CFI Blog

The Future of Refugee Financial Inclusion

Among all the challenges the economist and humanitarian sector has faced, tackling the refugee crisis has to be one of the grueling mountains to cross. The refugee crisis worldwide, especially in Europe, has increased and, in some areas in the European Union, has exploded. As wars and civil strife break out in the middle east and extreme climate change perpetuates droughts, floods, heat, and extreme poverty in Sub-Saharan Africa, mass migration is putting pressure on the international community to act and build infrastructure to include them in society and also financially. 

The refugee crisis has escalated due to the ensuing Russian and Ukrainian wars, with people fleeing the war zone, and different countries across Europe have to take in the refugees. The figures are staggering, to say the least. Nearly 83.9 million people across the globe have been displaced from their homes. The Ukrainian War and the US withdrawal from Afghanistan have significantly contributed to this crisis. Over 21 million are refugees in other countries, and over 53.2 million are internally displaced. 4.6 million refugees are asylum seekers, and over 4.4 million Venezuelans are displaced worldwide.

However, the world’s low and middle-income nations hosted and sheltered about 83% of the population compared to the developed countries, which hosted only 17% of the refugees. Neighboring countries have hosted 22% of all displaced Venezuelans. The refugees have been assimilated into the neighboring communities of origin.

Even more staggering is that of all refugees and displaced Venezuelans, 69% of them come from five countries, with the Syrian Arab Republic contributing 27 percent of the population and Myanmar contributing the least with 5 percent. 

Financial Inclusion or Encampment? Rethinking Digital Finance for Refugees

Financial Inclusion or Encampment? Rethinking Digital Finance for Refugees

Humanitarian forces and organizations have a verdict that merely giving the refugees shelter and food will not be enough. They have touted that the refugees must be given financial access and the ability to participate in the national economy. Financial inclusion is crucial for people who have left behind their homes, property, and probably their source of income. Financial inclusion enables them to become self-dependent and self-reliant.

Recent research has proven that access to digital financial services creates a pathway toward dignified humanitarian access to basic needs like food security, educational access, savings account, or investment portfolio. Digital financial access also leads them to have foundational and constitutional rights. However, many of the host countries have not enabled access to such financial facilities leading to being a part of second-class citizens. 

However, progress has been made over the past few years with multiple agencies that have taken up the fight to include socially and economically marginalized immigrants. This article will extensively discuss the immigration issue in Kenya and Jordon, where the discrimination against asylum seekers are most profound.

As for the displacement report, the figures are staggering, to say the least. Nearly 83.9 million people across the globe have been displaced from their homes. The Ukrainian War and the US withdrawal from Afghanistan have significantly contributed to this crisis. Over 21 million are refugees in other countries, and over 53.2 million are internally displaced. 4.6 million refugees are asylum seekers, and over 4.4 million Venezuelans are displaced worldwide.

Among all the challenges, the economist and humanitarian sector has faced, tackling the refugee crisis has to be one of the grueling mountains to cross. The refugee crisis worldwide, especially in Europe, has increased and exploded in some areas of the European Union. As wars and civil strife break out in the middle east and extreme climate change perpetuates droughts, floods, heat, and extreme poverty in Sub-Saharan Africa, mass migration is putting pressure on the international community to act and build infrastructure to include them in society and also financially.

In Kenya, restrictions have been imposed on asylum seekers due to COVID-19. Many policies have been adopted at face value, but they have not been implemented in practice. Refugees have not been given an environment where their basic needs are met. Some have been resettled somewhere else. However, they comprise a minuscule share of the refugee population. 

Two-Tier Finance in Jordan

Jordan’s immigration policies have undergone multiple paradigm shifts. The country has gone through multiple waves of immigration from Iran, Iraq, Syria, and Palestine. These places have undergone political strife, war, ruthless dictatorship regimes, extreme poverty, and drought. Over time people from other countries like Yemen, Sudan, and Somalia have arrived. The problem with Jordon is that the nation is a member and signatory of the Refugee Convention of 1951.

A convention of 1998 where a memorandum was adapted to strengthen ties between the Jordanian Government and the United Nations High Commission of Refugees and financial inclusion and the world economic forum at Davos where the organization hoped to use its resources to help the refugees in their crisis. United Nations High Commission of Refugees must stay for six months in any country where they can repatriate the people in their country of origin or resettle them in a third country. 

But Jordan has a massive infrastructure problem and is a developing nation. They have their poverty and cannot take in people, which can pressure the country’s resources. Many policies have been adopted at face value but have not been implemented in practice. Refugees have not been given an environment where their basic needs are met. Some have been resettled somewhere else. However, they comprise a minuscule share of the refugee population. 

The most tragic of the entire matter is that most people cannot return to their country of origin because it remains unsafe. Consequently, most refugees remain in precarious positions in the United States. Now there have been calls by the donors to integrate them socially and economically into Jordan society. This will act as a shock absorber after the plummeting humanitarian aid. 

In response to the Syrian civil war, the Jordanian government has adopted the local opportunity program where the integration of refugees becomes easier. But the program is focused heavily on improving the temporary condition of the refugees rather than providing a long-term solution. 

What Use is Finance Without Foundations?

What Use is Finance Without Foundations?

Refugees in Kenya were forced to be self-reliant and independent, but there are structural barriers to moving the social barriers. The most Kenyan labor force is in the informal sector with no fixed income or benefits, and that’s where most refugees are pushed to work. There is barely any provision for banking facilities and infrastructure for any digital banking and transaction. On top of that, Kenya has actively blocked refugees from using Kenya’s only digital banking platform M-pesa and other banking services. 

In one such instance, Phillip, a Nairobian citizen 38 years old, faced systemic changes at every turn to improve his life while he was a refugee in Kenya. In such strenuous conditions, the immigrants turn to the world of crime or talk illegal methods to earn their living. In one such instance, a refugee in Kenya had taken help from a dealer to get a job in a restaurant by using a fraudulent ID. Thereafter, when he was caught, he was fired. In fact, Financial vulnerability is hiding in plain sight.

Many refugees living in camps had figured out methods to start a business to self-sustain themselves without fearing bureaucracy and harassment from state officials. However, their business operations are restricted within the camp areas, and they are not allowed to expand their business and go out and seek better opportunities. For example, Susan, a mother of two, runs homemade alcohol because she couldn’t sustain herself with 60 dollar worth of salary. Her business thrived, but it stagnated after some time as she couldn’t expand her shop outside the camp she grew up in. 

Financial exclusion isn’t just a nuisance and a significant barrier for people like Susan who live in camps. Since the government already blocked the refugees from using M-pesa, they couldn’t use the fundamental tool for social mobility. The Kenyan government has heavily invested in mobile privacy and information security in global development projects, but refugees have kept out of those reforms. Others have taken the help of fraudulent IDs, which land them in jail and could get them fired.

And yet having a digital account means the world to these refugees. One refugee from Ethiopia had confessed she is jealous of the Kenyans using M-pesa. According to her, accessing a digital banking network means she can store her savings somewhere safe. According to our survey, one-third of the Nairobian population has used fake documentation IDs to access M-pesa; unfortunately, some had their SIM cards blocked and their accounts revoked. 

Financial Access Without Inclusion

Financial Access Without Inclusion

UNHCR, FSD Africa, and ILO formed a consortium of humanitarian institutions where it was agreed to offer humanitarian access through microfinance institutions to lend money and provide easy access to saving accounts. Microfinance institutions do not have the regulations and restrictions as much as other banking institutions, like the KYC requirements and the rigorous documentation process that the banking clients have to go through. However, considering the economic conditions of Jordan and Kenya, many are doubtful about how doling out business loans will help them instead access social security, savings account, and short-term credit. 

Many humanitarian actors have also tried to leverage the country’s financial infrastructure to provide aid for the refugees. One of the best examples is using M-pesa to provide financial aid to refugees and food assistance.

However, the government has put blockages and stifled the aid pathway. There were also talks about making digital cash payments to the refugees, but the government prohibited the refugees from using the M-pesa mainstream accounts. So the institutions have used closed-looped applications or food vouchers. However, this system seems to not be viable in the long term. 

Frequently Asked Questions (FAQs)

Q1. What do you see as the most significant financial challenge refugees must overcome?

The refugees have been uprooted from their country of origin for various reasons. They are without money, jobs, land, or any methods and means to sustain themselves. The biggest challenge they will face is social and economic upliftment and access to funds for their sustenance. 

Q2. How can we help refugees without money?

United Nations High Commission of Refugees and other humanitarian organizations have provided refugees with vouchers and educational facilities. Multiple legal organizations are fighting for the right of refugees. 

Q3. What are the most significant needs of refugees?

According to the United Nations High Commission on Refugees, the most significant needs of the refugees are food, shelter, security, secure income, and energy source to keep them warm or cool. Education, in later stages, is necessary for social, and economic upliftment.

Conclusion

According to many researchers, financial inclusion is a challenge for nations already in the developing stage. Jordon and Kenya are both developing nations with impending economic problems. But the refugee crisis is looming large.  Nearly 83.9 million people across the globe have been displaced from their homes. The Ukrainian War and the US withdrawal from Afghanistan have significantly contributed to this crisis. Over 21 million are refugees in other countries, and over 53.2 million are internally displaced. 4.6 million refugees are asylum seekers, and over 4.4 million Venezuelans are displaced worldwide.

Humanitarian forces and organizations have a verdict that merely giving the refugees shelter and food will not be enough. They have touted that the refugees must be given financial access and the ability to participate in the national economy. Financial inclusion is crucial for people who have left behind their homes, property, and probably their source of income. Financial inclusion enables them to become self-dependent and self-reliant. However, a battle is ensuing between the government and humanitarian organizations. The best financial inclusion framework is a policy that depends on short-term cash transfers and long-term economic benefits. 

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