The Kakuma Kalobeyei Challenge Fund (KKCF) addresses unmet market needs while decreasing social tensions in Kenya’s refugee-hosting Turkana County. Led by the International Finance Corporation (IFC) of the World Bank Group, KKCF is a partnership between multilateral organisations, bilateral agencies, local government and the private sector that de-risks private investment and supports inclusive enterprises. The KKFC mobilises businesses, creates jobs and expands public services.
Markets for peace: IFC’s conflict‑sensitive blended finance in Kenya
Abstract
In 2025, the Kakuma-Kalobeyei area in Turkana County hosted around 300 000 refugees and asylum seekers from Burundi, the Democratic Republic of the Congo, Eritrea, Ethiopia, Rwanda, Somalia, Sudan, South Sudan and Uganda, in an area remote from Kenya’s main economic centres. The lack of jobs and services following the large influx of refugees during the 2013-2014 South Sudan civil war, led to friction between refugees and host communities. The International Finance Corporation’s (IFC) study, Kakuma as a Marketplace, revealed unmet demand across multiple sectors, pointing to potential for private investment if entry barriers were reduced. Both refugees and local entrepreneurs struggled to formalise businesses, access capital and integrate into value chains. A blended finance and conflict-sensitive programme was needed to de-risk initial investments and ensure inclusive social benefits. The Kakuma Kalobeyei Challenge Fund (KKCF) was established to address untapped markets and tackle any potential for conflict amongst communities.
The KKCF operates through a collaborative approach, implemented by the IFC with the Africa Enterprise Challenge Fund (AECF), the United Nations High Commissioner for Refugees (UNHCR) and Turkana County government. It is co-funded by the European Union, Germany, the Netherlands, Switzerland and the United Kingdom (Figure 1). The KKCF uses a three-part model to unlock investment and jobs:
A competitive business challenge that co-finances enterprises (typically USD 100 000 to USD 750 000) through three funding windows: the private sector, social enterprise and local enterprise development. Companies, enterprises and entrepreneurs compete for performance-based grants that match their own funds and receive technical assistance.
Business and investment advisory services. With the support of KKCF and the UNHCR, Turkana County inaugurated the Biashara Huduma Centre, a one-stop shop for local government and business services, such as registering businesses, applying for permits and requests for small business loans. Through synergies with IFC’s Kenya Investment Climate Program Phase 3, efforts have been made to establish an Investment Promotion Corporation Bill and Portal to create a systematic regulatory framework for attracting and protecting investments within the county.
Targeted support for larger enterprises to help de-risk entry into the Kakuma‑Kalobeyei area. This includes providing analyses of market gaps and commercial potential, as well as feasibility studies to facilitate investment decisions. In February 2025, the IFC and Equity Bank Kenya launched a USD 20 million risk-sharing facility to expand access to credit for refugees or host residents and reduce the finance gap that restricts enterprise growth in displacement settings.
KKCF has helped mitigate potential causes of conflict and tension between refugees and host communities. By promoting shared benefits and inclusion, KKCF supports businesses and fosters social cohesion and stability in the region through:
Local ownership. By December 2023, KKCF’s competitive business challenge had supported 122 businesses, 102 of which are led by refugees or host community members. This highlights KKCF’s approach of embedding decision making, investment and benefits locally, strengthening ownership, legitimacy and long-term sustainability.
Job creation and service delivery. Supported enterprises have created over 300 jobs, including 199 for women and 82 for refugees, and delivered services to more than 70 000 refugees and host residents in sectors such as renewable energy, education, health and connectivity. Job creation and the expansion of services mitigated competition over scarce resources.
Accessible and inclusive finance. KKCF’s support has enabled microlenders to disburse over USD 1.5 million in microloans to over 1 800 clients, including women and refugees. In parallel, the one-stop Biashara Huduma Centre and implementation of an investment portal has reduced time and costs for enterprises. Integrating host-community businesses, tracking gender and inclusion, and requiring conflict-sensitivity in reviews has enabled sharing of benefits and avoided perceptions of favouritism.
Streamlined administrative procedures. Processes for registering businesses or requesting permits have been simplified for both hosts and refugees, reducing discretionary decisions and related grievances while formalising livelihoods.
Conflict sensitivity must guide operations and communications. KKCF’s integrated market approach and dual-benefit design for hosts and refugee communities build trust, reduce tension, generate income and foster inclusion. By considering refugees and hosts as one market, KKCF promotes shared growth and decreases perceptions of competition. Community engagement and transparent metrics proved vital to avoid tensions.
Evidence drives engagement, along with instruments adapted and responsive to market conditions. IFC’s 2018 household survey reframed the Kakuma-Kalobeyei area from an aid-dependent camp to an investable market, attracting businesses and investors. This first step provided a solid and necessary evidence base to mobilise private capital in an unknown market. Early feedback showed that co-financing and eligibility criteria were challenging for small, refugee or host-owned businesses to attain. Tailoring grant sizes, milestones and technical assistance to fragile market realities expands uptake of support.
A broad partnership increases effectiveness. Combining expertise from multiple partners, such as IFC, AECF, UNHCR, Turkana County, along with bilateral donors’ finance and diplomatic backing helped mitigate risks. This coalition increased leverage with businesses and authorities, aligning grants, policy reform and credit instruments to de-risk market entry and scale impact beyond what any single partner could achieve. This demonstrates the benefits of collaboration among complementary actors.
Attracting and retaining larger businesses, along with crowding-in private capital remains challenging. A high perception of risk, distances and a thin infrastructure slowed market entry. Leveraging financing is improving (e.g. the new IFC/Equity Bank risk-sharing facility), but mobilisation is still below potential. Grants need to be connected to downstream credit from the outset and supported by targeted support and on-the-ground presence to mitigate risks.
Instability and crises hindered delivery of funding. COVID-19 and national elections created delays and volatility for grantees highlighting the need to build adaptive management and flexible grant rules into governance.
AECF, Kakuma Kalobeyei Challenge Fund (KKCF), https://www.aecfafrica.org/approach/our-programmes/crosscutting-themes/kakuma-kalobeyei-challenge-fund-kkcf/.
IFC (2018), Kakuma as a Marketplace: A consumer and market study of a refugee camp and town in northwest Kenya, https://www.ifc.org/content/dam/ifc/doc/mgrt-pub/20180427-kakuma-as-a-marketplace-v1.pdf.
KKCF, The Kakuma Kalobeyei Challenge Fund, https://kkcfke.org/.
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OECD (2025), OECD DAC Blended Finance Guidance 2025, Best Practices in Development Co-operation, OECD Publishing, Paris, https://doi.org/10.1787/e4a13d2c-en.
To learn more about other development co-operation practitioners, see:
OECD, Development Co-operation Profiles, OECD Publishing, Paris, https://www.oecd.org/en/topics/sub-issues/development-co-operation-profiles.html.
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