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

A <a href="http://www.un.org/apps/news/story.asp?NewsID=57013#.WUkqMevyuM8">record number of people</a>, more than ever in our lifetimes, are fleeing their homes due to wars, persecution, and disasters. Nearly <a href="http://www.unhcr.org/en-us/figures-at-a-glance.html">20 people</a> are forcibly displaced every minute, amounting to 28,300 people each day. Roughly <a href="http://www.unhcr.org/en-us/figures-at-a-glance.html">65 million</a> people are currently displaced worldwide, according to the United Nations Refugee Agency. This figure is about the size of the <a href="http://www.cnn.com/2017/06/20/world/world-refugee-day-worst-crisis-in-history/">population of France</a> or the United Kingdom. About 22 million of the displaced are refugees (displaced across country borders). And more than half of whom are under the age of 18.

Today on World Refugee Day, we call on the international community to provide compassion for the displaced and support and solidarity for those working tirelessly to help them. It’s an opportunity to reflect on what we can do to overcome inaction, indifference, and fear.

Two areas in need of attention, as <a href="http://www.independent.co.uk/news/world/europe/refugees-120-migrants-drown-latest-mediterranean-disaster-boat-sinks-asylum-seekers-nigeria-sudan-a7798961.html">today’s news</a> has so painfully affirmed, <a href="http://www.unhcr.org/news/briefing/2017/6/5948dfb64/world-refugee-day-reports-three-new-shipwrecks-mediterranean-sea.html">are enhanced water rescue operations</a> and more viable and safer alternatives for those in need of international protection. Today we learned that <a href="http://www.unhcr.org/news/briefing/2017/6/5948dfb64/world-refugee-day-reports-three-new-shipwrecks-mediterranean-sea.html">several ships</a> that disembarked from the coast of Libya over the weekend sank and more than 120 refugees are feared to have drowned in the Mediterranean Sea.<a href="https://www.flickr.com/photos/126123741@N03/25780260202/in/album-72157663792457593/"><img class="wp-image-23747 alignright" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/06/25780260202_9b483f09f9_k.jpg" alt="" width="620" height="413" /></a>

The death toll this year of refugees attempting to cross the Mediterranean <a href="http://www.independent.co.uk/news/world/europe/refugees-120-migrants-drown-latest-mediterranean-disaster-boat-sinks-asylum-seekers-nigeria-sudan-a7798961.html">passed 1,000 in April</a>, a number that wasn’t reached until the end of May last year. The International Organization for Migration (IOM) indicates that during 2017 so far, at least 1,850 people have lost their lives trying to cross the Mediterranean.

As we’ve covered extensively on this blog, the financial inclusion industry is well-positioned to support internally displaced individuals and refugees. By offering payments, credit, insurance, and savings products, inclusive finance providers can help refugees stay connected to sources of financial support, transition beyond reliance on economic assistance programs, and ultimately contribute to their host countries.

Here are a few of our previous posts for you to read, or re-read. They offer an introduction to the topic of financial inclusion of refugees, outline the challenges and opportunities to serve this especially vulnerable client segment, including via new technologies and business models, and share success stories for others to learn from.
<ul>
 	<li><a href="https://cfi-blog.org/2016/09/20/financial-inclusion-of-refugees-an-introduction/">Financial Inclusion of Refugees: An Introduction</a>, by Daniel Balson, Lead Specialist for Eurasia and MENA, the Smart Campaign</li>
 	<li><a href="https://cfi-blog.org/2016/09/27/financial-inclusion-of-refugees-azerbaijan-case-study/">Financial Inclusion of Refugees: Azerbaijan Case Study</a>, by Daniel Balson, Lead Specialist for Eurasia and MENA, the Smart Campaign</li>
 	<li><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>, by the Social Performance Task Force (SPTF)</li>
 	<li><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>, by Kim Wilson</li>
 	<li><a href="https://cfi-blog.org/2017/02/14/refugees-and-humanitarian-assistance-which-kind-of-aid-is-best/">Refugees and Humanitarian Assistance: Which Kind of Aid Is Best?</a>, by Jeffrey Riecke, Senior Specialist, CFI</li>
 	<li><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>, by Brenda Santoro and Ahmed Dermish with Kim Wilson</li>
 	<li><a href="https://cfi-blog.org/2016/11/15/the-future-of-refugee-financial-inclusion/">The Future of Refugee Financial Inclusion</a>, by Daniel Balson, Lead Specialist for Eurasia and MENA, the Smart Campaign</li>
</ul>
Whether you work in the inclusive finance sector or not, we hope you’ll take action. For more information, head to the UN Refugee Agency <a href="http://www.unhcr.org/en-us/get-involved.html">website</a>.

Image credit: <a href="https://www.flickr.com/photos/126123741@N03/25780260202/in/album-72157663792457593/">Julian Buijzen via Flickr.</a>

It’s World Refugee Day - Financial Inclusion Stakeholders Take Note!

&gt; Posted by Elissa McCarter-LaBorde, CEO, Vitas Group

<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.

<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.

Image credit: <a href="https://www.flickr.com/photos/126278138@N03/17096832777/">Pictures of Money</a>

Have you read?

<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.

Have you read?

<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?

&gt; Posted by Daniel Balson, Lead Specialist for Eurasia and MENA, the Smart Campaign

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. 

Syrian refugees shop at a market with their bank card given by the Turkish Red Crescent.

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.

What can donors do better?

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.

What can practitioners do better?

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 aghabani 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>
What governments can do better:

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.

Have you read?

<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

&gt; Posted by the Social Performance Task Force (SPTF)

The following is the third post in a four-part blog series on the financial inclusion of refugees and the internally displaced. The first post can be found <a href="https://cfi-blog.org/2016/09/20/financial-inclusion-of-refugees-an-introduction/">here</a>, and the second <a href="https://cfi-blog.org/2016/09/27/financial-inclusion-of-refugees-azerbaijan-case-study/">here</a>.

Overview of refugee populations in Lebanon

The multi-cultural and open economy of Lebanon is no stranger to the need to accommodate refugees. Over the years, Lebanon, which has a population of roughly 6 million, has generously maintained an open border policy and has, until restrictions were introduced in 2014-15 following the very large influx of Syrian refugees, permitted refugees to settle temporarily but freely across the country. The country’s experience in providing financial services to these refugees and internally displaced persons offers insights for financial institutions around the world on serving these vulnerable global populations.

Lebanon's refugee populations are diverse. The largest refugee group is Palestinian, around half of whom live in the 12 recognized Palestine refugee camps. From Iraq, about 50,000 refugees arrived after American-launched military operations in Iraq in 2003. Many of the Iraqi refugees were at one time middle-class professionals who have self-settled in urban areas in Lebanon. Syrians, who have a long history as migrant workers in Lebanon, have never been counted as foreign workers, and many were known to work in Lebanon before the war in Syria. But when civil war broke out in Syria in 2011, an unprecedented number of Syrians emigrated to Lebanon. As of October 2015, close to <a href="http://www.refworld.org/docid/56557d3b4.html">1.1 million</a> Syrian refugees in Lebanon had registered with the United Nations High Commissioner for Refugees (UNHCR).

Serving as a refugee in Lebanon requires the ability to navigate in an environment of extremely complex political, economic, social, and security-related volatilities. For example, <a href="http://www.ilo.org/wcmsp5/groups/public/---dgreports/---exrel/documents/briefingnote/wcms_368227.pdf">Lebanese labor laws exclude</a> Palestinian refugees from Syria from entry into formal employment, while newer restrictions allow for Syrian refugees to obtain work permits only in the traditional migrant worker sectors of agriculture and domestic services, where almost half of the Syrian refugee workers are employed, and in construction. The increased competition for low-quality, low-skilled jobs has <a href="http://documents.worldbank.org/curated/en/698161468179049613/Lebanon-Promoting-poverty-reduction-and-shared-prosperity-a-systematic-country-diagnostic">resulted</a> in depressed wage incomes and increased job insecurity, which is a key perceived stress factor for both refugee and host communities. These dynamics can <a href="https://data.unhcr.org/syrianrefugees/download.php?id=9399">trigger</a> resentment and fear especially among lower-income Lebanese workers and entrepreneurs, including the traditional core clientele of financial service providers (FSPs) like Al Majmoua.

Al Majmoua - history and structure

Save the Children launched Al Majmoua (Arabic for “the Group”) was established in 1994 as a microfinance program with USAID funding to provide group loans to lower-income women entrepreneurs across disadvantaged areas of Lebanon. In 1997, it became an autonomous NGO. One of Al Majmoua's <a href="http://www.almajmoua.org/visionandmission.aspx">strongly held values is inclusiveness</a>; though Al Majmoua's core clientele are women, it also serves lower-income men as well as individuals of “any nationality whether located in rural or urban regions; [it] also serve[s] refugees and reach[es] out to those living in remote areas and Palestinian camps all over Lebanon.” As of October 2015, Al Majmoua had 54,000 active borrowers holding USD 49 million in loans. Fifteen percent of these borrowers are non-Lebanese, including migrant workers, Palestinians, and Syrian refugees. Contrary to some fears that loans to refugees are high risk, as of 2015, each of Al Majmoua's client segments, including the non-Lebanese, has a 30 day portfolio at risk rate below 1 percent.

Al Majmoua offers group and individual loan products for micro- and SME enterprises, information and communication technology (ICT) start-ups, and youth entrepreneurs. It also offers salary-guaranteed loans, home improvement loans, loans to pay school fees for children, and loans for the disabled.

Lessons learned from Al Majmoua on serving refugees

Expect initial staff and leadership resistance, but this can be overcome. Inclusion of refugees challenges stereotypes and preconceived ideas about ‘the other.’ This requires determined drive from the board and senior management. A good first step for institutions is to have an open-ended board discussion on why refugee populations in their country are – or are not – served by their FSP. Institutions might also consider a discussion on ‘why not refugees?’ with their national associations, and can meet with relevant external stakeholders such as protection agencies to get more information on refugee populations. Once the reasons for ‘why not’ are put on paper, a strategy session with management to convert obstacles into opportunities is a great next step.

Solicit and analyze feedback from institutions’ own staff and clients before offering services to refugee populations. Al Majmoua initiated a series of focus group discussions with existing clients to discuss the idea of offering financial services to Syrian refugees. These discussions revealed very significant negativity. A majority of clients feared being outpriced or losing jobs to Syrians willing to work more for less, and they did not think Al Majmoua should “help the competition.” Demand for rental housing was felt to be surging, affecting also rent costs for Lebanese. During 2012, the injection of relief funds in the economy was believed to inflate prices of basic commodities, while the increased demand for goods by refugees was seen to benefit larger businesses (for example, refugees were provided cash or vouchers to use in select, large supermarkets) at the expense of the small stores operated by Al Majmoua’s clients.

Develop and share the business case/strategy to secure buy-in. Developing the business case for serving refugees based on hard data can be difficult to do upfront, due to a big information gap. One path forward is institutions making it a point to compile all the questions and concerns for which they do not have an upfront answer and incorporate these into a ‘feasibility study’ to eventually build a business case that works for all stakeholders. As the business case is developed, it’s essential that all stakeholders are fully informed. For Al Majmoua, a key turning point came when clients and staff felt their concerns were being heard and addressed in the pilot project.

Market research is indispensable. Because culture, language, and traditions among the targeted refugee population differ from those in the host community, and thus also from FSP staff, market research is critical, as adaptation and adjustments to products or procedures may be necessary. Furthermore, market research can help make refugee populations become more visible to the FSP. A recommended starting point is consulting with protection agencies and local authorities, as they can usually assist with numbers, location maps, and basic socio-economic profiles of refugee populations. Al Majmoua suggests that FSPs focus their market research in the value chains where refugees have an advantage, such as in ethnic foods and handicrafts. Further, institutions supporting refugee associations offer another means for learning about and engaging with local populations. Institutions might also create opportunities for repeated informal meetings between refugees and existing clients and staff.

Do not outsource client selection. Protection agencies may refer the most vulnerable refugees, as they prioritize needs, even though FSPs can best serve the working or entrepreneurial poor. The experience of Al Majmoua suggests to not outsource or rely on referrals from other agencies for client selection or appraisals.

Non-financial services are relevant to refugees – and a good entry point. Offering non-financial services can be a great entry point for refugees who are often socially isolated, but  services must be based on actual, specific demand. Involve participants in the design of curriculum and activities, and take the time to find the right trainer - . Include the cost of transport to activities if possible, as transportation can be an access barrier to poor refugees. Finally, institutions should expect tension and be patient. Al Majmoua found that it took an average of two sessions among youth and four sessions among women for non-financial services participants to start feeling comfortable with each other.

Expand inclusive financial products to refugees. There is no need to develop specific ‘refugee products’ and in fact, segregated product access can be counter-productive and cause tension with existing clients. Refugees can perform as well as any other financial services clients, when well segmented and appropriately appraised.

Review and update the risk management regime. Lastly, during the pilot test period of serving refugees, institutions should review their risk management systems and risk mitigation measures to check that these accurately identify and mitigate risks appropriately.

The experience of Al Majmoua in including refugees in its portfolio of financial and non-financial products has been largely positive. The overwhelming message to other FSPs is not to be afraid: Appropriately segmented and appraised, refugees can be as good clients as any national low-income entrepreneur – and sometimes better.

This blog post was adapted by SPTF from the case study on Al Majmoua by Lene Hansen. To read the complete case study, please go to the <a href="http://sptf.info/working-groups/refugee-microfinancehttp:/sptf.info/working-groups/refugee-microfinance">”Refugee Microfinance” page</a> of the SPTF website.

Have you read?

<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/2015/06/30/political-risk-is-keeping-microfinance-ceos-up-at-night/">Political Risk Is Keeping Microfinance CEOs Up at Night</a>

Financial Inclusion of Refugees: Al Majmoua in Lebanon

&gt; Posted by Daniel Balson, Lead Specialist for Eurasia and MENA, The Smart Campaign

The following is the first post in a four-part blog series on the financial inclusion of refugees and the internally displaced. 

The unresolved Syrian conflict and the slow collapse of nation-states on Europe’s periphery have brought the topic of refugees back into the media spotlight. Whereas previously, refugees were often seen as a problem of the Global South, events have now brought migrants to Europe’s doorstop, forcing OECD countries to consider new strategies to provide for and integrate this population. Yet as refugee assistance becomes a hot topic once again, old myths and fictions have reemerged. Refugees are often described as highly transitory populations with few marketable skills who will inevitably rely on long-term government assistance. But these stereotypes are frequently inaccurate.

Providers of financial services for the poor can play a critical role in empowering refugee populations. By offering credit, insurance, savings and other products, these providers can help refugees transition beyond reliance on economic assistance programs, achieve independence, and contribute to their host countries. To attain this goal, however, the financial inclusion sector needs to gain a better understanding of the specific challenges and opportunities that refugees face and the financial needs they are likely to have. This is the first in a series of blog posts where we’ll discuss some of these critical questions. What happens when a previously included individual is excluded from the formal financial system? What special vulnerabilities do refugee populations face and what special protections can help ensure that they are not taken advantage of by lenders? How have other countries used financial services to help meet this challenge in the past?

In this post, we discuss two commonly told refugee narratives and explore what we already know about including forced migrants in the formal financial sector.

Myth 1. Refugees are transitory. To begin, how long do refugees typically stay in a refugee camp? It’s a lot longer than most people think. The most commonly quoted statistic (see <a href="http://www.cnn.com/2016/05/18/architecture/sean-anderson-moma-refugee-architecture/">CNN</a> and <a href="http://www.huffingtonpost.com/dale-buscher/why-refugees-need-to-make_b_256589.html">The Huffington Post</a>) is that the average length of stay in a refugee camp is 17 years. <a href="http://www.bbc.co.uk/programmes/p03wgr2n#play">According to the BBC</a>, this figure comes from a partial misreading of a 2006 report by the United Nations High Commission for Refugees (UNHCR), which used the figure to describe the average duration of refugee situations rather than the average duration of refugee encampment. More accurate statistics are hard to come by: the definition of a refugee often depends on the individual or organization deploying it. Nevertheless, while the average stay in a refugee camp may be well under 17 years, it is clear that refugees are far from the transitory population they are often depicted as in the popular imagination.

<a href="#_ftnref1" name="_ftn1"></a>

Myth 2. Refugees are an economic burden and do not contribute to the local economy. The world currently has the highest number of forcibly displaced people since World War II, but this has not been matched by an increase in pathways to increased economic opportunities for this vulnerable population. Were they to gain access to these opportunities, they could provide a boon for their host countries.

Research has shown that refugees aren’t merely passive victims but are engaged in a wide and diverse array of productive economic activities, leveraging a pool of extensive skills and experiences acquired both in their host countries and countries of origin. Indeed, a <a href="http://www.rsc.ox.ac.uk/refugeeeconomies">recent report</a> by the Refugee Studies Center at the University of Oxford challenges commonly-held myths that refugees are necessarily an economic burden, are technologically illiterate, and exclusively dependent on international assistance. A <a href="http://www.fmreview.org/sites/fmr/files/FMRdownloads/en/preventing/zetter.pdf">study</a> of the Dadaab Refugee Camp on the Kenya-Somalia border assessed the camp’s economic value at $14 million dollars – a full 25 percent of the economy of the province that hosted it. A <a href="http://www.irinnews.org/report/101624/benefits-hosting-refugees">joint study</a> by the United Nations Development Program (UNDP) and the UN’s refugee agency, UNHCR, found that, for every dollar invested in refugee assistance, roughly $.50 returns into the local economy through the multiplier effect. This shouldn’t be surprising. Scholars often term war and natural disaster as “social status agnostic;” physicians are as likely to flee violence as manual laborers, though they often do so under different circumstances and in different ways.

Despite their tremendous economic potential, refugees face very specific challenges in securing quality financial products that are rarely encountered by other vulnerable populations. If they were forced to flee conflict or natural disaster, they are likely to have had limited prior preparation. As such, refugees often lack the fixed assets necessary to secure a business or consumption loan, even if they had such assets where they originally lived. While many countries are parties to international agreements that enshrine the refugee’s right to work, refugees often encounter legal obstacles that prevent this right from translating into a reality. Of 15 countries examined by UNHCR, nearly <a href="http://asylumaccess.org/wp-content/uploads/2014/09/FINAL_Global-Refugee-Work-Rights-Report-2014_Interactive.pdf">45 percent</a> have effectively prohibitive legal barriers to employment for refugees. As a result, refugees are often drawn to black and grey markets, rendering them unable to document income as is necessary to secure a loan. Refugees have little say in where they reside. They often have a limited grasp of the language and culture and minimal experience navigating the bureaucracy in their host country. Finally, refugees are often perceived as a flight risk, and are not trusted by financial service providers to return borrowed funds. In cases where they are able to secure access to financial services, unscrupulous lenders may view them as easy targets for abuse, given their limited access to recourse. Moreover, creditors are rarely interested in arranging a lending infrastructure that can continue to serve refugee populations after they return to their home country. As such, credit scores built up in exile are valueless when refugees return to their countries of origin.

Systemic and concerted research on refugees and financial inclusion is new, and many questions remain unanswered. In the 1960s and 1970s, <a href="http://www.unhcr.org/en-us/research/epau/3f978a894/unhcr-refugee-livelihoods-self-reliance-brief-history.html">the UNHCR began to study</a> how refugees could be assisted in a sustainable way. The original plan was to develop large agricultural communities in host countries that, through international aid, would become economically self-reliant and subsequently ceded to the host-country, which would assume responsibility for governance and service provision. This approach proved unsuccessful and was overtaken in the subsequent decade by a focus on emergency response prompted by the collapse of communism and by famine in the Horn of Africa. In the 1990s, UNHCR saw a resurgence of interest in refugee livelihoods and assistance programs built around self-reliance in recognition of the greater prevalence of protracted displacement versus immediate crises. Organizations including NGOs and the UN began to explore how to leverage microcredit to assist refugees and the internally displaced.

In a recent effort to stimulate interest in and understanding of how to offer financial services to refugees, the Social Performance Task Force (SPTF) partnered with the UNHCR to <a href="http://sptf.info/working-groups/refugee-microfinance">design guidelines</a> for financial service providers. In addition to building the skills of financial service providers, the guidelines help dispel myths about refugee populations and encourage the adoption of delivery mechanisms and services that meet this population’s specific needs.

There’s no doubt that the financial inclusion sector is far better informed about providing assistance to refugees today than in the past. Still, major knowledge gaps remain. First, while the research has provided greater clarity on what it takes to sustain financial services for refugees, it has rarely explored how these services are experienced from the perspective of the refugee. Second, the research pays little attention to new products, services and methods of delivery that have emerged in the past few years. Finally, ongoing research has yet to explore how refugee populations can be protected from abuse by lenders, given their specific and unique needs.

This blog series will make a very modest attempt to explore some of these gaps through three follow-on blog posts. The next post will look at Azerbaijan, where the microfinance sector emerged specifically to serve internally displaced persons from that country’s war with Armenia. In a subsequent post, we will speak about Al Majmoua, a pioneering Lebanese institution that provides loans to mixed groups of Lebanese and Syrian refugee women. Finally, we’ll take a look at the future of financial services provision for refugees and consider how new technologies are opening up a world of possibilities for assisting migratory populations.

<a href="#_ftnref1" name="_ftn1"></a>

Have you read?

<a href="https://cfi-blog.org/2014/12/08/smart-certification-the-view-from-azerbaijan/">Smart Certification: The View from Azerbaijan</a>

<a href="https://cfi-blog.org/2016/03/31/client-voices-at-the-georgian-parliament/">'Client Voices' at the Georgian Parliament</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>

Financial Inclusion of Refugees: An Introduction

&gt; Posted by Center Staff
<img class="alignright size-medium wp-image-4061" title="disc-meter" src="http://centerforfinancialinclusionblog.files.wordpress.com/2011/08/disc-meter.jpg?w=300" alt="" width="300" height="174" />This latest "Top Picks of the Microfinance Blogosphere" swoops in for a closer look at spurious links between energy drinks and microfinance, examines ways of opening up impact investing to the masses, maps out Lebanese microfinance, and more.
<ul>
	<li>"Why is it illegal for me to invest even $100 in the business of my choice?" asks a post by Nilima Achwal on the <a href="http://www.nextbillion.net/blog" target="_blank">NextBillion blog</a>. <a href="http://www.nextbillion.net/blog/2011/09/13/socap11-breaking-down-barriers-to-people-powered-capital" target="_blank">"SOCAP11: Breaking Down Barriers to People Powered Capital"</a> dives deep into "the democratization of impact investing."</li>
	<li>"While the microfinance sector in Lebanon is growing, it is still relatively small in respect to the unmet need throughout the country," writes Jonathan Bloom in his post <a href="http://kivanews.blogspot.com/2011/09/passport-series-lebanon-part-2.html" target="_blank">"Passport Series: Lebanon: Part 2: Microfinance"</a> on the <a href="http://kivanews.blogspot.com/" target="_blank">Kiva.org blog</a>. He takes a look at the big picture of Islamic banking to contextualize his observations about the work taking place on the ground.</li>
	<li>Five young people of the <a href="http://www.africanleadershipacademy.org/" target="_blank">African Leadership Academy</a> (ALA) "interviewed their peers within their countries to solicit views on a number of questions about education, careers, financial services, leadership and entrepreneurship," Reeta Roy recounts in <a href="http://www.themastercardfoundation.org/blog/?p=658" target="_blank">"Managing Life Transitions"</a> on <a href="http://www.themastercardfoundation.org/blog/" target="_blank">The MasterCard Foundation blog</a>.  The post offers up the pivotal points that go with these peers' coming of age, as part of efforts to answer the wider question: "How do we prepare young people for a lifetime of transitions?"</li>
	<li><a href="http://blogs.cgdev.org/open_book/2011/09/microfinance-and-the-effects-of-energy-drinks-which-causes-which.php" target="_blank">"Microfinance and the Effects of Energy Drinks: Which Causes Which?"</a> asks David Roodman in a post on his <a href="http://blogs.cgdev.org/open_book/" target="_blank">Open Book blog</a>. After examining a particularly jolting piece of data mining, he suggests that, to inform policy, "we need to go beyond mere correlation, to determine whether interest in microfinance is driving people to look twice at high-calorie drinks or the other way around." You may want to crack open your second Red Bull of the day to really see where he's coming from.</li>
</ul>
Image credit: <a href="http://commons.wikimedia.org/wiki/User:Iainf" target="_blank">Iainf</a>
Have you read?
<a href="http://centerforfinancialinclusionblog.wordpress.com/2011/08/22/andhra-pradesh-haiti-corporate-capital-top-picks-of-the-microfinance-blogosphere-august-22-2011/" target="_blank">Andhra Pradesh, Haiti &amp; Corporate Capital – Top Picks of the Microfinance Blogosphere – August 22, 2011</a>
<a href="http://centerforfinancialinclusionblog.wordpress.com/2011/08/03/financial-ed-mobile-money-and-savings-top-picks-of-the-microfinance-blogosphere-august-3-2011/" target="_blank">Financial Ed, Mobile Money, &amp; Savings – Top Picks of the Microfinance Blogosphere – August 3, 2011</a>
<a href="http://centerforfinancialinclusionblog.wordpress.com/2011/07/19/women-india-and-tourism-top-picks-of-the-microfinance-blogosphere-july-19-2011/" target="_blank">Women, India, &amp; Tourism – Top Picks of the Microfinance Blogosphere – July 19, 2011</a>
<a href="http://centerforfinancialinclusionblog.wordpress.com/2011/06/13/armenia-andhra-pradesh-pakistan-top-picks-of-the-microfinance-blogosphere-june-13-2011/" target="_blank">Armenia, Andhra Pradesh &amp; Pakistan – Top Picks of the Microfinance Blogosphere – June 13, 2011</a>

Energy Drinks, Lebanon &#038; Impact Investing - Top Picks of the Microfinance Blogosphere - September 14, 2011

Micol Pistelli

Daniel Balson

Jordan

Lebanon

Malawi

Middle East and North Africa

Sub-Saharan Africa

Uganda

Azerbaijan

Libya

Iraq

Syrian Arab Republic

Greece

Pakistan

Rwanda

Kenya

Somalia

Financial Service Providers

Microfinance Institutions

Refugees and Migrants

Underserved Groups

Agent Banking

Impact Investing

Initial Public Offering

Responsible Exit

Mobile Banking

Telcos

Crowdfunding

Privacy

Social Performance

Blog Post

Jeffrey Riecke

The majority of Kenyans have mobile money accounts; their activity demonstrates digital financial services’ potential. Accion helps Kenyan innovators harness emerging technologies to create new financial services.