According to About.com, a character reference letter for a scholarship is a letter written by an individual to attest to a scholarship applicant's character and abilities. Character reference letters can be done by anyone as long as that person is familiar with the applicant.
Character references can be good for individuals without much work experience who are having trouble obtaining employment references. They can also be used in conjunction with employment reference letters in order to have a more solid scholarship or job application. Examples of people who can write good character reference letters include business associates, professors, academic advisers, customers or vendors. Other examples include leaders or members of an organization that the applicant has volunteered for.