If you had to embark on a journey similar to that of the 65 million people who are currently forcibly displaced, what would you bring? Most likely among your provisions would be a smartphone. Phones are the contemporary map and compass, a gateway to critical information, a means for keeping in touch with loved ones, and a financial toolkit. More and more, aid workers are witnessing refugees arriving at camps with smartphones. For both the refugee journey and the post-journey settlement process, a phone can be vital. With this in mind, you might not be surprised to learn that mobile money usage among refugees, including for cash transfers from governments and NGOs, is on the rise.
GSMA reports that the end of 2015, there were 271 operating mobile money systems across 93 countries, with over 400 million registered accounts globally. At the same time, the Center for Global Development estimates that the vast majority of aid to refugees is given in monetary form. Most aid is provided either through vouchers that can be used for specific purchases or in-kind donations of items like blankets, heaters, and bags of rice. There’s growing evidence suggesting that not only are cash aid transfers superior to vouchers and in-kind aid, but that mobile money is the optimal vehicle for cash transfers.
Most refugees use mobile phones extensively, with higher internet usage rates than the general population, according to a study from the Oxford University Humanitarian Innovation Project, “Refugee Economies: Rethinking Popular Assumptions”. In some cases refugees even buy a new SIM card each time they enter a new country in order to navigate their way to the next border. Governments and aid agencies are recognizing this trend and re-thinking how they support this vulnerable population. And for their part, mobile network operators (MNOs) increasingly see refugees as a new, viable customer base as well as an opportunity to contribute services to highly vulnerable people.
A new report from GSMA offers a handful of vignettes that illustrate the growing pervasiveness of phone-based financial services in refugee communities:
- In Pakistan, which has the third-largest refugee community in the world, the government is the primary source of cash assistance for displaced individuals, and the majority of cash transfers are completed via mobile money. Four of the market’s top five MNOs are active participants in the mobile money disbursement programs.
- In Uganda, GSMA surveyed refugees both in and outside camps and found that almost half of them used mobile money, mainly to receive remittances from family and friends. Recently, the MNO Orange Uganda built a tower in the Nakivale camp to support the launch of its mobile money service targeting the refugee population.
- Refugees in Rwanda are regular users of mobile money. Some are even working as mobile money agents.
Mobile money presents refugees with deepening financial inclusion opportunities. Large barriers persist to refugees adopting and using such services, but when given the opportunity, refugees and internally displaced populations use mobile money in the same ways that other populations do: for remittances, person-to-person payments, merchant payments, loans, and savings.
Potentially most crucial for refugees are international remittances, either to send money home or to receive money from home. The international remittances market has been disrupted by mobile money in recent years, with transfers via phone 21 percent cheaper on average than standard money transfer operations. And such services are spreading fast. In fact, international remittances are the fastest-growing mobile money service. One can now send international remittances via mobile money between more than 20 countries worldwide, particularly in regional markets, i.e., between neighboring countries. High rates of adoption are seen in several markets in which these services recently launched, including Burkina Faso, Ivory Coast, Mali, and Senegal.
Whether in settlement camps or post-settlement, refugees seek to quickly build new lives. To this end, they use person-to-person and merchant payments not only for consumption purposes, but also as livelihood-building and business tools. Eighty-nine percent of refugees in Kampala use their mobile phones to generate income, according to “Rethinking Popular Assumptions”. Phones can help refugees find employment, access market information, and run micro-businesses. A mobile money ecosystem also presents employment opportunities for ancillary services like selling phone charging services, mobile phone repair, and serving as mobile money agents. Mobile money empowers refugees to create or boost existing markets – for food, clothing, financial services, and more.
In addition to mobile money, we’ve seen an array of initiatives from governments and NGOs that pair aid with other digital financial services:
- Lebanon hosts the most refugees per capita in the world with 1.2 million individuals. Aid organizations like the International Rescue Committee (IRC) issue ATM cards for refugees to access cash benefits, taking advantage of the fully-functioning distribution networks of merchants and ATMs available in the country.
- In Syria, the United Nations Relief and Works Agency (UNRWA) developed a small fleet of mobile lending units to reach clients in areas without financial infrastructure.
- On the island of Lesbos, Greece, Mercy Corps offers refugees debit cards that connect to a bank account to help them build banking histories.
- The Digital Finance Institute launched the Banking on Refugees project which is piloting a cloud-based branchless bank that harnesses biometric identification and digital payment solutions, including prepaid cards and e-wallets.
However, a number of challenges impede the spread of mobile money-based humanitarian aid for refugees, as well as their uptake of broader mobile money services. These can come from both the supply and demand side. In some environments the mobile money ecosystem is still too nascent and not yet a viable option. In others, demand is weak, either because services are not sufficiently convenient or robust, or because of lack of customer awareness or familiarity. In its recent study, GSMA found that for refugees using mobile money, convenience and connectivity was more important than familiarity with the service, pointing to the importance of service and agent coverage and agent liquidity.
Proof of identity also poses a serious issue. As discussed on this blog previously, refugees often leave their home country without identity documentation, and sometimes even when they have it, the host country government may not have the technology and data needed to authenticate these documents. Lack of identification can impede refugees from buying SIM cards, owning mobile phones, and accessing mobile money and other financial services.
UNHCR in Jordan is mitigating this problem using biometrics. Refugees in the UNHCR program in Jordan receive iris scans which are stored in the cloud. The UNHCR offers bank accounts for refugees through the Cairo Amman Bank. When refugees arrive at the bank’s ATMs, they look into a set of binoculars that scans and verifies their eyes, and they’re able to withdraw the money in their name.
Refugees are also often faced with the loss of the banking and credit histories they built in their home countries. We’ve advocated before for credit history portability for refugees, allowing refugees to be able to apply preexisting credit histories in the host country and, if they return home, to bring credit histories accumulated in host countries back with them.
Trulioo, a company that works in identity verification, asserts the potential to use an individual’s cyber identity for identity verification and for enabling access to credit and other financial services. MNOs could serve as centralized, cross-border identifiers, by harnessing the user data and transaction histories linked to specific SIM cards. Additionally, aggregation of an individual’s online interactions, including of mobile money and online transactions could serve in place of credit histories to open financial doors.
But often it all comes back to the initial distribution of relief payments, where governments, NGOs, MNOs, and banks too often conduct business as usual. Although buy-in and coordination from these stakeholders is essential, many remain uncomfortable, unfamiliar, or unconvinced about the merits of cash transfers instead of vouchers or donated items, or about the merits of mobile money. Elizabeth MacBride of Quartz writes, “One of the obstacles to donors shifting their giving to cash has been that the NGO edifice that funnels their money is built to resist its own destruction.” Indeed, mobile money cash transfers might be a more efficient and effective means to offer refugees crucial resources, but there are vested interests in the status quo. For example, in 2013 USAID shipped 1.4 million metric tons of food aid as part of the World Food Program. To accomplish this, roughly $70 million was spent on shipping. Food sellers and shippers are likely to be strong advocates of retaining the in-kind system.
A number of studies suggest that not only is cash aid more efficient than other aid forms, it’s ultimately more helpful for refugees. One study estimates that the savings on administration gleaned from the more efficient digital cash transfer programs could help the aid reach 30 percent more people for the same price. In 2014 IRC, in partnership with Yale and the University of Brasilia, published a rigorous evaluation of emergency cash distribution for refugees with the core finding that refugees used the money for food as intended, as opposed to spending it on cigarettes or alcohol. Another IRC report in Lebanon found that 87,700 families who were given $575 via ATM cards used the funds for essential purchases, like food, clothing, fuel oil, and so forth. In both of these studies additional findings spoke to the entrepreneurial nature of refugees, who strive against extremely difficult odds to build new lives. In the first study it was calculated that for every $1 of cash assistance, $2 was created in local markets. In the second, with cash transfers instead of other aid forms, more children stayed in school because fewer families had to send their kids to work. Another study of Syrian refugees in Iraq found that 70 percent of individuals sold some of the aid they received in the form of rice. Compared to other forms of aid, cash transfers empower refugees to take action on behalf of themselves and smooth entry into their new country.
And digital channels for cash aid – whether mobile money or otherwise – offer a number of benefits over physical cash transfers. Digital finance offers greater transparency and the ability to track cash, which can combat the longstanding problem of corruption surrounding the physical handling of cash. And digital offers refugees greater security and safety from theft.
Sadly, the current refugee crisis is not going away any time soon. In the meantime, we applaud all those working to support these millions of individuals, through cash transfers, financial services, and other means.
Have you read?
Financial Inclusion of Refugees: An Introduction
Financial Inclusion of Refugees: Azerbaijan Case Study