship and augmenting both entrepreneurship development and entrepreneurial policy formulation in host societies. We introduce a theoretical framework building on Wauters and Lambrecht (2008, Journal of Ethnic and Migration Studies, 34(6), 895–915) and use inductive thematic analysis (Guest et al., 2013, Collecting qualitative data: A field manual for applied research) to examine which variables impact refugees. We identify how regulations, measures and policies in different environments affect those variables. We also examine the concept of mixed embeddedness (Kloosterman et al., 1999, International Journal of Urban and Regional Research, 23(2), 252–266), and its appropriateness for understanding the emergent entrepreneurial activity of refugees and the support systems that can aid opportunity-based integration. Our findings show that first, the most common challenges refugee entrepreneurs encounter are (a) seed capital, (b) language barriers, (c) location, (d) embeddedness and (e) knowledge about the local market. Second, there are no significant differences in the challenges that refugee entrepreneurs encounter, between the UK and Germany. Third, we also find that the support system for refugee entrepreneurs is larger in Germany than in the UK due to the capacity of government and civil society support. We conclude that combating downward occupational mobility, and fully using the potential and expertise of refugees, refugee entrepreneurship could be considered as a viable option for economic integration because refugee communities offer unique opportunities for potentially expanding the scope and style of entrepreneurship in host countries.
Introduction
Over the past years, the media, academics and policymakers have begun to turn their attention to refugee entrepreneurship. Stories of refugees from various backgrounds starting their own tech start-ups, restaurants, fashion labels, furniture stores or bakeries have been featured in numerous newspapers (Bearne, 2017; Boegli, 2017; Dierks, 2017; Kasiske, 2016; Safi, 2015). The EU parliament states that refugee entrepreneurship is one of the important ways in which refugees may contribute to host countries’ GDP in the long term.
The research and policy advice network for the G20 2017 in Germany (T20), published a paper criticising that ‘policy initiatives on refugee employment focus on the demand-side management’ neglecting the possibility of refugee entrepreneurship as an ‘important aspect of refugee integration’ (Sak et al., 2017, p. 2). More recently, the OECD, as part of its programme on inclusive entrepreneurship, has assessed the potential of entrepreneurship to be used as a tool for the integration of refugees into the labour market (OECD, 2019).
This article will specifically focus on the supply side by factors relating to economic integration, analysing the economic, social and policy context of refugee entrepreneurship in Germany and the UK. Starting first with a brief background about why refugee integration is important for both the refugees and the host countries and why it needs to be better addressed by the international community, before discussing the paper’s objective and contribution to the literature on refugee entrepreneurship and refugee integration.
Context and Background
The Rising Number of Refugees and Their Insufficient Integration in the Host Countries
Unlike ‘immigrants’, a refugee is not considered to be a person who just resides in a country other than their home country (Nicolaas & Sprangers, 2012), even though it is possible to acquire immigrant status in due course. A refugee is any person who is unable to return to their country of origin (COO) due to a well-established fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group or political opinion (United Nations Refugee Convention [UNHCR], 1951). Despite their explanatory differences, the terms ‘refugee’ and ‘asylum seeker’ are often used interchangeably. Various countries follow slightly different conventions without straying from the UN Convention. In general, a refugee would have completed the asylum process successfully, and been granted asylum (VluchtelingenWerk, 2016). This relatively ‘stable’ status might tempt us to consider refugee entrepreneurs to be those individuals who demonstrate an intent to enact an entrepreneurial event aimed at identifying and realising opportunities in a context of displacement outside their COO. The ‘stability’ that we refer to is only relative in comparison with asylum seekers. The refugee status is limited in time and is being reviewed periodically after which it can also be revoked. For example, in Germany, all refugees have to undergo an evaluation 3 years after acquiring such status for extended eligibility (in the UK it is an initial 5 years), which impugns their ability to form new enterprises and seek economic and social legitimacy. 1 What we have instead is fragility. The fragility to which we refer is one that haunts the lives of refugees when official policy begets a hostile environment as part of a conscious policy, as in the UK (Goodfellow, 2019).
Becoming an entrepreneur after having escaped from a fragile homeland to find oneself in a new world of fragility where one seeks refuge, is an extraordinarily problematic and complex prospect. Entrepreneurship does not, in these circumstances, spring up as a viable career choice for many refugees, However, there appears some evidence to suggest that it could be a sustainable pathway into work for some (OECD, 2019).
The number of displaced persons in the world today has reached a record high, with over 22.5 million refugees leaving their homes to find safer locations to continue their lives (UNHCR, 2022). While immediate assistance for these refugees to ensure their health and safety remains a priority, integration has moved up the agenda of governments because of the high current number of refugees and the long durations before refugees can return home. As we witness stories about refugees, who have lived in camps for decades, about children who were born and raised in camps and are now in their teenage years, still living in temporary tents, it is painfully obvious that social integration as well as integration into the destination country’s economy was lacking (Finch, 2015). The two reasons are relevant for both the refugees and also the host countries, because long term humanitarian aid is costly and integration policies are crucial to helping refugees become part of the destination country’s economy, community and life.
The decision on how far countries support integration has great implications for a refugee’s life. There can be restricting policies and laws, which the example of the Za’atari camp in Jordan shows. Refugees in the Za’atari camp in Jordan were neither allowed to work legally (Betts & Collier, 2017) nor allowed to leave the campgrounds without permission (Amar, 2015; Sherwood, 2012). However, policy and regulation changes were made by the Jordanian government in 2016, which have started to grant legal working permits to refugees (UNHCR, 2016). 2 For refugees integration is a crucial step for establishing their new life, it can have economic benefits for host countries once refugees are part of the destination country’s economy. The EU parliament sees social and economic integration of refugees as a vital part for ‘addressing Europe’s alarming demographic trends’ and possibly contributing to its workforce and GDP growth as well (European Parliament, 2016, p. 2). However, what exactly is integration? The two most common forms of integration are social and economic, whereas oftentimes both work together.
Economic Integration: Is Entrepreneurship a Viable Option?
Economic integration policies in the UK and Germany currently focus on assisting refugees to find employment while refugee entrepreneurship is being neglected as a viable option for integrating refugees into the destination country’s economy. Empirical evidence about refugees engaging in start-up/entrepreneurial activity is limited. This may be due to the difficulties they face in moving from one fragile environment from which they escape to a destination that can be seen as hostile, with institutions that can be considered to be too weak or fragile to accommodate their venturing needs. This notion of fragility is reinforced when conscious government policy imposes a ‘hostile environment’ for all refugees attempting to seek refuge from natural disasters, genocide or political exclusion (Goodfellow, 2019). 3
Research data from Australia shows that around 10% of refugees started their own business after staying in the country for 5 years, and 30% had done so after 10 years of stay (Legrain, 2016). Canadian evidence indicates that refugees are less likely to be self-employed than the native population during their first 3 years in the country. However, the proportion of refugees who become self-employed doubles after 5 years and leapfrogs the proportion of the native population (Green et al., 2016). It could be argued that this pattern of settlement in the host country and a necessary time period for adjustment from the traumas of movement, is a critical factor in promoting entrepreneurship. Compromises to any attempt at settlement resulting from an enforced fragility in the early years of uncertainty in a new country could easily fracture the basic edifice of entrepreneurial endeavour.
To identify the challenges refugee entrepreneurs encounter when setting up their business in Germany and in the UK, this article introduces a new theoretical framework building on a model used but Wauters and Lambrecht (2008) and uses inductive thematic analysis (ITA). We analyse the variables, which impact refugee entrepreneurship, and then identify how regulations, measures and policies by different actors affect these variables and ultimately refugee entrepreneurship today.
Our analysis identifies the following most common challenges refugee entrepreneurs encounter: (a) seed capital, (b) language barriers, (c) location, (d) embeddedness and (e) knowledge about the local market (OECD, 2019). Furthermore, this article identified that there are no significant differences in the challenges that refugee entrepreneurs encounter between the UK and Germany from a policy perspective. However, we also note that the support system for refugee entrepreneurs is larger in Germany than in the UK due to the capacity of government and civil society support. Furthermore, smaller differences in policies surrounding language courses and location of residence have been identified, which may make it more difficult for refugees to access language courses in the UK than in Germany and more difficult for refugees in Germany to change their location after receiving refugee status than in the UK. We conclude by observing that to combat downward occupational mobility, and to support refugees in using their potential and expertise to the fullest, refugee entrepreneurship could be considered as a viable option for economic and social integration. This could be achieved by developing targeted policies supporting refugee entrepreneurship and abandoning/amending restrictive policies by addressing the challenges identified above.
An Overview of the Literature
Economic Integration of Refugees
The literature on economic integration is very broad and has many approaches. While a number of articles focus on the definitions of economic integration (Balassa, 1961; Hartog, 1953; Marjolin, 1953), Ager et al. (2008) provide a holistic overview on the integration of refugees, how integration can be understood and what ‘constitutes “successful” integration”’(p. 166). Furthermore, their paper does address the financial independence of refugees as a crucial point for their integration, but it does not mention entrepreneurship as a conduit for integration. Bloch (2008) and Valenta and Bunar (2010) focus specifically on economic integration with both examining economic integration in relation to public policies. Bloch (2008) explores the ‘conflict between economic integration and policy-led labour market restriction’ (p. 21) and argues that the ‘human capacity’ as well as ‘personal characteristics have an impact on refugee employment’ (p. 34). These papers contribute to an understanding of the policy context around economic integration of refugees, from essentially an economic perspective, centred around employment.
Mushaben (2006) explores the integration potential of entrepreneurship by looking at economic migrants in Germany. She introduces the ‘do-it-yourself-integration’ processes, which resulted from Germany’s ‘refusal to pursue active integration policies across a span of 30 years’. This ‘do-it-yourself-integration’ process especially supported women in identifying with the local society and men to foster ‘participatory consciousness’ (p. 204) by having ‘created new jobs, stimulated investment, introduced technological inventions and networked non-traditional supplier and distributor networks’ (p. 216).
Wauters and Lambrecht’s (2006) paper is the only one that discusses refugee entrepreneurship specifically in relation to economic and social integration. They investigate the potential of refugee entrepreneurship and state that ‘entrepreneurship can be seen as an instrument to realise the goal of integration’ (p. 512). In a separate paper, they focus on the challenges refugee entrepreneurs face in Belgium, arguing that the ‘the compulsory integration programme should devote more attention to entrepreneurship’ (Wauters & Lambrecht, 2008). Their work limits their research to the geographical region of Belgium. Yet, with the numbers of refugees rising globally, and nearly 90% of refugees currently staying in developing countries (Betts & Collier, 2017, p. 1), it becomes crucial to not only consider one country, but take a wider approach reviewing critically prospects in other countries.
The ethnic entrepreneurship literature has produced a rich harvest over the past decades (Barrett et al., 1996; Kloosterman & Rath, 2001, Kloosterman, 2010; Mushaben, 2006). Much of the focus in this literature has been on entrepreneurship by people who have left their COO as economic migrants and set up their own businesses in the country of destination (COD). However, in his paper, Gold (1988) establishes the differences between economic migrants and refugees by stating ‘that by virtue of their reasons for exit, refugees may possess demographic, social, occupational and economic characteristics that are significantly different from those of economic immigrant populations’ (p. 412) and stresses the fact that ‘these distinguishing characteristics have special implications for their participation in small business activities’ (p. 411).
Only a small portion of the literature looks at refugee entrepreneurship specifically (Fong et al., 2007; Gold, 1988, 1992; Wauters & Lambrecht, 2006, 2008). The paper by Fong et al. (2007) uses qualitative data in the form of in-depth interviews to identify the main challenges refugee entrepreneurs face. While they briefly examine macro-level challenges such as attaining financial credit, for example, they tend to zoom in on individual challenges of refugee entrepreneurs and consequently, neglect analysing the broader macro-level landscape.
The German Federal Ministry for Economic Affairs and Energy (Bundesministerium für Wirtschaft und Energie) as well as the American Office of Refugee Resettlement have commissioned a number of reports to investigate the potential of refugee entrepreneurs (Sänger et al., 2016) and the efficacy of projects supporting refugee entrepreneurship (Else et al., 2003). They summarise and evaluate the projects that have been supported by the Office of Refugee Resettlement over an 11-year period. Both reports give important insights into governmental aid for refugee entrepreneurship. The first recommendation that Sänger et al. (2016) provide is the ‘establishment of an inclusive support culture (Aufbau einer Unterstützungskultur)’ (p. 4). This is important for refugees, as in many cases their embeddedness is limited in comparison to other migrants.
The OCED’s (2019) briefing paper on refugee entrepreneurship in OECD countries endorses the arguments above, pointing to the fact that the numerous small-scale programmes focusing on training and coaching, which have been introduced to support refugee entrepreneurs in recent years, have been created at the local level, often with the involvement of non-government organisations is common. Financial help is less forthcoming. The most successful initiatives combine multiple types of support and offer personalised assistance together with tailored delivery methods which consist of specialised help with translation and interpretation, and familiarity of the local entrepreneurship support system. The report argues for the ongoing need to develop a stronger evidence base on entrepreneurship among refugees, especially on the effectiveness and efficiency of policy. To this end, we examine the social, economic and policy context in the UK and in Germany.
Embeddedness in Fragile Environments
While embeddedness is of significance for entrepreneurs in general, it is even more so for migrant entrepreneurs. Sociologists, including Waldinger (1995), have emphasised ‘the importance of ethnic social structures as the source of action propelling business growth’ (p. 555). Deriving from this concept of embeddedness, Kloosterman et al. (1999, p. 257) criticise the one-sidedness of embeddedness and suggested the concept of mixed embeddedness. Mixed embeddedness describes for instance the embeddedness of migrant entrepreneurs, who are ‘embedded both socially and culturally in more than two different national contexts’ (Harima, 2015, p. 68) akin to the concept of dual habitus propounded by Bourdieu. Mixed embeddedness could mean that an entrepreneur is embedded in the culture, society and community of the COO, the COD or in the COO’s ethnic enclave of the COD. While Kloosterman et al. (1999) and Waldinger (1995) recognise the effect of embeddedness on entrepreneurship, we argue that embeddedness is not given and that the process of embeddedness takes time. Gaining cognitive and social legitimacy in one’s destination country is the first hurdle that the refugee encounters. Regaining or reclaiming contact with one’s COO, which the refugee has left due to onerous conditions, can entail an even more hazardous and time-consuming exercise. The fragile and broken environment of their COO and enforced new habitat of COD creates mental states and social conditions that do not correspond to the established and stability found in embeddedness. A critical understanding of fragility, rather than just embeddedness, could offer new insights for the emergence of a new community of entrepreneurs.
Fragile situations and environments refer to regions and nation states where there is a political or economic crisis or full-blown conflict. The fragile state fails to meet its population’s needs and expectations but responds to them in a way that excludes the interest of its citizens forcing them and, in some cases, to flee the country (Samman, 2018). This fragility can be compounded by ‘hostile environment’ policies of a receiving country’s government and the absence of both empathetic responses to the plight of refugees or the more direct form of policy provision which impede good intentions behind any welcome for refugees (Goodfellow, 2019). When such an environment is part of a trajectory of institutional practices centred around controlling migrants, which began developing in the United Kingdom in the early 1970s, they can evolve into a bespoke industry and infrastructure, together with a process of bureaucratisation, that Bowling (2013) refers to as the ‘crimmigration control system’. ‘Crimmigration control system’ prioritises the goals of exclusion, control and efficiency at the expense of justice. This process of bureaucratisation and, its corollary, social distancing blocks out any moral objection to the creation of a ‘really hostile environment’ for undocumented migrants (Bowling & Westenra, 2020). Thus, both sets of countries can be unwilling, or absent, influencing local security and the provision of basic services (Ritchie, 2019), albeit in different ways. Any programme for integration, has, therefore, to be examined in terms of how embeddedness can be obtained in the dual habitus of fragility. Entrepreneurship necessitates a search for opportunity and its realisation in uncertain environments. When the difficulties associated with that search are exacerbated by institutional disincentives, rigidities or even negation, then refugees exchange one form of fragility with another, making the act of entrepreneurship a hazardous provision.
Conceptual Framework and Methodology
While assessing whether refugee entrepreneurship could be considered a part of economic integration, we also identify which challenges should be tackled by future policies. Wauters and Lambrecht (2008) also looked at the different barriers refugees encounter in Belgium. They based their framework on a model first introduced by Waldinger et al. (1990), which was created to examine the different success rates among various groups of migrant entrepreneurs. This model was then further developed by Wauters and Lambrecht to not only examine migrants but also refugee entrepreneurs. They adopted the two different ‘groups of variables’, which ‘influence the success rate of ethnic businesses: opportunity structure and group characteristics’ (Wauters & Lambrecht, 2008, p. 899). They amended the model to incorporate the mixed embeddedness aspect introduced by Kloosterman et al. (1999) and finally came up with two additional variables: ‘institutional environment and societal environment’ (Wauters & Lambrecht, 2008, p. 899).
While this theoretical framework presented above is promising because of the ways it structures the different variables that influence refugee entrepreneurship, it has the risk of being too rigid and not allowing emerging challenges to be identified. Although Wauter and Lambrecht’s framework examines the variables separately, its top-down approach has set categories which are used as maps to guide the analysis and does not consider any influences among the themes. Crucially, the framework is challenged by the introduction of the fragility factor referred to above.
In our adopted framework, we allow for emerging themes to be included and consider the interplay of these themes as well. Individual factors such as motivation, skill set or experiences, addressed in Wauters and Lambrecht’s framework are not taken into account since our study focuses on macro-level challenges, which could be addressed by policy. Once we identify the challenges, we explore the institutional and social environments and how these environments influence the challenges by examining government, civil society, markets and their regulations, policies and measures, identifying either their strength or fragility in both countries.
Methods and Data
To serve this framework, we have adopted ITA, a method which best fits the scope and aim of the first part of analysis. ITA focuses on identifying and coding emerging themes in data (Guest et al., 2013). To do so, the methodology specifies the data to be in free-flowing form. To this end, we conducted semi-structured in-depth interviews. In total, 15 interviews were conducted; of which, 6 were conducted in English and 9 in German. The interviews took place either over the phone or in person, depending on participants’ convenience and feasibility, and lasted for 30–70 minutes. To triangulate the results, the interviews were conducted with three groups using the snowball sampling method. The first group consisted of eight refugee entrepreneurs living in the UK and in Germany, who have set up or are in the process of setting up their own business.
The total of eight cases with refugee entrepreneurs have been used as the basis of this article. The five refugee entrepreneurs in the UK were introduced by TERN, an organisation supporting refugees to become entrepreneurs. The remaining three cases in Germany have been provided by the EU project Virtual Incubator for Refugee Entrepreneurs (VIFRE), which conduced in-depth interviews with refugees. Due to their vulnerable situation and the small number of refugees working with TERN and VIFRE, any identifiable information, such as COO, age and sex will remain anonymous. Therefore, the refugee entrepreneurs will be referred to as I1, I2, I3 and so on.
Expert Interview Participants.
The triangulation approach enabled the capture of both the demand and supply side of policymaking, necessary to validate the information from both sides.
Data Analysis
Boyatzis (1998, p. 29) introduces three steps to analyse and identify the emerging topics through ITA. These stages consist of (a) choosing the sample and the design, (b) ‘developing themes and a code’ and (c) ‘validating and using the code’ (p. 29). In addition, we make use of thematic mind maps, 4 which were also applied by Braun et al. (2006) in combination with ITA. This helps the visualisation of the gradual coding and identification process of the emerging themes.
In the second part of the analysis section, the challenges identified as themes in the first part are described and analysed using a matrix, listing the different challenges and the actors involved, namely, the government, civil society and the market. The matrix is used as a guide to discuss the different themes by examining the presence or absence of regulations, measures or policies that could have an impact on refugee entrepreneurship. Furthermore, these examinations will be assisted by revisiting the in-depth interviews and analysing what experts as well as refugee entrepreneurs said about the individual themes.
Analysis and Discussion
Identifying Refugee Entrepreneurship Challenges
The emerging themes were identified by analysing all in-depth interviews using ITA. After asking general questions about their background, occupation in COO and pathway since arriving in COD, the questions became more specific and were individually adjusted to understand their new business and the journey to setting up their businesses. Researchers and experts were asked to share their experience on what challenges refugee entrepreneurs are facing in UK/Germany, and how these challenges can be overcome.
Figure 1 provides a diagrammatic account of the main codes and how they map out in terms of the ITA Stage 1.
All quotes depicted give an insight into obstacles refugee entrepreneurs encounter. Some topics have been addressed more often than others and could form a theme. We have put the threshold at three mentions to form a theme. Hence, other themes such as the problem of refugees’ limited IT experience or the challenge to prove one’s motivations for becoming a refugee entrepreneur have been dropped in this exercise. 5
Figures 2 and 3 display the next step in which the different main codes (key words and phrases) have been reorganised to indicate possible groupings or patterns. Furthermore, the lines in the charts indicate connections between different themes.
Figure 4 shows the final product of the thematic mind map and ITA. The different themes were further simplified to depict the essence of the themes.
The themes identified are (a) seed capital, (b) location, (c) language, (d) embeddedness and (e) knowledge of the local market. Almost all of the themes are identical to those generated by Wauters and Lambrecht (2008, p. 900), which are organised under the categories ‘opportunity structures’, ‘group characteristics’ and ‘institutional and social environment’. The only theme that was not specifically named in Wauters and Lambrecht’s model was the location, which would be categorised in the institutional environment category of their model (2008, pp. 900, 909). These themes, and the negative values associated with the responses consolidated in the themes, highlight the fragility of the conditions and the environment that refugees have to negotiate in the two destination countries.
Analysis of the Identified Challenges
We consider relevant policies, regulations and measures at three different levels namely, government, civil society and market in relation to the challenges that refugee entrepreneurs face. In Table 2, each challenge is organised within the different levels, wherever appropriate, following the matrix.
Seed Capital
Almost every interviewee named seed capital as one of the key challenges. One of the experts from the German Chamber of Commerce explains that many refugees had to use most of their savings to flee their home country, and that bank accounts in their COO are often times frozen so that access to capital becomes difficult. Gold (1992) and Wauters and Lambrecht (2008) argue that the process of obtaining finance to start a business is one ‘situation’, which ‘differs from that of immigrants’ (Wauters & Lambrecht, 2008, p. 905).
There are several ways to obtain seed capital. If one does not have sufficient seed capital, one can borrow from family and friends, one can obtain micro-credits from institutions or states, or one can receive credit from the bank. Depending on the COO, the lending or borrowing culture might be different as well. According to the same German representative, the most common option in many Middle Eastern countries is to borrow from family and friends. However, the challenge with this option is that many family members and friends might be in similar situations as the refugees themselves. Kasiske (2016) describes how a Syrian real estate agent who fled to Germany planned to open her own restaurant. Her cousin was keen to provide financial assistance, however, most of establishments for rent demanded a €20,000 down payment to rent a restaurant. She says that even with the support of a family member a sum such as €20,000 is impossible for her to pay (Kasiske, 2016).
On a similar note, the Head of the MoveOn project in Hamburg, discloses that when programme participants come to her for advice when opening a restaurant, she suggests starting with a catering service first, simply because seed capital is so difficult to obtain. Why exactly is it so difficult for refugees to obtain seed capital from banks or micro-credits from institutions? The representative from TERN, an organisation that also provides financial services to refugees, explains that there are no particular regulations by banks or laws against lending to refugees. Instead, banks make risk-averse decisions when it comes to lending. Any information that could indicate a possible difficulty for the credit receiver to pay back their credit in 3 years makes it difficult for the bank to grant the credit. A non-existent credit history (TERN), the time granted for the refugee status (SINGA) and language skills (Singer, IQ Fachstelle) are all barriers that need to be overcome to access seed capital. Overall, it is important to note that most of the programmes offered by TERN, SINGA, MoveOn or the IQ Netzwerk are relatively new and have all started as a reaction to the large influx of refugees to Europe in 2015. Therefore, most of the participants of the entrepreneurship programmes have not tried to obtain credit yet. What follows is an analysis of what actors influence the process of refugees obtaining credit and how they do so.
Following the framework matrix, we can observe that different actors, through direct or indirect measures, regulations and policies, influence the access to seed capital for refugee entrepreneurs. First, the governments do not have any direct policies addressing the access to capital for refugees. However, we can see that there are several indirect ways in which their policies can have an impact on this process. In the UK, refugee status is granted for 5 years at first, after which period a refugee may apply for settlement, which grants ‘indefinite leave to remain’. 6 In Germany, on the other hand, refugee status is only granted for 3 years, after which one can apply for settlement (Federal Office for Migration and Refugees, 2017). 7 The SINGA expert illustrates how ‘when you arrive as an asylum seeker here, you are usually granted to stay for a maximum period of three years as a refugee’. 8 ‘For this short amount of time’, she says, ‘no bank, not even a public bank, will grant credit’. This is one way in which a country’s law, especially in Germany, can restrict opportunities to obtain capital.
There are also indirect ways in which governments are enhancing the process of obtaining seed capital. In Germany, for example, the Federal Ministry for Economic Affairs and Energy informs about two kinds of financial aid, for which individuals who are not employed can apply: ‘Gründungszuschuss’ and ‘Einstiegsgeld [Basic subsidy entry fee]’. 9 Similarly, the UK has a ‘New Enterprise Allowance’, 10 which is applicable to people who are receiving a jobseeker’s allowance, employment and a support allowance or income support. However, these regulations are not aimed at refugees specifically, but rather at individuals who are unemployed and are setting out to start their own businesses. So, they may apply only to some refugees.
Another way in which the government generally supports entrepreneurs is the micro-credit system. Through the Federal Ministry of Labour and Social Affairs, the German government founded the ‘Mikrokreditfonds Deutschland [Microcredit Fund, Germany]’ in 2010, which supports small businesses to obtain seed capital for up to €20,000. 11 In the UK, one can apply for a start-up loan, which grants loans from £500–£25,000. 12 IQ Fachstelle points to the difficulties for refugees to obtain such credits: ‘You can apply for these micro-credits, of course, but you have to consider the people, who arrived here without preparation and asking them to understand the bureaucratic language and asking them to write a business plan in business language which can be […] very difficult’. Obtaining seed capital in the ways above is only possible after learning the local language, or with help from some native speakers.
Civil society, which is the next section in the matrix, is strongly involved in assisting refugees with obtaining seed capital. They do so in multiple ways. First, organisations, such as TERN, SINGA or MoveOn are working closely with refugees to provide them with information about how they can obtain credit and prepare for the application process. Second, the organisations named above all assist their participants in writing business plans, which a refugee entrepreneur who decides to apply for a credit needs for his application process. Third, civil society assists in creating a better structure between different organisations and actors. SINGA, for example, is working closely with job centres, public banks and other credit institutions to create networks suited to the needs of refugees. Fourth, credits granted directly by civil society.
There are numerous platforms that provide the opportunity to allow crowdfunding, which allows individual people to introduce their project and others to support it or invest in it. Additionally, TERN, for instance, also invests in start-up businesses themselves as well as organises investors who contribute to the seed capital. TERN comments that after the refugee entrepreneurs have successfully paid back loans, they will have better credit history, which they will then be able to use to apply for credit from regular banks. This is one critical difference that this study found between the UK and Germany, as currently there is no organisation in Germany that directly funds refugee entrepreneurs to start their own businesses.
With the government and civil society as main actors, the market does not impact refugee entrepreneurship very much. In the seed capital section, however, the market does play a role, since the difficulty to obtain credit from the bank is one of the reasons why refugees struggle. However, there are no specific regulations that prevent banks from granting credit to refugees. As mentioned above, when banks give credit or loans they usually decide to do so in a risk-averse way. The credit history is one piece of information banks look at when deciding whether to give out a credit. Barclay’s, for example, explains what credit rating is on their homepage by saying that ‘your credit rating is used by lenders to assess the risk of offering you credit. It’s calculated based on information in your credit report, such as, your recent address history, and outstanding credit card and loan balances’. 13 These two points of information, which are listed on the homepage, are already difficult for refugees to provide. In other words, while the regulations of the bank do not make it impossible to loan money to refugees, the process of how banks decide whom to give credit to and which variables are looked at make it nearly impossible for refugees, who have just arrived in the COD, to obtain a loan.
Language
Even though refugee entrepreneurs are not the only group of people who must tackle language barriers, this was listed as one of the most common challenges that refugee entrepreneurs face. Especially when it comes to managing the bureaucratic process of setting up, registering a business or dealing with taxes and regulations, an advanced knowledge of the local language is crucial. I8 explains even if one speaks the language ‘there is still a problem, because the language of the law is so different. The language you use in society, you hear or use daily is a completely different language. That is very difficult to understand’.
The government takes the biggest role in tackling the language barrier at the moment. Therefore, this section will examine the policies in the UK and in Germany, which focus on learning the local language. Both in the UK and in Germany there are policies that support refugees to learn the local language. In the UK, it is important to note that England has separate policies on English for Speakers of Other Languages (ESOL) than Scotland and Wales. The current government policy on ESOL was established in 2010 under the ‘Skills for Sustainable Growth’ strategy document under the coalition government (Department for Business Innovation and Skills, 2010). In this document, the policy states that ESOL will be fully funded and ‘available for those actively seeking work on Jobseekers Allowance and Employment Support Allowance benefits’ (Department for Business Innovation and Skills, 2010, p. 32).
Unlike the UK government, the governments of Wales (Welsh Government, 2014) and Scotland (The Scottish Government, 2015) have recently published separate policy papers addressing ESOL and its goals. In one of the in-depth interviews, a refugee pointed out how he feels that ‘it is a huge waste of time for asylum seekers not to be able to attend language classes’ (I4). In fact, in ‘Scotland and Northern Ireland all adult asylum seekers are eligible for free ESOL classes on arrival; and do not need to meet the 6-month period of residence requirements which apply for asylum seekers in England’ (Refugee Action, 2016). The policies and laws regarding language courses for refugees in Germany were updated in 2016, and it was made mandatory for newly arrived refugees to take part in integration and language courses (Federal Office for Migration and Refugees, n.d.) 14 . Furthermore, in Germany, asylum seekers are allowed to attend language courses as well (Federal Government of Germany, 2016a).
There are many organisations in the civil society sector that support refugees in learning the local language. Especially in the UK, where funding for ESOL has been cut in the past years and waiting lists for ESOL courses are long (Refugee Action, 2016, p. 9), civil society engagement in this field has become more important. On the other hand, since language courses in Germany are mandatory for refugees by law, civil society engagement seems to focus more on practising German in relation to something else (e.g., networking or building a community by organising yoga or photography classes in the way that SINGA Berlin does). The organisations, which have contributed to this research by participating in in-depth interviews, support refugees in learning the local language as well, by organising group workshops, networking events with locals and by helping refugees to navigate through German laws and regulations. In this way, civil society and government help the prospects for refugee entrepreneurship by providing them chances to learn the language of the COD. As the market is not involved in this, it was not covered in this section.
Location
An expert from Bremen, Germany explains how locations and their different entrepreneur ecosystems can pose a challenge to refugee entrepreneurs. Some cities or areas have better entrepreneur ecosystems owing to an active entrepreneur community, supporting organisations, co-working spaces, entrepreneur events or incubator programmes.
The German government plays a restricting role in this field through its policies and laws. In 2016, Germany introduced a law by which refugees who want to keep receiving benefits are not allowed to change their location of residence which they were first assigned to when they attained refugee status (Federal Office for Migration and Refugees, 2017; Federal Government of Germany, 2016b). I7 explains in his interview how the location of the business has a significant impact. ‘It depends on the local situation […]. For example, if I want to make my food truck in Cologne means there is a lot of competitors to me’. In this situation, I7 is not able to choose a location and his competitors, because he has to stay in the Cologne area.
By way of contrast, the UK compulsory dispersal policy seeks to divide the ‘burden’ of hosting asylum seekers and, therefore, disperses refugees to different locations (Stewart & Shaffer, 2015). However, this policy only applies to asylum seekers and not to refugees. Even though the policy in the UK is not restrictive, it applies to both countries because moving locations can be very difficult for refugees due of financial reasons.
The influence of civil society on refugees’ location is small. Much of the entrepreneur ecosystem is initiated by civil society. On one side, the services that civil society provides are enhancing because they create a support system where there might be none; however, due to the reason that programmes at the moment are largely run regionally and not nationally, it also contributes to the different levels of supports in locations. Market influences the cost of living of locations. London, for example, has one of the best entrepreneurship ecosystems in the UK, however, the cost of living is also very high. This would make it difficult for refugee entrepreneurs to sustain their living while building their business.
Embeddedness and Lack of Knowledge About the Local Market
As discussed in the literature review, the importance of embeddedness to the success of a business is recognised by academics and practitioners alike (Kloosterman & Rath, 2001). I6 explains the difficulty of not being embedded: ‘The network, language and culture’ is a problem ‘I have to spend more time. I need time to get used to involve this community or society here and then I try to do something otherwise it’s no way actually’.
However, there seem to be several differences between refugee entrepreneurs and ethnic entrepreneurs. First of all, refugees ‘did not come to Germany voluntarily’ (IQ Fachstelle) and, therefore, were not able to prepare life in the destination country to the same extent as economic migrants would be able to. This means that they are, in most cases, not able to form any relations or contacts with locals prior to their journey. Furthermore, ‘they have not dealt with the German economic, political or social system’ (IQ Fachstelle) prior to arriving and, therefore, lack the understanding of the local market, customers, economy and laws. This is not only a challenge in German but also in the UK. TERN explains how the dispersion of a prior network of people and the lack of knowledge about the market are some of the great challenges of refugee entrepreneurs. By definition refugees also cannot choose the location in which they are going to live. 15
Another crucial difference is in the likelihood of embeddedness. Ethnic entrepreneurs can be embedded in the home country and the ethnic enclave in the destination country. Even though refugee entrepreneurs could eventually earn the distinction of being embedded in the same way, they often have greater difficulty in doing so. The short duration of their stay as refugees in the destination country, language and cultural barriers, all act as impediments to embeddedness. In addition, until they are set up in a more permanent location, they are usually limited to a camp or another temporary location, in which the majority of people are other refugees, who are not embedded as well.
Both the UK government and the German government have started pilot projects in which they created programmes to support refugee entrepreneurs to network and learn about the local market. The Federal Government of Germany has run a project called ‘Start-Up Your Future’ (Bundesministerium für Wirtschaft und Energie, 2017). This pilot project, which started in June of 2017, teams up refugee entrepreneurs with mentors who have experience in building up their own businesses in Germany, to provide them with knowledge about the local market and ease their efforts to become embedded. The Federal Minister for Economic Affairs and Energy, explains that ‘many who have come to Germany as refugees have the potential to become entrepreneurs. Through the project, “Start-Up Your Future” we want to provide refugees with the option to become entrepreneurs and thus, contribute to the economic and social integration’ (Bundesministerium für Wirtschaft und Energie, 2017).
The start of this programme marks the first pilot project in Germany that has been directly initiated by a part of the government. Furthermore, The National Integration Plan: Driver of Integration Policy states:
Since integration actors across the board have only limited financial and Human Resources, it makes sense to test the effectiveness of new Integration initiatives in pilot projects. If they prove ineffective no further funding would be provided. But [if] they prove successful, it is important to move from the ‘prototype stage to serial production’. (Federal Office for Migration and Refugees & Forum Integration, 2007, p. 3)
The document goes on to stipulate that ‘a pilot project must then become standard practice’, leaving the possibility of such a practice emerging out of a successful outcome.
While both the UK and German governments are still in their starting phases with support of embeddedness and knowledge about the local market, civil society has been very active in this section for the past years. The organisations that this study has interviewed support refugees in understanding the local market, economy and regulations while connecting refugees with people in the local society who could help with their businesses.
Comparison of the UK and Germany
We did not find any significant differences in the type of challenges refugee entrepreneurs face in the UK and in Germany. Nevertheless, there are several differences in how the different actors influence these challenges. Overall, the refugee entrepreneur support system in Germany could be considered to be better equipped than in the UK. This is due to the fact that support by both the government and by civil society is stronger in Germany than in the UK. The German government has started a pilot project to support refugee entrepreneurs. Furthermore, the intervention by the Minister of Economic Affairs and Energy shows that this programme is intended to help refugees in economic and social integration (Bundesministerium für Wirtschaft und Energie, 2017). There has been no official press release or document that details a similar initiative by the UK government. Additionally, there is only one organisation that specialises in supporting refugees in becoming entrepreneurs. While most of the support schemes in Germany are still centred in larger cities, there are several organisations in Berlin, Hamburg and Freiburg. Thus, they are able to cover a much larger area than TERN, which is located in London and is currently the only organisation in the UK that provides this specialised assistance.
However, location and seed capital seem to be two challenges which are less severe in the UK. On location, the UK has policies that do not restrict refugee entrepreneurs from moving from one place to another; whereas, in Germany refugee, entrepreneurs cannot move without losing the right to welfare. Attaining seed capital is similarly difficult in the UK and in Germany. Yet, in Germany, there is no organisation that directly provides credit specifically to refugee entrepreneurs.
One more difference can be found in the policies around the provision of language programmes. While in the UK language programmes are voluntary, they are mandatory for refugees who have arrived in the past years in Germany. This does not make a difference on how it influences refugee entrepreneurship. However, it might become a problem if the voluntariness of the courses on offer might mean that their numbers are restricted leading to overcrowding. Refugee Action (2016) reports that is indeed the case.
Refugee Entrepreneurship in Relation to Integration
In reflecting on entrepreneurship as a means to integration two questions arise: (a) Should refugee entrepreneurship be treated as a valid option for economic integration and, if so, should it be assisted by government policy and measures in the same way in which refugee employment is supported? And (b) does refugee entrepreneurship contribute to social integration and, if so, could this be another reason why refugee entrepreneurship should be assisted by government policy and measures? Providing an empirically sound answer to these two questions is incredibly difficult, because there is simply not enough data available to make scientifically constructed conclusions. Yet, it is possible to rephrase the questions above and think about whether there is at least enough evidence to consider refugee entrepreneurship as an option for economic integration and whether it could contribute to social integration. Even if these questions sound trivial, answering them is an important step towards research in this field and premeditative for possible future policies.
In considering economic integration, it is generally known that refugees have higher percentages of unemployment than the citizens of the destination country (Krahn et al., 2000, p. 60) or economic migrants who arrived at the same time (Samuel, 1984, p. 48). Furthermore, many of the refugees, who do get employed, face downward occupational mobility, meaning that they only find employment in positions for which they are overqualified (Gans, 2009). According to Krahn et al. (2000, p. 60),
The employment problems encountered by refugees and some immigrants, have been linked to various labour market barriers, the most common of which are: limited […] language skills (Samuel, 1987; Wooden, 1991); discrimination on the part of employers (Collins, 1999; Henry, Tator, Mathis, & Rees, 1995; Lam, 1994); visible minority status (Basavaraijappa &Verna, 1990; Reitz & Sklar, 1997); a lack of Canadian work experience (Aycan & Berry, 1996); and reluctance by licensing bodies to recognise foreign educational and occupational credentials (Aycan & Berry, 1996; Marshall, 1991; Swan et al., 1991).
Furthermore, quotations by refugees, who were interviewed for this study, support the phenomenon of downward occupational mobility:
It took me 2 years to get my first job in the office. You can get jobs in coffee shops or other [similar] jobs easily and by doing so you can maybe build up your customer service skills, but if you want to build up your career you need other skills. You can’t get them in the coffee shop. I volunteered in the customer service office first, before I found a job in administration for a property management company. (I1)
SINGA Berlin explains how one of the incubator programme participants used to be an evening gown designer back in his home country: ‘It would probably be very difficult for him to find employment in the fashion industry, which would use his talents and expertise to the fullest. With his background, it makes much more sense for him to start his own business’. 16 A problem coupled with downward occupational mobility is the fact that many previous experiences, qualifications or certificates from the home country do not suffice or are not recognised in the destination country. Hence, refugee entrepreneurship can be seen as an option to employment in these instances.
Moreover, a significant number of refugees have owned businesses in their home country, such as I2, who talks about his experience as a business owner back home:
How it works in Nigeria is that you work for your master for some years, maybe 5 years and after that they give you money to open up your own business. So that’s how it works there; at least in the Eastern part of Nigeria, that’s what is common there. So I did, I had my own shop for 10 years. When I got my permission to work here in the UK, I worked for the 99p shop. So, for refugees it is not easy. You want to do your own business, but you don’t know how. There are so many things you are not aware of. (I2)
Refugees, who have owned their own businesses in the COO would be able to build on their experiences to become entrepreneurs in the destination country.
Balassa (1961) in ‘Towards a Theory of Economic Integration’ discusses various definitions of economic integration in the economic literature, such as Myrdal’s: contention that ‘the economy is not integrated unless all avenues are open to everybody’ (Myrdal, 1956, p. 11). Taken that Myrdal primarily refers to international economic integration, this definition can also be used to explain the economic integration of refugees into a local labour market. In this sense, the removal or ease of labour market barriers such as those listed by Krahn et al. (2000) have been at the centre of refugee integration policy. Nonetheless, all the labour market barriers addressed above are specifically about barriers that refugees encounter when seeking employment. Setting up a business and becoming an entrepreneur is as much an option to become integrated into the local economy as finding employment. In other words, entrepreneurship is part of the economic system, avenues to which, according to Myrdal (1956, p. 11), should be accessible to everyone.
From a social integration perspective, Wauters and Lambrecht (2006, p. 512) argue that ‘by promoting refugee entrepreneurship, integration into the host society can be assisted’. What is more, the German Minister of Economic Affairs and Energy explicitly states that not only economic integration can be assisted through refugee entrepreneurship but also social integration. Two of our German experts agree that often times refugees, when building their own businesses, have to be proactive in approaching and seeking the help of locals because they lack sufficient physical or intangible resources to build their businesses. The necessary interactions with locals could of course improve their language and new social skills. A counter argument from our expert at Leuphana University in Germany suggests that there might be a selection bias as well because those who found their own business are generally outgoing, ambitious and focused. She notes that no one knows if they would have integrated better, faster or similarly if they had not become entrepreneurs.
Concluding Observations
A Framework Matrix for the Key themes.
Our study was able to identify seed capital, language, location, embeddedness and knowledge about the local market as the main challenges refugee entrepreneurs face in the UK and Germany. It also identified the influence of different actors and their regulations, measures and policies through which it identified various differences between the UK and Germany. While the challenges are the same in both countries, we found that the overall refugee entrepreneurship support system in Germany is stronger than in the UK, owing to the capacity of both government and civil society support in Germany. The differences lie in policies surrounding the availability of seed capital, the question of location and issues related to language training and use. Unlike in Germany, refugees have the option to apply for seed capital in the UK through organisations like TERN, which provides credits specifically to refugee entrepreneurs and their businesses. While in Germany refugees who want to receive benefits have to remain in the location, which was first assigned to them after receiving refugee status, the UK does not have these restrictive policies and refugees in the UK are allowed to move. The language policies in Germany make it mandatory for refugees, who have arrived recently to take language courses. In the UK, however, language courses are voluntary. As a consequence of this and the fact that English learning programmes have faced budget cuts, courses are often overwhelmed by high numbers of students. That good intentions characterise much of the effort in both countries, it is also clear that these intentions can get easily tangled in indifferent policies or via a bureaucratic machinery of implementation. It is these impediments that create the new form of fragility that hinder embeddedness and the realisation of productive, refugee entrepreneurship.
On integration, this article concludes that to combat downward occupational mobility and to use the capacities and experiences of refugees to the fullest, refugee entrepreneurship should be considered as a viable option to employment in economic integration. Similarly, our evidence suggests that refugee entrepreneurship can be considered a form of social integration. However, to achieve an efficacious outcome of social integration, it is critical that the fragility that refugees relinquish when they leave their countries of origin and the socio-psychological damage that it causes is not renewed by way of socio-economic barriers to entrepreneurial endeavour in their countries of destination.
Limitations
Due to the small number of interviews conducted for this study, it is difficult to generalise about specific groups of employees or the advantages ages or otherwise of refugee entrepreneurship in any one country. Our exploratory study offers a starting point for future research and identifies topics that could be explored and measured in more depth through quantitative and longitudinal studies. It would have been appropriate to interview refugee entrepreneurs from both the UK and Germany, but time constraints and access issues made this difficult. Understanding the individual backgrounds and the entrepreneurial personalities of refugees provide for better insights into their propensity for and interest in entrepreneurship. The third limitation is the way in which the in-depth interviews were conducted. The absence of focus groups and other validating instruments might have lent the interview process greater objectivity and allowed for the discussion to flow without much of the interviewer’s involvement. The small number of respondents did not make focus group activities a viable option.
Implications
Future research should focus on collecting data on refugee entrepreneurs to be able to support findings with large data sets. Furthermore, it would be interesting to expand the regional scope of the study and attempt a global study, which looks at refugee entrepreneurs globally.
Footnotes
Authors’ Note
We acknowledge that the World Bank guidelines recommend the use of terms such as ‘lower-middle income countries’, ‘upper-middle income countries’ and ‘high-income countries’. However, for the purpose of our paper we refer to broad-based terminology because we are not identifying specific countries in any of the World Bank countries and neither are we associating the refugee question to the income status of those countries.
Declaration of Conflicting Interests
The authors declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.
Funding
The authors received no financial support for the research, authorship, and/or publication of this article.