AFI member stories – Asia: Best practices in financial inclusion of FDPs

To mark World Refugee Day on 20 June, AFI members shed light on their efforts in innovating responsibility sharing, partnerships, and policy actions to advance the financial inclusion of FDPs.  These proactive policy approaches being implemented by emerging economy financial regulators show what is possible even within the context of compliance with global standards and other constraints such as an underdeveloped financial infrastructure.  These policy actions have furthermore been made possible through innovative partnerships established with actors from beyond the traditional financial inclusion sphere, such as humanitarian agencies and Anti Money Laundering & Countering the Financing of Terrorism (AML-CFT) stakeholders. 

ASIA

AFGHANISTAN by Da Afghanistan Bank (DAB)

Due to the continuation of conflict and violence in different parts of the country, the total number of FDPs and Internally Displaced Persons (IDPs) is increasing in Afghanistan.  As of end 2016, the official number of FDPs in Afghanistan stood at 2.5 million people.[1]  Although there is no systematic data available on FDPs, a large portion of the FDP population consists of IDPs.  According to Afghanistan’s Ministry of Refugees and Repatriations (MRR), at the end of May 2018, the total number of IDPs stood at 3,797,661 people (759,532 Families).   At the same time, based on a report by the Norwegian Refugee Council (NRC) released in 2018, 94% of the IDPs they have surveyed said that they had fled due to conflict, violence or persecution.[2]  The report also adds that “50 people are forced to flee their homes every hour in Afghanistan.” This means that on average 1200 people flee everyday which averages to 438,000 FDPs annually.

Since IDPs represent an important segment of the unbanked people in Afghanistan it is important to financially include them. In addition, financial services and products i.e. savings, remittances, and accounts to safely store money, are very important and helpful for improving IDPs’ economic well-being.  

Based on an understanding with the World Food Program (WFP), Da Afghanistan Bank (DAB) issued a circular in 2016 instructing all banks and MNOs to open transaction accounts for IDPs who are registered.  This circular indicated that bank accounts can be opened for FDPs by asking for at least one document that can prove their identity i.e. driving license, UN migration card, UNHCR card, WFP card, or MRR card.  Moreover, in the forthcoming National Financial Inclusion Strategy (NFIS) which will be launched by mid-2019, there will be a particular focus on FDPs in order to include specific regulatory approaches for their financial inclusion. 

Once DAB completes its National Risk Assessment (NRA), which will be done in parallel with the formulation of the NFIS, it will implement simplified KYC requirements where appropriate and also introduce financial inclusion products and services which will ease access of the deprived, underserved or unserved segments of the population i.e. IDPs and FDPs to finance. It is worth mentioning that the government has recently started the distribution of digital National Identification Card (NID). All these efforts together, will change the situation and will pave the way to better serve FDPs.

However, similar to other countries with FDP populations, there remain challenges when addressing such a complex issue.  The challenges that DAB faces include a lack of NID because IDPs leave their home towns due to war and violence; vulnerability to ML and TF risks because of a lack of such ID; and the underdevelopment of the financial sector infrastructure i.e. for digital payments.

Having an FDP/IDP specific demand-side survey of financial inclusion will be very useful for informed and evidence-based policy making. In the meantime, designing and introducing specific low risk financial products for FDPs, with proportionate KYC requirements and at an affordable price, is needed. Those countries that are in the process of developing a National Financial Inclusion Strategy (NFIS) and are also home to considerable number of FDPs and IDPs should furthermore consider including a specific section under the NFIS for these displaced persons.

BANGLADESH by Bangladesh Bank

Bangladesh has experienced several influxes of Rohingya refugees over the past 40 years from neighboring Myanmar’s Rakhine state due to persistent marginalization and violence. The fresh escalation of violence in Rakhine State, Myanmar, since 25 August 2017, has resulted in a humanitarian crisis, where approximately 700,000 Rohingyas have crossed the border into Cox’s Bazar (a district in south-eastern Bangladesh). Many of the arriving Rohingyas have experienced physical and emotional violence, where their sense of wellbeing is extremely compromised. This is further compounded by varying degrees of extreme food insecurity and malnutrition. The Government of Bangladesh has welcomed the Rohingya refugees and ensured comprehensive support for them inside Bangladesh.

Bangladesh is a small, low-lying, under-resourced and densely populated country. The influx of Rohingya refugees has changed the demographics of the south-eastern part of Bangladesh. Apart from malnutrition, and waterborne and communicable diseases, Rohingyas are also at risk from trafficking, including for sex, drugs and labor.  The United Nations Development Program (UNDP) recently released an environmental assessment, identifying 28 risk factors threatening biodiversity and human security. In this situation, financial inclusion for the Rohingya population deserves significant importance in order to improve the efficiency of cash-based service delivery while helping to reduce non-regulated services linked to a shadow economy. By giving cash through legal channels, refugees will be able to access money safely and implementing partners will be able to conduct cash distributions through digital financing mechanisms.

From a regulatory perspective, a customer needs to satisfy KYC requirements to open a bank account to reduce the Money Laundering and Terrorist Financing (ML/TF) risks. In most cases, refugees are unable to satisfy KYC requirements either due to their status or because they do not have the required documentation. However, such risks can be mitigated through tailoring financial services offered to Rohingyas as they require only basic banking services such as cash deposit, payments, and money transfers. These services represent lower ML/TF risk with regards to the risk scale of different banking products. Moreover, the Government of Bangladesh issued a Registration Card for Rohingya refugees. Apart from this, WFP (for SCOPE Platform) and UNHCR also issued Refugee Card for the Rohingya that include personal information along with biometrics, which can be used as the documentation to satisfy ML/TF regulations while opening a bank account.

Bangladesh is also planning on how to financially include refugees through receiving their aid and remittances by using payments. The Bangladesh Financial Intelligence Unit (FIU) is closely working with the UNHCR, WFP, International Organization for Migration (IOM) and Bangladesh Red Crescent Society along with the private sector and other stakeholders on a feasibility study of refugee inclusion that complies with international standards on AML-CFT.