The core essence of financial inclusion lies in its non-discriminatory principle that everyone, everywhere, should have access to essential financial services that are affordable and that meet their needs. When it comes to refugees, however, access to even the most basic financial services, such as opening a bank account, is not legally allowed in some countries and problematic in most others.
In countries where refugees do have the right to open a bank account, lack of suitable documentation is usually the main obstacle. Recently arrived refugees often have no fixed address, which banks require as part of their due diligence; this can lead to delays or rejection of bank account openings. Strict anti-money laundering and counter terrorism financing rules also make international banks more reluctant to open accounts for customers who lack a passport, even when host governments’ directives state that biometric cards or other government-issued ID documentation should suffice.
The European Union (EU), which has received over a million refugees and other migrants since 2015, has recently taken an important step to expand access to finance for refugees. A new law requires banks to offer basic payment accounts to all customers legally resident in EU countries, including asylum seekers and refugees. The application of this directive, however, will depend on the banks’ ability to move quickly and adapt their internal procedures, while also complying with know-your-customer (KYC) policies and other international regulatory procedures.
While the EU has experienced an extraordinary influx of forcibly displaced people in the past couple of years, it is still the developing world that hosts the vast majority of the world’s refugees. In these countries, financial service providers (FSPs) with a social mission and experience in serving marginalized populations have the potential to play an important role in expanding their services to refugees.