Financial Regulators and the Global Forced Displacement Crisis: a Shared Responsibility
The global forced displacement crisis is undoubtedly one of the most pressing challenges facing both global bodies and national policymakers today, manifest in developed and developing countries alike. According to data from the United Nations High Commission for Refugees (UNHCR) we are witnessing one of the highest levels of forced displacement on record, with more than 65.3 million people forcibly displaced persons (FDPs) worldwide. These displaced communities include nearly 21.3 million refugees, 40.8 million internally displaced persons, and 3.2 million asylum seekers. In addition to both new and protracted conflicts, the impacts of climate change are expected to add significantly to the numbers of FDPs in the years ahead. The scale of the crisis constitutes a significant impediment to progress being made towards achieving the Sustainable Development Goals (SDGs).
An important, though until recently under-analyzed, aspect of the crisis is the challenge of providing fast, efficient and sustainable delivery of financial services to FDPs. Although specific data on FDPs’ access to financial services is limited, it is evident that a great number lack access to a full range of formal financial services that meet their needs, and are consequently reliant on informal, unregulated, and often unsafe alternatives. Options to safely store money, build up savings, send and receive money transfers and conduct everyday financial transactions are vital for FDPs. Financial inclusion can therefore play a key role in enabling FDPs to both meet their day-to-day financial needs, as well as realizing their future potential.
While forced displacement has until recently been addressed predominantly as a humanitarian issue, there is now a broad consensus among the international community that a multi-stakeholder approach bringing together the humanitarian and development sectors together with both policymakers and private sector innovators. The striking fact that 80% of displacement crises now last ten years or more demonstrates the need to link the humanitarian response to longer-term solutions, including financial inclusion of this vulnerable segment of the population. Efforts such as the ‘Barcelona Principles’ for Digital Payments in Humanitarian Response have recognized the need to create such effective bridges.
In recognition of the shared responsibility of addressing the global forced displacement crisis, and the importance of financial inclusion in this context AFI jointly conducted a High-Level Forum in Berlin on the Financial Inclusion of FDPs in collaboration with the Global Partnership for Financial Inclusion (GPFI), and under the auspices of Germany’s G20 Presidency. At this multi-stakeholder forum, a draft Special Report exploring the perspectives of financial regulators from the AFI Network on the financial inclusion of FDPs was presented. AFI members from 13 countries contributed to the report, sharing their experiences, challenges, and ideas for solutions to this urgent challenge.
The report, which will be finalized ahead of the AFI Global Policy Forum to be held in Egypt this September, highlighted the role of financial regulators in encouraging the financial inclusion of FDPs through the creation of conducive regulatory environment and by taking the needs of FDPs into account in the design of their national financial inclusion strategies. For example, the Central Bank of Jordan is working to provide official channels for refugees to transact and monitor their finances linked to a UNHCR issued biometric ID card. An important role for regulators is also to consider how to take account of FDPs in National Risk Assessment (NRA) processes to inform the implementation of tiered KYC regimes and simplified due diligence to enable more straightforward client onboarding for FDPs lacking formal identification. In the Philippines, the Bangko Sentral ng Pilipinas has made provision for flexibility in KYC requirements to be applied in the context of forced displacement caused by natural disasters.
The forum discussions highlighted the role of innovations such as digital payment technologies, including through mobile money as well as distributed ledger solutions, which are widely seen as holding the potential to catalyse the financial inclusion of FDPs. Equally, it is apparent technology alone will not solve the issue, and it must be carefully complemented by an enabling regulatory environment that is also risk-aware. In this regard, policy approaches such as the ‘regulatory sandbox’ carry significant promise to support innovations that can meet FDPs’ needs. Perhaps above all, the forum emphasized the need for continued multi-stakeholder discussions at the global level accompanied by concerted national level implementation efforts as we collectively strive to bring the benefits of financial inclusion to those in urgent need.
ABOUT THE AUTHORS
Robin Newnham is the Head of Capacity Building and Policy Analysis at the Alliance For Financial Inclusion (AFI).
Mariam Jemila Zahari is the Program Officer of Capacity Building at the Alliance For Financial Inclusion (AFI).
Photo by Ggia (Own work) [CC BY-SA 4.0 (http://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons
 Regulatory sandboxes have been advanced by a number of financial services regulators to promote innovation in how services are tailored and delivered. Proposals are developed in close collaboration with domestic regulators thus creating a ‘safe space’ for testing new delivery models. See for example: https://www.fca.org.uk/firms/innovate-innovation-hub/regulatory-sandbox