Removing Barriers to Expand Access to Finance for Refugees

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.

Unfortunately, so far only a handful of FSPs have considered extending their financial services to this population. Lack of identity documentation is often mentioned as an issue; however this is not specific to refugees and can be solved by adding some flexibility to the FSPs’ policy requirements. For example, UNHCR registration cards or other IDs issues by local authorities are often accepted as alternatives by regulators.

A more significant barrier to refugees’ financial access is the lack of familiarity that FSPs have with this market segment. Providers lack information on livelihood opportunities for refugees, the business case for serving them, and their credit risk, and so they make assumptions. Typical assumptions tend to be that refugees are only in the country temporarily, that they are dependent on aid and that they don’t have any assets. As such, they are perceived as very high-risk clients. However, these stereotypes often start to unravel when you look at the data available from protection and development agencies in a given country. FSPs should examine this data as a preliminary step when considering expanding their services to refugees.

Lebanon Refugee Camp for Syrians. Photo credit: Ashraf Saad Allah AL-Saeed, World BankFor example, UNHCR data shows that refugees are not as mobile as often thought. By the end of 2015, 41% of refugees under UNHCR’s mandate were estimated to have been in exile for five or more years in a given asylum country, with most of them forcibly displaced for at least 20 years.

Regarding aid-dependency, only very few refugees rely fully on aid, which is usually insufficient to meet their needs. In the case of Syrian refugees in Lebanon, for example, aid barely covers the most basic of necessities, and 60% of households in a number of governorates report borrowing from informal money lenders in order to cover daily needs such as food, rent and medical expenses.

UNHCR aims to promote awareness of refugees as a market segment and to encourage lasting linkages between refugee populations and the financial sector. As part of this effort, in 2016, UNHCR partnered with the Social Performance Task Force (SPTF) to develop guidelines for financial service providers interested in serving refugees. The guidelines offer an overview of why refugee populations are financially excluded and suggest ways for FSPs to successfully reach and serve this untapped financial market segment.

As the guidelines state, refugees’ financial needs evolve over time, depending on the vulnerability experienced, their displacement phase, their human and social capital, and their migratory plans. Looking at the displacement phase, there are a variety of services that FSPs can provide, as the table below summarizes.

 Displacement phase Financial Service Demands
 Phase 1 (arrival)Survival cash for food, housing, medical services and to repay debt incurred during escape.
 Phase 2 (initial displacement)Saving products, remittances, microcredit for consumption, health insurance.
 Phase 3 (stable/protracted displacement)Saving products, microcredit for business and consumption, mortgage/home improvement loans, transactional accounts for cross-border payments, remittances, health insurance.
 Phase 4 (permanence)Saving products, microcredit for business and consumption, pension plans, insurance products. If return/resettlement is the goal: savings for journey, transferrable credit history, transferable pension schemes.

To help FSPs become more familiar with refugees’ profiles and livelihood opportunities, UNHCR also offers the following support:

  • Aggregate data sharing on refugees’ needs, socio-economic segmentation, locations, and – whenever available, value-chain analysis and business opportunities;
  • Support to access refugee settlements in non-urban settings;
  • Training for FSPs about refugees’ needs and opportunities for livelihoods in a given country;
  • Links with NGOs partners and other development agencies at the field-level that provide non-financial services to refugees – such as business skills, language training and legal support;
  • Development of case studies and webinar series to share successful experiences of working with refugees.

Other areas of focus for UNHCR’s work on financial inclusion of refugees include:

  • Establishing a partial risk guarantee facility in partnership with the Swedish Development Agency (Sida) to facilitate access to financing for FSPs willing to provide loans to refugees and host populations.
  • Connecting more vulnerable refugees with UNHCR’s Livelihoods Unit’s Graduation Program to help refugees move out of extreme poverty into sustainable livelihoods. Once the program participants have increased their assets and become less vulnerable, UNHCR seeks to create linkages with FSPs, so that refugees can enter the financial mainstream.
  • Investigating the possibility of linking digital IDs – already introduced as part of UNHCR refugees’ registration process and the cash assistance program – to remittance payment products, with the goal of increasing access and lower costs of these products, while providing an entry point for FSPs to offer a broader range of financial services for refugees.
  • Expanding collaboration with donor agencies to support FSPs with technical assistance to conduct market assessments, implement new technology solutions, and extend financial products based on refugees’ demand.

As UNHCR expands its agenda on financial inclusion for refugees, these initiatives all aim to help overcome the barriers that refugees encounter in access to finance, with the ultimate goal of helping them to rebuild their lives in dignity, find sustainable livelihoods and achieve self-reliance.


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