In the early days of the pandemic, many governments put moratoria in place to protect customers. That, combined with the overall economic downturn, caused concerns about the liquidity of FSPs. Now, as moratoria have been lifted and economic activity is returning – albeit at mixed levels – the focus is shifting to how regulators can support FSPs by adopting measures that allow for some degree of flexibility.

CFI’s recent policy report examines the types of <a href="https://centerforfinancialinclusion.org/regulatory-flexibility-during-the-pandemic-emerging-lessons/" target="_blank" rel="noopener noreferrer">regulatory flexibility measures</a> adopted in response to the pandemic and provides early evidence on the impact of these measures. The report tackles pandemic responses by a broad range of regulators and financial service providers (FSPs).

To find out what others in the inclusive finance space are seeing, CFI reached out to <a href="https://www.fincaimpact.com/" target="_blank" rel="noopener noreferrer">FINCA Impact Finance</a> (FIF) for perspectives on moratoria and other regulatory measures, customer-oriented approaches, liquidity, and more.
<h3>How has your organization fared through the pandemic? What regulatory measures have you seen governments take that have had the most benefit to your operations?</h3>
In addition to the <a href="https://centerforfinancialinclusion.org/how-a-microfinance-network-has-changed-customer-and-staff-engagement-during-covid-19/" target="_blank" rel="noopener noreferrer">immediate measures</a> we took to ensure the well-being of our customers and staff and the sustainability of the network, we also issued guidelines to encourage and support proactive engagement with regulators by offering direction and suggestions on key regulatory issues that FIF subsidiaries would be facing as they responded to the COVID-19 crisis. The key areas of focus were:
<ol>
 	<li>Temporary waiver and flexibility of requirements, processes, and formalities, such as flexibility for the restructuring and rescheduling of existing client loans, flexibility concerning client analysis requirements, allowing KYC completion remotely when the digital track record of the client is available and sufficient, accepting light KYC to open limited velocity accounts, among others.</li>
 	<li>Support of subsidiaries in driving the adoption of digital channels, including waiving or decreasing fees applicable to all digital transactions. This includes fees from third-party agents and terminals. It also includes eliminating restrictions preventing MFIs from developing proprietary agency networks and preventing MFIs from joining directly -- not as sub-agent to a bank -- national switches accessible to banks.</li>
 	<li>Financial or policy support for losses incurred during grace periods given to customers. This includes preferential loans and lines of credit with preferential terms from central banks or other governmental institutions to cover the cash flow shortfall. Support from the regulator to waive any taxes triggered by the refinancing and restructuring of loans has also been key in this regard.</li>
 	<li>Support to help conserve our cash position, including relaxing CAR requirements, provisioning requirements, and delaying implementation of <a href="https://www.ifrs.org/issued-standards/list-of-standards/ifrs-9-financial-instruments/" target="_blank" rel="noopener noreferrer">IFRS9</a>, and support for intercompany payments.</li>
</ol>
Across the world, we saw different approaches in response. There was a positive response in countries like DRC and Uganda that increased limits on digital transactions. In Tanzania and Kyrgyzstan, we saw relief of provisioning during the lockdowns. And while we welcome and applaud these moves, we still believe more can be done, especially with regard to allowances for digital signatures and e-contracts.
<blockquote class="pullquote--right">More can be done, especially with regard to allowances for digital signatures and e-contracts.</blockquote>
As one example, the Central Bank of Congo took numerous actions to support the sector, many of which are still ongoing, including:
<ul>
 	<li>lowering the key rate from 9 percent to 7.5 percent to reduce the cost of credit</li>
 	<li>establishing a special refinancing window in local currency with a maturity ranging from 3 to 24 months to increase banks' resources and allow us to increase financing of the economy</li>
 	<li>reducing the coefficient of reserve requirement on sight deposits in national currency, which went from 2 to 0 percent, to free up liquidity</li>
 	<li>freezing of loan classification rules to allow financial institutions to suspend the application of late payment penalties on receivables past due during the crisis.</li>
</ul>
<h3>We’ve determined that deposit-taking FSPs “seem to be in a much more comfortable position today.” Has being a deposit-taking institution helped soften any negative liquidity impacts to your balance sheet? Was liquidity less of an issue for you than initially feared?</h3>
Like many companies, liquidity has been a primary concern throughout the pandemic, and we quickly implemented measures to monitor liquidity -- including changing monthly asset-liability committees (ALCOs) to weekly, and curbing loans to new clients.

One trend we saw among our subsidiaries that defied conventional wisdom was that our deposit portfolio grew during 2020: from $418 million in December 2019 to $433 million in December 2020. In DRC, for example, our agents were still available to their communities throughout the pandemic, and we saw the average agent savings balance move from $12 to $17, a significant amount for microsavers.

We attribute the increase in deposits to the strength of our brand and the fact that people who are going into a period of economic uncertainty are eager for a safe and trusted place to keep their money.
<h3>Our research suggests that FSPs that employ high-touch, customer-oriented approaches – even as simple as phone calls to clients’ families – have fared better than those that haven’t. What high-touch, customer-centric approaches stand out as particularly helpful for you?</h3>
For customers needing real-time information, our previous investment in call centers was crucial to our response. In the early days of the pandemic, we focused on our call centers to support the increased level of inbound customer inquiries regarding payment locations and restructuring options. Utilizing the call center also allowed staff to work from home -- keeping them safe, while we also took steps to ensure the protection of customer data. In just the first two weeks of April, the call center in FINCA Jordan received 4,600 calls -- a 59 percent increase from the total number of calls received in March.

Our investment in digital and social media marketing also became an asset. We were able to rapidly develop and deploy a personalized, and multi-channel communications strategy to reach our customers. We used digital channels to reinforce publicly the steps we were taking regarding the safety and health of our customers and staff, emphasize all communication and transaction channels that are available, provide communication channels for customers to have their questions answered, and more.
<h3>Regarding moratoria, nearly all FSPs reported that customers asked to continue to pay even during lockdowns, but customers who were ready and willing to continue paying to avoid costs of moratoria didn’t have a lot of options. What role should moratoria play in a crisis like this? What have we learned that could be applied to future crises?</h3>
Early on, it became clear we would need to help customers who were suffering from short-term cash flow challenges.

We anticipated that the crisis would affect some business sectors more than others. Because of this, segmenting customers according to their business type was key (i.e. restaurants may be heavily affected, while agriculture less so). We also knew that depending on government reactions to the crisis and given how the virus spreads, segmenting customers according to their location would become important. And lastly, we monitored portfolio at risk (PAR) closely according to business type and location. If a specific segment sees a significant rise in PAR, we contacted these customers with restructuring options clearly explained.
<blockquote class="pullquote--left">While blanket moratoria can be very effective because of their simplicity, we needed to ensure that clients who could and wanted to continue to pay weren’t negatively impacted.</blockquote>
One final and important point: while blanket moratoria can be very effective because of their simplicity, we needed to ensure that clients who could and wanted to continue to pay weren’t negatively impacted. Many of our customers were still highly motivated to reestablish their livelihoods and continue supporting their communities with their businesses. We considered the full range of options available to support them, which also meant encouraging timely repayment when possible.
<h3>How has your organization dealt with accumulating interest during moratoria? Most regulators have not mandated how FSPs should collect the accumulated values. Has this been the case in your experience? How has your organization dealt with this?</h3>
At the onset of the pandemic in many of our countries, customers only paid interest. We looked very specifically at industries and terms and felt the key to responding to the pandemic was offering tailored solutions. For example, at FINCA Kyrgyzstan, we restructured a significant percentage of the portfolio (50 percent); over 27,000 clients were provided restructuring options of their loans (out of 77,000 customers that were contacted). Each client was contacted through the call center and different options for restructuring were explained by our customer relationship officers.
<h3>Risk weighting for loans to small and medium enterprises (SMEs) has been lowered in a few markets, such as Brazil. Were you the beneficiaries of such reclassification?</h3>
In many markets where FIF operates, the central banks offered less stringent provisioning rules for COVID-19 restructured loans. While these were not necessarily lower weights, they helped to facilitate the restructuring of the current overdue loans.
<h3>Have any countries you work in stand out with regards to regulatory flexibility? If so, how?</h3>
Across the world, we saw different responses based on the different realities on the ground. The most helpful, in our view, were in places like Azerbaijan where there was relief on CAR requirements. The government there was focused on food security, which allowed us to be able to secure dedicated funding for on-lending to the agriculture sector, helping to avoid disruptions. Overall, the financial system and currency stability, together with the concessionary financing made available for on-lending, helped support the micro clients we work with. We were able to see the positive impact in our monthly COVID client surveys where rural clients -- who make up most of our customer base -- indicated these measures made this challenging time more bearable.

Another example is the Central Bank of Jordan, which at the beginning of the pandemic relaxed the cash reserves ratio, allowing banks to have more liquidity and thus enabling us to continue lending. The central bank also introduced COVID relief loans for SMEs affected by the pandemic, with tenures of up to 10 years, long grace periods, and subsidized rates disbursed through commercial banks.

<strong>For more on policy responses to the COVID-19 pandemic and their impacts on low-income consumers of financial services, visit our <a href="https://www.centerforfinancialinclusion.org/series/policy-responses-to-covid-19-their-impacts-on-low-income-customers" target="_blank" rel="noopener noreferrer">report series page</a>.</strong>

Discussing Moratoria and Other Pandemic-Era Measures, a Q&A with FINCA Impact Finance

As countries around the world grapple with the economic impact of the COVID-19 pandemic, governments have turned to supplemental cash transfers as a key policy instrument to offset the loss of income of their citizens.

This policy brief explores what national governments are doing to enable rapid payments to those without existing accounts. The swift measures governments took to speed up payments to citizens during the pandemic include:
<ul>
 	<li>Quick identification of eligible recipients</li>
 	<li>Simplification of customer due diligence for rapid account opening</li>
 	<li>Greater use of alternative channels such as mobile apps, post offices, and non-bank financial institutions (NBFIs) such as microfinance providers.</li>
</ul>
Each section of this brief includes country-specific examples and key takeaways. Efforts by 19 countries to facilitate cash transfers, both digital and non-digital, are discussed.

This publication is the second in a <a href="https://www.centerforfinancialinclusion.org/series/policy-responses-to-covid-19-their-impacts-on-low-income-customers">series</a> of policy briefs on COVID-19 economic policy responses and their impact on low-income customers.

Rapid Response for Social Payments During COVID-19

This paper examines how COVID-era economic policy measures – specifically those addressing liquidity – are directly affecting low-income segments and the financial institutions that serve them. In particular, the paper reviews the liquidity needs of financial institutions serving low-income customers in light of COVID-19, provides examples of policy measures being taken around the world to address concerns over liquidity, and addresses how these measures are affecting the financial institutions that serve low-income customers in emerging markets, especially MFIs and other related non-bank financial institutions (NBFIs). This is the first in a series of policy papers on COVID-19 economic policy responses and their impact on low-income customers.

Preserving Liquidity: Policymaker Responses to COVID-19 and the Impact on Low-Income Customers

<em>This post was <a href="http://www.jopacc.com/DetailsPage/AnnouncementsDetails?ID=19">originally published</a> on JoPACC's website.</em>

It is estimated that approximately half of the world’s population is locked down, with the other half likely to have experienced drastic changes in their day-to-day lives as a result of the COVID-19 pandemic.

Here in Jordan, this crisis has brought us closer, both as people and to our public institutions. With a full, country-wide lockdown, emergency fiscal, monetary and social welfare policies and measures, and labor protection measures, the response of the Jordanian government has been extraordinary.

And in addition to first responders, medics and all those working in the field for our safety, this crisis has also revealed a new type of hero: mobile money.

Mobile money arrived to Jordan in 2014 when the National Payments Council launched the <a href="http://www.jopacc.com/Pages/viewpage?pageID=22">Jordan Mobile Payment (JoMoPay)</a> Switch, which was operated by the Central Bank of Jordan. With this, JoMoPay laid the foundations for mobile payment service providers (mPSPs) to enter the market and offer mobile money products.

JoMoPay, however, was unique compared to other mobile payment ecosystems in a number of ways. First, all e-money issuance was fully backed and guaranteed within escrow accounts, in addition to settlements of JoMoPay transactions taking place in central bank electronic money. Second, it was an open ecosystem ensuring interoperability by design. Third, it uniquely identified customers and wallets through a combination of Jordan’s National Identity Scheme for Jordanians, and other unique identifiers for non-Jordanians. It is also the only real-time micropayment system in Jordan operating during this crisis.

These distinguishing characteristics, which were originally conceptualized to ensure safe and accessible digital financial services for the unbanked in Jordan, led to JoMoPay (now operated by <a href="http://www.jopacc.com/">JoPACC</a>) becoming the primary chain connecting the government, private sector and NGOs, and an integral component of financial survival during the lockdown.

In order to amplify this potential, and ensure the smooth implementation of economic relief measures, the Central Bank of Jordan, JoPACC, and all financial institutions in the market, introduced policies, measures and actions aimed at expanding access to digital financial instruments, most notably mobile wallets.
<blockquote>The Central Bank of Jordan, JoPACC and FSPs introduced policies, measures and actions for expanding access to digital products and services during COVID-19.</blockquote>
The first of these was the sanctioning of remote digital onboarding through simplified electronic customer due diligence (eCDD) for mobile wallets. This was done without compromising the safety of the financial system, owing to Jordan’s comprehensive national identification scheme and the UNHCR ID for refugees. Furthermore, to ensure that no mobile phone numbers, which serve as the unique wallet identifiers, were reserved in vain, JoPACC, along with all JoMoPay participants, undertook a full data cleansing effort leading to the closure of all inactive mobile wallets (with zero balances and no transactions for a minimum of one year). This was of great importance as it freed up a substantial proportion of mobile numbers associated to inactive wallets for consumers to onboard with. It also provided high-precision insights on the beneficiaries of mobile wallets in Jordan, 91.3 and 2.67 percent of whom were Jordanians and refugees, respectively.
<h2>Innovation Prevails During Times of Crisis</h2>
The Unified Agent Interface (UAI), developed in-house at JoPACC, originally served one purpose: an interoperable platform for super agents of mPSPs to serve any mobile wallet user. However, during the COVID-19 crisis, several developments and enhancements took place on the platform, making it the center of an innovation storm geared towards automating and enabling access to mobile wallet information and services remotely. This included an online wallet inquiry service built on OCR technology for extracting information from national ID cards, a comprehensive directory of mobile money agents around the kingdom, as well as information on fees charged by each mPSP to enable consumers to make the best choice of provider. This brought our attention to the potential the UAI holds, and we are looking forward to developing it further and to transforming it into a holistic platform for mobile wallet users.

The aforementioned measures paved the way for the opening of approximately 85,000 new mobile wallets during the crisis, a 20 percent growth in the number of wallets in Jordan. This number is expected to grow exponentially as the National Aid Fund continues to migrate its recipients of cash assistance to digital financial services, and the government begins disbursing cash assistance for the most economically impacted individuals solely through mobile wallets facilitated by JoMoPay’s bulk payment capabilities.
<blockquote>JoPACC's agent platform enhancements during the crisis have lead to a 20% growth in the number of mobile wallets.</blockquote>
A key to the success of all the above measures and initiatives is ensuring accessibility to cash in cash out (CICO) facilities for beneficiaries, as well as adequate usage opportunities. In Jordan, the wallet to agent ratio is 414:1. To lower this number and ensure higher accessibility to CICO facilities, two banks in Jordan enabled full cardless cash out capabilities for mobile wallet holders through their ATM network, making the ratio of wallets to CICO facilities 339:1. With another bank expected to join, the ratio will go down to 294:1. This ratio is <a href="https://www.rolandberger.com/fr/Publications/Mobile-Money-for-the-unbanked.html">comparable to advanced mobile money markets</a>, such as Kenya, Rwanda, and Uganda.

In addition, eFAWATEERcom, Jordan’s only electronic bill presentment and payment system, is directly integrated with the JoMoPay switch, enabling seamless bill payments for wallet holders, and ensuring no interruption of cash flow for billers. Coupled with an unprecedented increase in the number of billers on the eFAWATEERcom platform, this injects substantial usage opportunities for mobile wallet users. Furthermore, the Central Bank of Jordan, in partnership with JoPACC, launched the COVID-19 Challenge Fund to promote mPSPs to enable contactless payment technologies and acquire merchants to increase usage opportunities. JoPACC is also in the process of enabling interoperability of e-commerce platforms with mobile wallets and QR acceptance.

The above summarizes some of the efforts undertaken to ensure the protection of Jordan’s most vulnerable through mobile money during this crisis. JoPACC will conduct a full impact assessment on DFS in times of crisis to assess the resilience of Jordan’s payments infrastructure and extract lessons to safeguard its economy against future crises.

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Mobile Money in Times of Crisis: An Unlikely Hero

This <a href="https://centerforfinancialinclusion.org/financial-inclusion-week-2019/">Financial Inclusion Week</a>, we’re asking ourselves what the purpose of our work is. For those of us who work with refugees, financial inclusion is often for rebuilding sustainable livelihoods, resilience, and self-reliance.

Driven by necessity and limited employment choices, many refugees decide to start a business once they settle in a host country. However, lack of financial capital represents a major stumbling block on the way to business success. Financial service providers (FSPs) in a number of countries are starting to become aware of the potential of this underserved market, but much of the work is still at an incipient phase. FSPs often have questions related to whether operations adjustments may be required, strategies to follow to reduce credit risk, and supporting non-financial services. While every context is different, some good practices are emerging among a number of FSPs, which have been extending credit and other financial services to refugees. Drawing on their experiences, here are four recommendations for FSPs on how to start including this underserved market in their microfinance portfolio:
<h2>1. Analyze market data for better targeting.</h2>
Refugees aren't a homogeneous group, so FSPs first need to understand the differences of their socio-economic characteristics to be able to make an informed decision regarding which sub-segments they wish to serve. Relevant data for a first screening may be offered by local development and humanitarian agencies, and – in addition to basic demographic information – should ideally include data such as vocational or business training received, access to start-up financing, access to bank accounts, description of enterprises, and membership to any existing saving groups. Sometimes this data may be unavailable or insufficient, and market feasibility studies may be required. Especially in countries with high concentration of refugees living in settlements where FSPs have no presence, this would require set-up costs for branches or delivery channels.
<blockquote>A study revealed that refugee communities had enough financial capacity to be good clients.</blockquote>
To identify the potential market of serving refugee entrepreneurs in the West Nile region, <a href="http://www.visionfund.org/2095/where/africa/uganda/">VisionFund Uganda</a> conducted an <a href="http://www.visionfund.org/222/media/news/article/report---serving-refugee-communities-in-uganda/">assessment</a> of 6,700 refugee members of existing saving groups. The study revealed that the refugee communities had enough financial capacity to be good clients, given the presence of daily and weekly markets in the camps, availability of fairly good network coverage, and mobile money agents and existence of entrepreneurial groups and business activity. The results from this assessment, when considered alongside data collected from a broader <a href="https://www.findevgateway.org/blog/2018/oct/getting-it-right-providing-financial-services-refugees">market survey</a> previously conducted by Microfinanza, convinced the MFI to set-up their first branch in the West Nile and start serving refugees.
<h2>2. Widen the range of acceptable forms of IDs while complying with regulation.</h2>
Depending on FSPs’ internal policies and the host country’s regulatory framework, adjustments to FSPS’ internal procedures may be required to serve refugees clients. <a href="https://corporate.mybucks.com/articles/worlds-first-refugee-camp-bank-a-resounding-success/13TBmOsflyCQsUqyeQoSMI">MyBucks in Malawi</a> is the first financial institution to provide a full range of financial services to clients at a refugee camp. Refugees in the Dzaleka camp had no access to FSP providers until last year and had to travel roughly 40 kilometers to the nearest city of Lilongwe to access financial services. The bank saw the business potential of this untapped market, but in order to serve refugees, MyBucks needed to tailor its offering by widening the acceptable forms of identification. Refugee clients often don't meet KYC policies required by the bank – such as a passport or national ID – and don't own land properties that the bank can use as securities. Therefore, in order to comply with the country’s regulations, MyBucks sought a waiver from the central bank to use refugee forms provided by UNHCR to allow refugees to open bank accounts. Today, the bank, which opened its first branch in April 2018, is offering a full range of banking services to refugees.

As of July 2019, 153 refugee entrepreneurs have received business loans from the bank, which relies on group lending methodology to lower credit risks in extending collateral-free loans to refugees. Each individual has to repay according to his/her amount and repayment schedule. The group guarantees for the members, in case a member can't repay on time. Repayment rates to date are 100 percent. MFIs in other countries which don't have to comply to stringent banking regulations, have also been accepting old refugee IDs and expired passports as means to verify identities. A number of new identification and verification measures through blockchain are also starting to emerge which provide innovative tools to verify people’s identities and monitor risk in financial transactions.

A <a href="https://www.makingcents.com/hawiyati-english">digital identity</a> for refugees has been piloted in Jordan and Lebanon by local MFIs. This provides their clients with a “portable identity” that verifies their foundational identification (government or UNHCR issued) digitally, records their credit history, and uploads other important documents. This identity will be especially useful in case a refugee wishes to access banking services upon return to the home country or in case of resettlement, and can also work as an incentive to repay the loan on time.
<h2>3. Establish alternative procedures to mitigate credit risk.</h2>
FSPs are used to the conventional eligibility requirements that proof of citizenship, identity, and residency cards reduce credit risk. Nevertheless, there can be other ways to monitor risk and to verify IDs by adding some flexibility to documentation required. <a href="https://www.almajmoua.org">AlMajmoua</a> is the biggest MFI in Lebanon, the country with the highest number of refugees relative to its population. The MFI serves over 9,000 refugee borrowers with a loan portfolio of over $9 million and repayment rates of almost 100 percent, making it the financial institution with the highest number of refugee borrowers served in a country. More than half of the loans disbursed by AlMajmoua to refugees are for income generation in the limited sectors were refugees are allowed to work in the country, such as field crops, cleaning services, sewing, selling clothes and hairdressing.
<blockquote>AlMajmoua serves over 9,000 refugee borrowers with a loan portfolio of over $9 million and repayment rates of almost 100 percent.</blockquote>
How did this MFI succeed in reaching thousands of refugee clients – many of which through individual loans, so where no social guarantee can be applied – with excellent repayments? To mitigate credit risk, the MFI primarily relies on a strong communication channel between their loan officers and clients by conducting regular business visits, which also allow it to find out whether refugees may have imminent plans to return to their home country or relocate. Additionally, AlMajmoua exceptionally provides loans up to $1,500 to refugees who don’t hold an active residency permit as long as they have a Lebanese, Palestinian or Syrian guarantor with a valid residency permit.
<h2>4. If you provide enterprise support services, consider what would be relevant for refugees new to business.</h2>
Sometimes credit isn't sufficient to initiate and scale up a business activity and refugees may need the support of incubators and start-up technical assistance. Some FSPs might already have their training curricula well developed, which might have to be adapted to the needs of the foreign-born clients. <a href="http://www.microfund.org.jo/">Microfund for Women</a> (MFW), Jordan’s largest not-for-profit microfinance institution, serves over 7,500 Syrian refugees, approximately 40 percent of whom are involved in income generation activities, mostly commercial and home-based services. For MFW, it proved particularly important to accompany loans with non-financial services tailored around refugee women’s specific needs (most of their Syrian refugee women clients were not working before the war started). The MFI has established a learning academy and developed training curricula for both beneficiaries and staff members related to market ofrientation, business management skills, financial literacy, and marketing. In addition. MFW offers free feasibility studies for start-up entrepreneurial businesses with loan amounts higher than $4,000.

When FSPs don't offer such services, they may be able to partner with organizations offering that do. For example, <a href="https://www.ilo.org/global/lang--en/index.htm">ILO</a> is adapting its <a href="https://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_560493/lang--en/index.htm">business skills development training tools</a> to the needs of the displaced population and the local context, and is now planning to train refugees and host communities to develop their own enterprises and facilitate access to finance. A first training has already been deployed in Kenya through the Danish Refugee Council in the Dadaab refugee camps.
<blockquote>When FSPs don't offer such services, they may be able to partner with organizations that do.</blockquote>
Hopefully, this post will spark FSPs to realize the important role they have in finding solutions to the refugee crisis. By extending their services to the refugee population in their country, FSPs won't only support the resilience and self-reliance of this widely underserved market, they will also assist in overcoming stigma and helping refugees contribute economically and socially to host communities.

How to Include Refugee Entrepreneurs in Microfinance

This was the question that a team of us at The Fletcher School at Tufts University set out to answer in our study “<a href="http://fletcher.tufts.edu/Institute-for-Human-Security/Research/Migration-Crisis-and-State-Fragility/Financial-Mobility-of-Refugees">The Financial Journey of Refugees</a>.” We studied the routes and financial challenges of more than 100 refugees in Greece, Jordan and Turkey, between July 2016 and April 2017. The refugees we interviewed had traveled from South Asia, Central Asia, the Middle East, East Africa and West Africa.

Regardless of their country of origin, with the exception of Syria, a refugee’s biggest expense was the cost of hiring a smuggler. Smuggling expenses ran about 85 percent of the total cost of the journey. The smuggler’s fee included important services: travel by air or overland, depending on the refugee’s budget, guide services across borders, payment of bribes at border crossings, and documentation falsification expenses. Smuggling prices varied widely by country of origin (some borders being porous, others sealed tight), by how deluxe a trip was (air versus ground), by numbers of borders crossed (affecting the number of falsified IDs required). To give an example, journeying overland from Afghanistan through Pakistan, Iran, and Turkey to Greece might cost $7,500 per person, a price that went up or down based on shifting rules and border crackdowns. Traveling from Eritrea to Greece might cost the same amount. Traveling from Syria to Turkey could cost as little as $500.

The price of the journey was one factor in a traveler’s safety – the higher the cost, the better the traveling modes, and the safer the travel. While <em>what</em> refugees paid their smuggler was important, <em>how</em> they paid them was equally important. Did the refugee pre-pay the kingpin smuggler in advance of the journey? Did she post-pay him after arriving safely in Greece or Germany? Did she pay leg by leg? All these strategies were in play and we outline them in our <a href="http://fletcher.tufts.edu/~/media/Fletcher/Microsites/Human%20Security/Final%20Journeys_Briefing%20Paper.pdf">report summary</a> and they are detailed by the refugees themselves in a <a href="http://fletcher.tufts.edu/~/media/Fletcher/Microsites/Human%20Security/Compendium%20Financial%20Journeys%20%20Publication.pdf">Compendium of Field Notes</a>. Below we describe two of many strategies.
<h3><strong>Strategy 1: Guarantee Scheme via a Financial Third Party</strong></h3>
Money agent networks, often informal, span from Pakistan to Germany, and around the world. These networks—dubbed Eastern Union by a Jordanian regulator—do far more than transfer funds from person A to person B. They will store funds for later disbursement or, if instructed, will shunt funds directly to smugglers. For example, a journeyer traveling overland from Kabul to Athens might visit a money agent in Kabul (a saraf) who will take her deposit for $7,500. When she arrives safely to her first waypoint, which could be in Zahedan, Iran, she texts a code to her saraf. The code, incidentally, would have been randomly generated by the saraf’s app before her departure and she would have memorized it. By sending the code, the refugee signals her safe arrival at the Zahedan waypoint. The saraf then forwards a predetermined sum to the kingpin smuggler, using a network of couriers and other money agents to get him his funds. The kingpin in turn deploys a combination of banks and money agents to make sure his local smugglers get paid.

There is no single way this system of guarantee works. It is customized, improvised upon, and individually negotiated by various actors. In some instances, there is no code. In others, there are several codes. In some instances, the kingpin smuggler chooses the saraf. In others, the refugee chooses the saraf. In Syria, the third party is often a shopkeeper who charges $50 to insure the journey. In Iran, the money agent charges a percentage (often 10 percent) of transactions.
<h3><strong>Strategy 2: Crowdsourcing via Kin</strong></h3>
Typically, crowdsourcing via kin is a pre-payment strategy, but not always. We interviewed refugees who were held hostage by smugglers at various points along their routes. When relatives—sometimes a circle of relatives both forward and backward along the route—paid up, the hostage refugee was released to be smuggled farther along her route.

Often crowdsourcing came in the form of pre-payments along various points in a route. For example, traveling from Eritrea to Greece, a journeyer might signal a relative in Khartoum to fund trip expenses. The relative in Khartoum would crowdsource funds from family members in multiple countries across Europe and North America. She might use Zain, a mobile money system, to collect the funds and hold them in Khartoum. She would then secure a smuggling network to help the Eritrean refugee cross to Sudan. The kingpin smuggler would be paid via a courier upon the refugee’s safe arrival in Khartoum. If the Eritrean refugee wanted to continue north to Turkey, Greece or Northern Europe, another round of crowdsourcing would begin. Again, the relative would make payment to the smuggler after the refugee’s safe arrival. In some cases, to ensure compensation, the smuggler will stay with the refugee in a safe house until he has received his payment via Western Union or an informal money agent.

Said one refugee: “It’s a collective system. All Eritreans understand each other on this.” The understanding is that she does not have to pay her relatives back, but she is expected to pay her debt forward: when someone else in her network tries to escape Eritrea, she is expected to do her part to financially support his or her expenses.

What do these strategies mean for providers of financial services? Clearly suppliers cannot legally, knowingly pay smugglers. But, perhaps there are other forms of financial assistance that are perfectly legal.

First, licit travel is often part of a route and could be better insured. For example, a refugee may be able to obtain a visa to a transit country and would like to secure legal travel there. But, because prior legs of the journey may be cobbled together through smugglers, the refugee cannot predict when they will reach the transit country. Insurance could help offset this uncertainty. Too often providers are skeptical that people need financial education to understand sophisticated insurance products. As long as the systems are familiar and offer value, refugees both literate and illiterate, will master them quickly. Second, providers believe that people don’t like to save, but, we found that saving for a purpose—journey preparation—is valuable. Surely, there are many legal ways to assist refugees to accumulate savings for journey purposes. And just as surely, clever suppliers could find ways for refugees to easily access those licit savings along their journey. Third, the ubiquity of informal agents could lead to service expansion. Can trusted informal money agents be co-opted and certified within a legal framework in much the same way that Uber has recruited its drivers?

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2017/03/09/the-digital-demands-of-the-displaced-dont-track-me-dont-expose-me-dont-cut-me-off/">The Digital Demands of the Displaced: Don't Track Me, Don't Expose Me, Don't Cut Me Off</a>

<a href="https://cfi-blog.org/2016/02/09/financial-inclusion-and-immigration-in-europe-disrupting-identity-norms/">Financial Inclusion and Immigration in Europe – Disrupting Identity Norms</a>

<a href="https://cfi-blog.org/2016/08/17/a-learners-license-to-master-the-rules-of-the-credit-road/">A Learner's License, To Master the Rules of the Credit Road</a>

Migration’s Middlemen and How to Pay Them

[caption id="attachment_23436" align="aligncenter" width="615"]<a href="https://www.flickr.com/photos/cfi_accion/33301263350/in/album-72157678506203794/"><img class="wp-image-23436" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/04/33301263350_ab536c426a_k-1.jpg" alt="" width="615" height="410" /></a> Alex Silva, Executive Director, Calmeadow[/caption]

Governance is a business imperative, and investors are willing to pay a premium for effective corporate governance. This was one of the key takeaways from the <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/investing-in-inclusive-finance/mena-leadership-seminar">Middle East and North Africa (MENA) Governance and Strategic Leadership Seminar</a>, held recently in Amman, Jordan. We’ve seen this stated priority of governance in the MENA microfinance market exhibited elsewhere, too. A joint <a href="http://www.ifc.org/wps/wcm/connect/703b6a004a7232b29eefdf9c54e94b00/Voices+MF+Sector+in+Arab+World.pdf?MOD=AJPERES">IFC-Sanabel report</a> assessing the top perceived risks facing the microfinance industry in the Arab world uncovered that the market’s stakeholders viewed weak corporate governance structures as one of the more threatening risks out of roughly 30 risk categories. Financial service providers in particular perceive this risk to be rising.



[caption id="attachment_23433" align="aligncenter" width="615"]<a href="https://www.flickr.com/photos/cfi_accion/33301262930/in/album-72157678506203794/"><img class="wp-image-23433" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/04/33301262930_46467c6ac5_o.jpg" alt="" width="615" height="482" /></a> Hany Assaad, Co-Founder and Chief Portfolio and Risk Officer, Avanz Capital[/caption]

This seminar was the first time senior leadership from across the MENA region’s microfinance industry convened to discuss their experiences with governance and strategic leadership. A total of 41 participants from 19 MFIs came together for three days of peer learning and exchanges. The seminar, modelled after CFI’s <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/abf">Africa Board Fellowship</a>, was hosted by CFI, <a href="http://www.calmeadow.com/">Calmeadow</a>, and <a href="http://www.sanabelnetwork.org/home/default.aspx">Sanabel (the Microfinance Network of Arab Countries</a>), with support from the <a href="https://www.fmo.nl/">Dutch Entrepreneurial Development Bank (FMO)</a>. The Arabic Microfinance Gateway was also among the partners to help facilitate the event, and we are thrilled to share the main takeaways in this post.

“As an investor, I look for adding value and reducing risk,” shared Hany Assaad, Co-Founder and Chief Portfolio and Risk Officer at Avanz Capital. “Effective corporate governance increases the value of businesses,” he added.

[caption id="attachment_23438" align="aligncenter" width="615"]<a href="https://www.flickr.com/photos/cfi_accion/32842329964/in/album-72157678506203794/"><img class="wp-image-23438" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/04/32842329964_a25170c838_k.jpg" alt="" width="615" height="410" /></a> Mohammed Khaled, Senior Microfinance Operations Officer for MENA, IFC[/caption]

Mohammed Khaled, IFC’s Senior Microfinance Operations Officer for MENA, noted that most MFIs in the region are NGOs, and as such have largely volunteer board members, which can contribute to limited effectiveness. The commercial development of the sector in the region has been hindered by the lack, until recently, of legal pathways for transforming NGOs. As laws evolve in the region, MFIs may be allowed to register as non-bank financial institutions, which would change the institutions’ financial structures and create a need for investors and, as such, an increased need for sound corporate governance. Board responsibilities and dynamics are different for investor-owned financial institutions than they are for NGOs, requiring board members to acquire new skills, according to Alex Silva, Executive Director of Calmeadow.

The stakes are getting higher in the region as the overall industry is growing in complexity. Deborah Drake, Vice President, Investing in Inclusive Finance, CFI, spotlighted the changing sector risks as charted by the <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/investing-in-inclusive-finance/risk">Banana Skins report series</a> from 2008 to 2016.

The Banana Skins reports are based on the views of sector participants of the most pressing risks and challenges, like new technologies, new market entrants, client repayment capacity, and macro-economic risks. The <a href="https://www.microfinancegateway.org/library/financial-services-all-csfi-banana-skins-survey-risks-financial-inclusion">2016 Banana Skins report</a> pointed to the importance of governance, finding that nine of the top ten risks were “internal” and that institutions without a sound strategy could face marginalization.

[caption id="attachment_23444" align="aligncenter" width="615"]<a href="https://www.flickr.com/photos/cfi_accion/32842330394/in/album-72157678506203794/"><img class="wp-image-23444" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/04/32842330394_de9f46adb4_k.jpg" alt="" width="615" height="410" /></a> Suha Ennab Tleel, Board Member, Vitas, Jordan[/caption]

Competition from new market entrants in the region, in particular fintech companies, is a prominent concern expressed by participants. According to a <a href="https://www.microfinancegateway.org/library/fintech-mena-unbundling-financial-services-industry">recent report</a>, the number of fintech companies in the region offering financial services has doubled from 46 to 105 in the past three years. Half of these offer payment solutions, and one-third offer lending and financing services. MFIs in the region are now estimated to reach out to <a href="http://www.cgap.org/blog/20-years-financial-inclusion-arab-world">approximately 3 million borrowers</a> with an outstanding portfolio over $2 billion – far below the market potential. Slow growth is due to both internal factors such as slow expansion and the lack of product diversification and external factors including political instability and regulatory barriers. MFIs in the region need to think deeply about the different risks and opportunities in order to adapt to change.

[caption id="attachment_23448" align="aligncenter" width="615"]<a href="https://www.flickr.com/photos/cfi_accion/33528835012/in/album-72157678506203794/"><img class="wp-image-23448" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/04/33528835012_a2d936d0e9_k.jpg" alt="" width="615" height="410" /></a> Eyad Nino, Deputy General Manager, Microfund for Women[/caption]

Keeping the client at the center is one of the keys for sustainable and responsible growth. <a href="http://www.cgap.org/publications/business-challenges-booklet">Recent research</a> shows that customer centricity not only allows organizations to better serve customers but also solves the common business imperatives of acquisition, retention, and expansion.

When considering commercialization, concerns about drifting away from the social mission grow larger. One way to preserve the social mission is to ensure that management and boards consider both social and financial performance indicators. For example, the Microfund for Women in Jordan created the position of Social Performance Manager and Al Amana in Morocco established a Social Performance Committee that reports to the board.

[caption id="attachment_23440" align="aligncenter" width="615"]<a href="https://www.flickr.com/photos/cfi_accion/33528835252/in/album-72157678506203794/"><img class="wp-image-23440" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/04/33528835252_48d18f34df_k.jpg" alt="" width="615" height="410" /></a> Jane Giacaman, Director of Microfinance, UNRWA[/caption]

Both the <a href="https://sptf.info/universal-standards-for-spm/start-here">Universal Standards for Social Performance Management</a> and <a href="http://www.smartcampaign.org/certification">Smart Certification</a> also provide guidance on best practices to help financial service providers put clients at the center of all strategic and operational decisions and align their policies and procedures with responsible business practices.

The seminar’s discussions engaged and enriched participants, who returned home with stronger masteries of good governance and leadership. Going one step further, many participants made specific commitments: to form board committees; to provide board training; to recruit more diversified and experienced talent for their boards; to better define risk appetites; to seriously explore technology and adaptations to their business models; to incorporate social performance and client protection practices; and finally to adequately prepare for succession planning. We, the seminar organizers, will be checking in with the participants to see how they are faring, and we hope these are just the first steps of many to further the dynamic microfinance market in the Arab region.

<em><a href="https://www.flickr.com/photos/cfi_accion/33644035656/in/album-72157678506203794/"><img class="aligncenter wp-image-23431" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/04/33644035656_186e4ea05f_k.jpg" alt="" width="615" height="410" /></a>The Arabic Microfinance Gateway served as the Outreach Partner for the MENA Governance and Strategic Leadership Seminar. You can learn more about governance and other topics on the Gateway in </em><a href="https://goo.gl/y4gpXz"><em>Arabic</em></a><em>,</em><a href="http://www.microfinancegateway.org/topics/governance"><em> English</em></a><em>, </em><a href="http://www.microfinancegateway.org/fr/sujets/gouvernance"><em>French</em></a><em>, and</em><a href="http://www.microfinancegateway.org/es/temas/gobernabilidad"><em> Spanish</em></a><em>. </em>

<em>And for more photographs from the seminar, the full album is available </em><a href="https://www.flickr.com/photos/cfi_accion/albums/72157678506203794"><em>here</em></a><em>. </em>

<em>This blog post is also available in Arabic <a href="https://goo.gl/V5s0Mt">here</a>.</em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2014/12/23/governance-challenges-in-mena-microfinance-institutions/">Governance Challenges in MENA Microfinance Institutions</a>

<a href="https://cfi-blog.org/2013/03/27/are-youth-inclusive-financial-services-in-mena-a-driver-of-financial-inclusion/">Are Youth-Inclusive Financial Services in MENA a Driver of Financial Inclusion?</a>

<a href="https://cfi-blog.org/2016/04/07/what-can-we-learn-from-governance-success-stories-in-mena/">What Can We Learn from Governance Success Stories in MENA?</a>

It’s All About Governance!

<em>&gt; Posted by Elissa McCarter-LaBorde, CEO, Vitas Group</em>

<a href="https://www.flickr.com/photos/126278138@N03/17096832777/"><img class="alignright wp-image-23408" style="margin-top: 0;border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/04/17096832777_b86f614a70_z1.jpg" alt="" width="315" height="178" /></a>Alex Silva and Jeffrey Riecke’s recent blog post entitled “<a href="https://cfi-blog.org/2017/03/17/whats-responsible-about-impact-investing-exits/">What’s 'Responsible' about Impact Investing Exits?</a>” hits squarely on the head a critical issue facing our industry. But it doesn’t go far enough. They ask “What if responsible investors sell their stake to an investor that doesn’t place priority on the social mission?” They argue for investors to take a “pragmatic” course and find “a buyer in the middle,” meaning something in between the “high-priced but questionable offer” and the “capital-starved social investors.” This left me wondering, who exactly is in the middle?

In the past, the NGO founders of what are today profitable microfinance banks were expected to be the keepers of a social mission, if not through ownership then through some form of continuing sponsorship or governance role. Compared to five years ago, today we see term sheets that force NGO shareholders out in the name of successful exits. In fact, even the large open-ended funds, presumably more socially-responsible leaning ones, and the development finance institutions (DFIs) that technically don’t require tighter exits of 5-7 years, are coming with term sheets that require a put option (an option contract giving the owner the right to sell assets at an agreed price) in 5-7 years back to the NGO founder or the company, or that include a drag-along right that forces a majority sale to a future “strategic buyer.” In other words, if the minority investor finds a strategic buyer who wishes to buy a majority stake or to acquire the whole company, the investor can drag other shares along to constitute a majority sale.

This seems to be the outcome of lessons that exits are still incredibly difficult in our industry. With IPOs hard to count on, the equally opaque and far off “strategic buyer” seems the other plausible solution. But just who is this strategic buyer? It is not another microfinance investment vehicle (MIV), DFI, or other player on the spectrum of social responsibility. Few of these want to buy secondary shares. A strategic buyer is a commercial bank, a telecommunications company, a consumer finance company, or other commercial entity that will want to get in on the base of the pyramid market.  Hopefully the managers of these businesses might have sympathetic feelings about the business and appreciate that it is social because it reaches lower-income customers, but at the end of the day, social is not in their lexicon.

Is this a bad thing? I agree with Silva and Riecke that if lower-income customers are served well, then it shouldn’t matter. But in reality, it does often matter because there are tradeoffs. We in the financial inclusion industry are working very hard to demonstrate returns and prove that exits are possible in order to build an impact investing community of buyers and sellers. But it can be at the expense of the investees – the financial service providers. We need more of the focus to be on what these financial service providers need and how to tailor the right kind of capital to fit those needs. Where are the (affordable) investment bankers who can identify buyers and structure appropriate capital at the right stage to match those needs?  Managing a double bottom line is never an even balance when shareholders are sitting at different stages of investment. There are always trade-offs. Riskier market segments, harder to reach geographies, capacity building or expansion that is good for the investee and its customer base, but will reduce book value and returns in the short run, are often at the losing end of those trade-offs. They are casualties when the dominant need is to push the price up.

Who is responsible for the responsible exit? We need shareholders to act responsibly together, to sequence investments in a way that helps the business pursue its goals and leads to the success of the business, not just the success of the impact fund. The fund managers who often sit on boards are not in the right place to do this. There are too many pressures to demonstrate a return for the next fund they are raising. Should the onus be on the anchor investors, many of whom are still DFIs and large institutional investors? The alternative is that “pragmatic” decisions taken by shareholders could force a sale to a commercial buyer when the institution might not be ready or not find such a sale in its best interest at that point in time.

In full disclosure, I am not opposed to commercial investors and ironically, I am finding the purely commercial investors easier to negotiate with, than the socially responsible ones who in theory are “like-minded.”

Vitas Group, established by Global Communities as a for-profit vehicle to advance its work in financial inclusion, operates a network of financial services companies that lend to small enterprises across the Middle East. Over the last decade, Vitas companies have disbursed more than $1.6 billion to 614,000 customers with an annual default rate below one percent in Iraq, Palestine, Lebanon, and Jordan. Vitas employs more than 1,500 young professional staff and has sustained more than 214,000 jobs by lending to small business owners. Despite the volatility that has defined this region, even before ISIS or the Syria conflict emerged, Vitas has continued to earn double digit returns and has been a solid investment for its shareholders, illustrated by the fact that this year Vitas will close its first transactions with two purely commercial, private equity investors in the region.

To my point above, Vitas could not have arrived at this point without the right kind of capital at the right time. With new commercial partners and technological innovations coming into our industry, we have an even greater opportunity to achieve that larger goal of financial inclusion for every citizen. But that makes it all the more important for the development-focused founders, sponsors, investors, and other shareholders to govern well and to work together responsibly to shepherd the process.

<em><a href="http://www.vitasgroup.com/summary/leadership/#">Elissa McCarter-LaBorde</a> is Chief Executive Officer of Vitas Group and Vice President of Development Finance for Global Communities, where over the last 12 years she has built the technical department that manages Global Communities’ microfinance, SME, and housing finance operations. Ms. LaBorde has 18 years' experience as a microfinance practitioner.</em>

<em>Image credit: <a href="https://www.flickr.com/photos/126278138@N03/17096832777/">Pictures of Money</a></em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2017/03/17/whats-responsible-about-impact-investing-exits/">What's "Responsible" about Impact Investing Exits?</a>

<a href="https://cfi-blog.org/2013/03/20/four-challenges-for-impact-investing/" target="_blank" rel="noopener">Four Challenges for Impact Investing</a>

<a href="https://cfi-blog.org/2015/03/03/what-impact-investors-could-learn-from-microfinance/">What Impact Investors Could Learn from Microfinance</a>

Who's “Responsible” for Responsible Impact Investing Exits?

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. <a href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2017/02/The-Importance-of-mobile-for-refugees_a-landscape-of-new-services-and-approaches.pdf">More and more</a>, 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 <a href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2016/04/SOTIR_2015.pdf">271 operating mobile money systems</a> across 93 countries, with over 400 million registered accounts globally. At the same time, the Center for Global Development <a href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/">estimates</a> 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 <a href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/">superior to vouchers and in-kind aid</a>, but that mobile money is the <a href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2017/02/The-Importance-of-mobile-for-refugees_a-landscape-of-new-services-and-approaches.pdf">optimal vehicle for cash transfers</a>.

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, “<a href="https://www.rsc.ox.ac.uk/refugeeeconomies">Refugee Economies: Rethinking Popular Assumptions</a>”. In some cases refugees even buy a new SIM card <a href="https://www.trulioo.com/blog/financial-support-for-refugees-displaced-people/">each time they enter a new country</a> 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 <a href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2017/02/The-Importance-of-mobile-for-refugees_a-landscape-of-new-services-and-approaches.pdf">new report from GSMA</a> offers a handful of vignettes that illustrate the growing pervasiveness of phone-based financial services in refugee communities:
<ul>
 	<li>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.</li>
 	<li>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.</li>
 	<li>Refugees in Rwanda are regular users of mobile money. Some are even working as mobile money agents.</li>
</ul>
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 <a href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2017/02/The-Importance-of-mobile-for-refugees_a-landscape-of-new-services-and-approaches.pdf">21 percent</a> 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:
<ul>
 	<li>Lebanon hosts the most refugees per capita in the world with 1.2 million individuals. Aid organizations like the International Rescue Committee (IRC) <a href="https://cfi-blog.org/2016/11/15/the-future-of-refugee-financial-inclusion/">issue ATM cards</a> for refugees to access cash benefits, taking advantage of the fully-functioning distribution networks of merchants and ATMs available in the country.</li>
 	<li>In Syria, the United Nations Relief and Works Agency (UNRWA) <a href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=1&amp;cad=rja&amp;uact=8&amp;ved=0ahUKEwi_nNidh47SAhUqw1QKHUnmAIQQFggcMAA&amp;url=https%3A%2F%2Fcfi-blog.org%2F2016%2F11%2F15%2Fthe-future-of-refugee-financial-inclusion%2F&amp;usg=AFQjCNECigBXaYLGABweP1wabi4C7_sZdA&amp;sig2=CIjwqfD6abOcndsGBat1RA">developed a small fleet</a> of mobile lending units to reach clients in areas without financial infrastructure.</li>
 	<li>On the island of Lesbos, Greece, Mercy Corps <a href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/">offers refugees debit cards</a> that connect to a bank account to help them build banking histories.</li>
 	<li>The Digital Finance Institute launched the <a href="http://www.digitalfinanceinstitute.org/?post_projects=childrens-adventure-camps">Banking on Refugees project</a> which is piloting a cloud-based branchless bank that harnesses biometric identification and digital payment solutions, including prepaid cards and e-wallets.</li>
</ul>
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. <a href="https://cfi-blog.org/2016/11/15/the-future-of-refugee-financial-inclusion/">As discussed on this blog previously</a>, 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 <a href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/">receive iris scans</a> 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 <a href="https://cfi-blog.org/2016/11/15/the-future-of-refugee-financial-inclusion/">advocated before for credit history portability</a> 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, <a href="https://www.trulioo.com/blog/financial-support-for-refugees-displaced-people/">asserts the potential</a> 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 <a href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/">writes</a>, “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 <a href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/">1.4 million metric tons</a> 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 <a href="http://mastercardcenter.org/action/mobile-money-transforming-financial-inclusion-refugees/">used the money for food as intended</a>, 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 <a href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/">used the funds for essential purchases</a>, 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 <a href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/">70 percent</a> 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.

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2016/09/20/financial-inclusion-of-refugees-an-introduction/">Financial Inclusion of Refugees: An Introduction</a>

<a href="https://cfi-blog.org/2016/09/27/financial-inclusion-of-refugees-azerbaijan-case-study/">Financial Inclusion of Refugees: Azerbaijan Case Study</a>

<a href="https://cfi-blog.org/2016/10/07/financial-inclusion-of-refugees-al-majmoua-in-lebanon/">Financial Inclusion of Refugees: Al Majmoua in Lebanon</a>

Refugees and Humanitarian Assistance: Which Kind of Aid Is Best?

[youtube https://www.youtube.com/watch?v=8flyHNiuKJY]

Time flies. It’s hard to believe that the Africa Board Fellowship (ABF) program will soon begin its fifth cohort of fellows. Over the past few years and four cohorts, the ABF program has included more than 125 CEOs and board members from over 40 financial inclusion institutions across 35 countries in sub-Saharan Africa. If you’re an inclusive finance leader in sub-Saharan Africa, now’s your chance to join the governance and strategic leadership program. Applications are now open for the fifth cohort.

ABF recently held two seminars in Cape Town, welcoming the fourth cohort of fellows and graduating the third cohort. With new case studies on disruptive technologies, and an emphasis on interactive role plays and simulations, the seminars proved once again that peer-to-peer exchanges are an effective way to examine best and worst governance practices. To hear the fellows’ takeaways from the two seminars, watch our new video above.

The fifth cohort will kick-off with an opening seminar May 3-5 in Cape Town. The six-month fellowship begins and ends with multi-day in-person seminars and between seminars fellows are connected through a virtual collaboration space that includes discussion forums and dialogues.

The ABF program has demonstrated that many of the fellows are clearly struggling with the same challenges at their respective institutions and have a lot to share with each other. Though each ABF fellowship is only six months long, it is our hope that the connections forged among fellows create a durable network of leaders throughout sub-Saharan Africa in the financial inclusion sector.

This year, with Calmeadow and Sanabel, CFI is also hosting a Governance and Strategic Leadership Seminar for inclusive finance CEOs and board members of the Middle East and North Africa (MENA) region. The seminar will be held March 7-9 in Amman, Jordan. The highly-interactive two and a half days include discussions guided by industry leaders, case-based dialogues examining pressing sector risks, collaborative simulations, and opportunities for peer exchange and learning.

<em>To learn more about ABF, and to apply, <a href="https://www.centerforfinancialinclusion.org/about/what-we-do/africa-board-fellowship-program/">click here</a>.</em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2015/07/23/lessons-learned-from-abfs-convening-of-microfinance-leaders-in-cape-town/">Lessons Learned from ABF's Convening of Microfinance Leaders in Cape Town</a>

<a href="https://cfi-blog.org/2017/01/10/calling-all-financial-inclusion-leaders-in-mena-registration-is-open-for-the-mena-governance-and-strategic-leadership-seminar/">Calling All Financial Inclusion Leaders in MENA! Registration Is Open for the MENA Governance and Strategic Leadership Seminar</a>

<a href="https://cfi-blog.org/2016/12/08/harbingers-of-doom-bank-failures-in-africa-how-to-interpret-these/">Harbingers of Doom? Bank Failures in Africa - How to Interpret These</a>

Join the Africa Board Fellowship Program

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Loretta Michaels

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India is a global leader in financial inclusion. For over a decade, Accion has worked with and learned from India’s innovators, investors, and policymakers to expand economic opportunity for its people and businesses.

South Africa is a global hub for fintech innovation. Accion supports and advises South African innovators using technology to help entrepreneurs expand their businesses and families protect their homes around the world.

Though Nigeria’s government has set ambitious goals for financial inclusion, the majority of its people lack a formal bank account. Accion has worked in the country since 2007 to expand access to financial services.

Jeffrey Riecke

<em>&gt; Posted by Center Staff</em>

<img class="alignright wp-image-22706" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/01/meetingroom_mena.png" alt="MeetingRoom_MENA.png" width="330" height="218" />You’d be hard-pressed to list <a href="http://www.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/ifc+cg/resources/guidelines_reviews+and+case+studies/mena+corporate+governance+success+stories">all the ways</a> corporate governance can make (or break!) an organization. In the financial inclusion sector, strong boards ensure effective strategic planning, manage sustainable growth, bolster attractiveness to investors, balance risks, develop client centric products and delivery channels, and, increasingly, act as “<a href="http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/adapting-your-board-to-the-digital-age?cid=other-eml-alt-mkq-mck-oth-1609">strong digital sparring partners for management</a>.”  Yet, a <a href="http://www.ifc.org/wps/wcm/connect/703b6a004a7232b29eefdf9c54e94b00/Voices+MF+Sector+in+Arab+World.pdf?MOD=AJPERES">recent study</a> sponsored by the Sanabel Network and the IFC that inspected risks confronting the microfinance sector in the Middle East and North Africa (MENA) found that half of their interviewees perceived corporate governance risk as “high” or “very high.”

Being a board member or CEO of a financial inclusion institution is a great responsibility, and can also be a complex task. All boards have different dynamics and governance best practices can sometimes be nebulous. To address these challenges, Calmeadow, FMO, Sanabel and the CFI are hosting a “<a href="http://bit.ly/MENA-leadership">Governance and Strategic Leadership Seminar</a>” this March in Amman. This seminar brings together CEOs and board members of leading financial institutions serving the financially excluded in the MENA region to strengthen board capacity through peer learning and exchange. If you’re a leader in MENA’s inclusive finance sector, please consider attending this seminar to contribute your unique experiences and perspectives, and also to learn from the experiences of your peers.

The seminar will be held March 7-9 in Amman, Jordan. The highly-interactive two and a half days includes discussions guided by industry leaders, case-based dialogues examining pressing sector risks, collaborative simulations, and opportunities for peer-to-peer exchange. A diversity of topics will be covered, not limited to managing risk, board roles and responsibilities, managing sustainable growth, navigating challenging environments, client centricity, governance dynamics, and strategic leadership.

Why attend? Seminar takeaways include:
<ul>
 	<li>A greater understanding of the key trends, challenges, and risks facing MENA’s inclusive finance sector – and how to manage them.</li>
 	<li>An opportunity for participants to interact and network with representatives of other MFIs operating in the MENA region, working under similar geographic and social contexts.</li>
 	<li>Access to first-class experts and industry leaders in microfinance with expertise in corporate governance and risk management.</li>
 	<li>The ability to recognize early warning signals and key risk indicators.</li>
 	<li>An increased awareness of corporate governance and risk management best practices and how to implement them.</li>
</ul>
The program builds on the successes of the Center’s <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/abf/">Africa Board Fellowship (ABF) program</a>, which works to strengthen the governance and risk management capacity of CEOs and board members of financial institutions serving lower-income clients in sub-Saharan Africa.

Register today! There are a limited number of seminar spots. To learn more about the MENA Governance and Strategic Leadership Seminar, and to register, <a href="http://bit.ly/MENA-leadership">click here</a>.

<em>*This post was modified from its original version on January 11, 2017. The original posting incorrectly indicated that one has to apply for the seminar, while one simply has to register. However, it's important to reiterate that the seminar is only open to CEOs and board members of financial institutions serving lower-income clients in the Middle East and North Africa region.</em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2014/12/23/governance-challenges-in-mena-microfinance-institutions/">Governance Challenges in MENA Microfinance Institutions</a>

<a href="https://cfi-blog.org/2013/03/27/are-youth-inclusive-financial-services-in-mena-a-driver-of-financial-inclusion/">Are Youth-Inclusive Financial Services in MENA a Driver of Financial Inclusion?</a>

<a href="https://cfi-blog.org/2016/04/07/what-can-we-learn-from-governance-success-stories-in-mena/">What Can We Learn from Governance Success Stories in MENA?</a>

Calling All Financial Inclusion Leaders in MENA! Registration Is Open for the MENA Governance and Strategic Leadership Seminar

<em>This post is part of a </em><em>series</em><em> examining the global phenomenon of de-risking and its impact on financial inclusion. To investigate this issue, CFI staff partnered with </em><em>Credit Suisse Global Citizen</em><em> Rissa Ofilada, a compliance lawyer based in the Philippines, to undertake a literature review and conduct interviews with key players in the conversation on de-risking.</em>

NGOs, both large and small, are often on the front lines of humanitarian efforts, assisting people who are affected by conflict and terrorism. It is troubling that so many of these organizations’ efforts are hampered by de-risking. The funding and other forms of non-monetary aid that NGOs provide are directed towards addressing seemingly intractable problems – such as <a href="https://ftsbeta.unocha.org/content/fts-data-use-ocha-humanitarian-community">humanitarian conflict</a>, <a href="http://www.globalhumanitarianassistance.org/report/forced-displacement-poverty-and-financing-seven-facts-you-need-to-know/">forced displacement</a>, natural disaster, and violent extremism – and yet, the de-risking behavior of banks, brought on in response to anti-money laundering and combatting the financing of terrorism (AML/CFT) regulation, often makes it difficult for these organizations to function and serve those who are most in need.

Given the focus on disaster- and conflict-afflicted countries, whose populations are some of the most vulnerable in the world, it is perhaps not surprising that in designing comprehensive AML/CFT risk guidelines for NGOs, governments, financial service providers (FSPs), and regulating authorities have struggled to find the ideal balance between exercising rigorous due diligence and affording more flexibility in the treatment of organizations to reflect their individual capacity.

De-risking affects NGOs when: a) banks refuse to serve them; b) donors cut off funds to broad groups of organizations; and c) NGOs de-risk themselves by getting out of certain lines of operation. A 2014 <a href="http://www.cfg.org.uk/Policy/archive/~/media/Files/Policy/Banking/Briefing%20%20Impact%20of%20banks%20derisking%20activities%20on%20charities%20%20March%202015.pdf">survey</a> conducted by the U.K.-based Charity Finance Group (CFG) highlighted the obstacles that many charities and NGOs operating in “risky” environments face, and the specific financial products and services that are most adversely impacted as a result of de-risking. The most common problems cited by charities in the CFG survey included:  international transfers delayed or denied by banks or correspondent banks; requests for further information before proceeding with transactions; problems getting funds transferred to a partner or own bank account in a high risk country; funds frozen due to a bank's due diligence process; delays in opening bank accounts; accounts closed; and donations blocked.

The CFG also identified a number of characteristics of such “problem locations” that seem to increase the difficultly of accessing financial services for the charities surveyed:
<ol>
 	<li>Area where there is no formal banking structure (e.g., Somalia);</li>
 	<li>Country where regulation is hyper-vigilant (e.g., the U.S.);</li>
 	<li>Country on a sanctions list (e.g., Iran, North Korea);</li>
 	<li>Country in a state of conflict (e.g., Syria, Ukraine);</li>
 	<li>Country where proscribed or terrorist groups are known to operate (e.g., Afghanistan);</li>
 	<li>Country in close proximity to, and typically serving as an access corridor to a region of instability (e.g., Jordan, by providing access to Syria).</li>
</ol>
Some observers worry that the lack of clarification from regulating bodies on the interpretation of AML/CFT legislation with respect to NGOs has created a <a href="https://www.irinnews.org/analysis/2014/12/31">two-tiered system</a> whereby larger and more capable organizations easily navigate the labyrinth of governmental and financial actors and regulations, while smaller organizations with fewer resources face a more existential crisis as they have great difficulty implementing compliance controls that are both vague and burdensome. Conversely, a top AML official at Wells Fargo <a href="http://www.globalcenter.org/publications/understanding-bank-de-risking-and-its-effects-on-financial-inclusion-2/">expressed a similar sentiment</a> on a perverse impact of de-risking on smaller FSPs which might not have enough capacity to adequately implement AML/CFT regulations, and which might not be as proactive in de-risking, closing their doors to certain client types:  “[t]he ironic result of de-risking is re-risking … you are sending [higher-risk customers] to banks that probably can't handle it.”

In the current policy environment, it is understandable if AML/CFT compliance specialists convince their clients to de-risk by exiting certain business segments or ceasing operations in “risky” countries. However, as one executive from a charitable organization <a href="http://files.acams.org/pdfs/2016/Derisking-Final.pdf">put it bleakly</a>, “[t]he impact of de-risking is real and strong. In trying to prevent money laundering and terrorism finance, restrictions on sending money are resulting in the death of persons, particularly victims of terrorism.”

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2016/10/05/does-global-de-risking-create-financial-abandonment-the-background-you-need-to-know/">Does Global De-Risking Create “Financial Abandonment”? The Background You Need to Know</a>

<a href="https://cfi-blog.org/2016/09/29/de-risking-why-should-you-care/">De-Risking: Why You Should Care?</a>

<a href="https://cfi-blog.org/2016/10/13/who-is-to-blame-for-global-de-risking-the-united-states/">Who Is to Blame for Global De-Risking? The United States?</a>

&nbsp;

&nbsp;

Does De-Risking Hinder NGOs and Humanitarian Relief?

<em>&gt; Posted by Daniel Balson, Lead Specialist for Eurasia and MENA, the Smart Campaign</em>

<em>This is the fourth and final blog entry in a <a href="https://cfi-blog.org/tag/financial-inclusion-of-refugees-blog-series/">series</a> exploring how financial services can be leveraged to assist refugee populations. This entry will consider the future of refugee financial services and what our sector can do to ensure that the future is an inclusive one that serves genuine needs and protects refugee rights. </em>

<em>Syrian refugees shop at a market with their bank card given by the Turkish Red Crescent.</em>

It is worth asking whether the financial inclusion sector is at the forefront of the movement to financially include refugees. The humanitarian sector has long struggled to determine how to provide assistance during a crisis in a way that is sustainable, effective, and accountable. Recently, humanitarian organizations such as Oxfam and the International Finance Corporation (IFC) have begun considering whether it’s possible to use payments as an on-ramp for financial inclusion of refugees. Cash transfers have historically facilitated corruption and failed to make it into the hands of the people who needed it most. In-kind donations of goods such as tents, food, sleeping material and other items undermined local merchants who made their livelihoods selling these very goods. In response, the sector has begun experimenting with digital financial payments. In Afghanistan, for example, the World Food Program (WFP) has <a href="https://btca-prod.s3.amazonaws.com/documents/185/english_attachments/Afghanistan_Case_Study_May2016.pdf?1463507198">issued e-vouchers</a> and mobile money to cover food aid. The first e-voucher pilot was carried out on a small user base of 603 recipients in Kabul for a three-month disbursement cycle from April to June 2014. The total value of e-vouchers disbursed was US$72,360. The program proved successful and the WFP launched several follow-on pilots across the country in the subsequent year.

By eliminating the need for central distribution points, e-vouchers helped insulate staff and beneficiaries from security risks. Biometric technology such as finger-print scanning and chip and pin technology helped the WFP overcome literacy challenges and safeguard client data. As a result, e-vouchers were more effective at protecting clients’ rights to privacy and helped deliver a more transparent and approachable payment product.

Lebanon has proved to be another test case for digital financial services and refugee populations. Lebanon has welcomed 1.2 million refugees within its borders, mostly from Syria, Iraq, and Palestine. As such, it is the country with the most refugees per capita in the world. Here too, digital financial services have played a pivotal role. By creating points of access with merchants and ATMs, aid organizations have <a href="http://www.cashlearning.org/downloads/untappedhumanitariandemand-abusinesscaseforexpandingdfs.pdf">developed a fully functioning distribution network</a>, allowing refugees to use their pre-paid cards in more transactions than ever before.

With the success of these seemingly disconnected technology programs, humanitarian organizations have begun speaking to their financial sector counterparts to explore how these pilots could transition to an on-ramp for genuine financial inclusion. Whereas in the past, humanitarian organizations became adept at quickly installing basic, flexible, and effective financial networks to use in times of crisis, the new approach seems to be focused around developing a more lasting system that can continue to serve at risk populations long after reconstruction. For example, more and more humanitarian organizations are considering how payment networks can evolve into a system that facilitates savings, credit, and insurance.

<strong>What can donors do better?</strong>

To achieve results on this front, donors, aid agencies, and humanitarian organizations will have to take a critical look at prior approaches and incentives. For example, the sector may wish to reconsider whether old monitoring and evaluation paradigms are best suited to providing sustainable financial services to refugees. Previously, auditors assessing the efficacy of an intervention might have counted how much money was distributed and spent. However, if we are to work towards developing long-standing financial channels for refugees, it is imperative that we account for and encourage savings. Evaluators may be required to develop newer and more accurate metrics to determine whether pre-existing payment channels can grow to accommodate the diverse array of financial services refugees will require.

Additionally, donors and practitioners will need to learn to tell their story better. In doing so, they might consider what counts as a success and why it matters to governments, donors, practitioners, and to refugees themselves. New narratives would be most effective if boosted by emerging research on refugee financial services. For example, if the sector were to demonstrate that financially included refugees are more likely to return to their country of origin, it could use this data to make a stronger case before skeptical donors. Donors champion financial organizations like Al Majmoua in Lebanon and Microfund for Women in Jordan that experiment with financial services for refugees.  By highlighting successes, donors could use their considerable megaphone to reinforce the importance of such programs and demonstrate that they can deliver financial services for refugees in a sustainable and effective manner. Such publicity could be paired with a concerted focus on overcoming the perception of refugees as risky borrowers: donors could guarantee some portion of loans issued.

<strong>What can practitioners do better?</strong>

Practitioners can find new ways to leverage digital services to address challenges refugees face. Myriad avenues are being explored; a few of the more promising ones are highlighted below:
<ul>
 	<li>Currently, refugees risk losing credit histories that they carefully built in their home countries – as well as credit histories they start from scratch and build in their host country. Credit score portability can help mitigate these challenges and encourage refugees to take up financial services in their host country as well as return to their home countries when it is safe, with the knowledge that their sound financial decision making will be recognized.</li>
</ul>
<ul>
 	<li>Refugees often arrive to their host countries with few fixed assets and limited collateral. Creditors can harness the power of crowdfunding to create digital stores of collateral for potential refugee clients, allowing them to get a foot in the door of the credit marketplace.</li>
</ul>
<ul>
 	<li>As refugees might arrive with limited documentation, they are often unable to demonstrate their creditworthiness. Alternative creditworthiness analysis tools offer one promising solution. By leveraging a refugee’s social media presence, contacts and networks, loan officers can get a sense of the client’s trustworthiness and diligence, allowing the provider to lower the interest rate on an otherwise prohibitively risky product.</li>
</ul>
<ul>
 	<li>Many refugees face political persecution in both their home country and their host country. As such, they are often reticent to divulge personal information necessary to secure a loan. Strong digital safeguards can help protect a refugee’s privacy, anonymize data and minimize risk to the client’s contacts back home.</li>
</ul>
Technology, of course, will not be a substitute for appropriate strategizing and good sense. Many of the core obstacles facing refugees’ financial inclusion can be best solved not through novel technical approaches but by reviewing and carefully internalizing lessons already uncovered by the sector. For example:
<ul>
 	<li>Mobile lending units allow the product to come to the client in cases where the client cannot come to the product. In Syria, UNRWA developed a small fleet of mobile lending units, allowing loan providers to reach clients in areas with few security threats but limited financial infrastructure.</li>
</ul>
<ul>
 	<li>Appropriate and flexible products can help an institution adapt to a rapidly changing situation. In Syria, UNRWA launched its <a href="http://www.unrwa.org/sites/default/files/content/resources/microfinance_department_annual_report_2015.pdf">BST (“Bastat”)</a> product aimed specifically at street peddlers and designed to cope with their frequent displacement, in part through low repayment amounts. A separate product provides home reconstruction loans for Syrians. These highly tailored products help address real and pressing needs faced by Syrian victims of conflict. These strategies are an effective illustration of appropriate product design, the first of the Smart Campaign’s Client Protection Principles. You can learn more about how the Smart Campaign views this principle <a href="http://smartcampaign.org/about/smart-microfinance-and-the-client-protection-principles">here</a>.</li>
</ul>
<ul>
 	<li>Providing financial services to refugees is often a contentious proposition. In countries where resources are limited, politics are fraught and conflict is a recent memory, the public and the government are often skeptical when precious funds are redirected to temporary and foreign visitors. Recognizing this reality, institutions can minimize disruption by supporting activities that do not compete with the local economy. For example, in Lebanon, Al Majmoua has funded refugee families who make <em>aghabani</em> table cloths, a traditional Syrian textile in high demand throughout the Middle East.</li>
</ul>
<ul>
 	<li>Institutions serve refugees best when they focus on people. As we’ve seen in <a href="https://cfi-blog.org/2016/09/27/financial-inclusion-of-refugees-azerbaijan-case-study/">our Azerbaijan case study</a>, one of the easiest and most effective ways financial institutions can learn about how to serve refugees and the internally displaced is to hire them. Refugee staff come with an intuitive feel for the clients and their culture and an eagerness to work and learn. Additionally, financial institutions have found success by creating joint refugee and host borrower groups to create interdependence and build bridges between individuals who might not normally associate with one another. Additionally, by offering financial products to women refugees specifically, institutions are more likely to assist an underserved market segment and less likely to be seen as intrusive.</li>
</ul>
<strong>What governments can do better:</strong>

Meaningful progress on providing financial services to refugees requires the assistance of governments. Elected and appointed officials set the rules of the market, determine the country’s overarching policy towards refugees, signal moral support for migrants’ rights, and channel public concerns. Their support is fundamental to ensuring that refugees and the internally displaced can access meaningful economic opportunities.

Government officials can begin by stimulating an honest dialogue about the political dimensions of refugee financial inclusion and steering the rhetoric away from a binary option. Rather than forcing the public to make an imagined choice between citizen rights and refugee assistance, governments could explore avenues for how refugees can be financially included while benefiting their host communities.

Recognizing that refugees are some of their most vulnerable populations, officials can enact rules that would ensure their protection. By encouraging formal institutions to enter the market before they are superseded by less reputable lenders, officials can prevent the emergence of a black market for credit and thwart abuses before they appear.

While financial inclusion practitioners know far more about what it takes to assist refugees today than ten or even five years ago, there is much more to learn. Are refugees with more access to capital more likely to return to their home country? What types of financial services offered to refugees have the greatest net-positive effect on their host communities? These and other questions require additional research. Governments have the resources and the moral suasion to commission and implement such studies and should be vocal about the need to learn more on this critical topic.

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2016/09/20/financial-inclusion-of-refugees-an-introduction/">Financial Inclusion of Refugees: An Introduction</a>

<a href="https://cfi-blog.org/2016/09/27/financial-inclusion-of-refugees-azerbaijan-case-study/">Financial Inclusion of Refugees: Azerbaijan Case Study</a>

<a href="https://cfi-blog.org/2016/10/07/financial-inclusion-of-refugees-al-majmoua-in-lebanon/">Financial Inclusion of Refugees: Al Majmoua in Lebanon</a>

The Future of Refugee Financial Inclusion