Financial Inclusion… For Whom? Considering Immigration and Citizenship

> Posted by Sonja E. Kelly, Fellow, CFI

The U.S. Congress has recently been involved in debate on immigration, a theme also explored in President Obama’s State of the Union Address last week. Such conversations have led me to wonder… what does financial inclusion mean for people who are living outside of their home country?

There has been a marked increase in countries that have released definitions of financial inclusion, national strategies for financial inclusion, and regulations that support financial inclusion. The focus of these efforts is in part determined by how countries define the target population for financial inclusion. Often, financial inclusion is not for everyone.

At the Center for Financial Inclusion, our definition specifies that financial services are “for all who can use them.” For us, age, disability, gender, or citizen status should not keep people from formal financial services.

In the implementation of financial inclusion policy, regulation, and strategy, however, there are legal and security-based concerns affecting why our definition of financial inclusion “for all who can use financial services” isn’t reflected in every definition of financial inclusion. The OECD and the EU, for example, are very clear that financial inclusion is for citizens only. Other countries around the world similarly adopt this definition. It makes sense that banks would want to know whether a prospective client is a citizen. Proof of citizenship means lower risk. It implies that legal problems can be routed through the national justice system. It ensures that the owner of the account or the holder of a line of credit can more likely be found in case of a problem.

It also means, however, that there are many migrants and refugees who are by virtue of their citizenship status excluded from the formal financial system. In Saudi Arabia, over 30 percent of people in the country are not citizens. In UAE, over 80 percent of people are not citizens. In Jordan and Hong Kong, this number is about 40 percent, and in Kuwait and Qatar, around 70 percent. In sheer numbers, the U.S., Germany, and Russia lead the way, with an estimated 70 million people living in one of these three countries without citizenship.

If we fail to create solutions to serve migrants and refugees, we ignore a huge number of those who are excluded from formal financial services.

Potential solutions should remind policymakers of financial inclusion’s intent: to serve marginalized and vulnerable populations, and in my opinion, that includes those without citizenship. Regardless of which side of the political spectrum you stand, extending financial services to migrants and refugees has the potential to increase their economic potential and contribute to the gross domestic product. In other words, if migrants and refugees are managing their finances in the formal financial system in which they are working, the money they earn can contribute to the economy in their country of employment rather than solely in their country of citizenship. With an estimated 232 million migrants around the world, and remittances expected to reach $515 billion by 2015, this presents a significant business opportunity for providers.

If financial inclusion is just for citizens, then we will continue to have an enormous exclusion problem even with the benefit of inclusive policy, regulation, and strategy at the national level. Financial inclusion shouldn’t be just for citizens—it should be for all.

Image credit: joiseyshowaa

Have you read?

Finance for All by 2020 in Order to End Extreme Poverty by 2030

Prelude to the U.S. Election: Voter IDs and Financial Identity 

Financial Inclusion by 2020: Our Generation’s Equivalent of Putting a Man on the Moon