4 June 2020

Locating FDPs in IGF policies

By Mariam Jemila Zahari, Policy Analyst & Majidah Hashim, IGF & GIF Communications Manager, AFI

Financial regulators and policymakers are facing challenges of forced displacement while tackling underlying causes of poverty and underdevelopment.

As of end-2018, approximately 70.8 million people in the world had been forcibly displaced as a result of persecution, conflict, violence or human rights violations, according to the UN High Commission for Refugees (UNHCR). Additionally, 17.2 million people had been newly displaced from their homes because of extreme weather disasters, according to the UN Office for Disaster Risk Reduction (UNDRR).

However, formulation and implementation of mitigation and adaptation inclusive green finance (IGF) policies can play a key role  in bringing financial inclusion for forcibly displaced persons (FDPs)

Doubly disadvantaged

Displacement does not hit everyone the same way. Those at the bottom of the economic pyramid experience a double blow when they become forcibly displaced during climate disasters. Besides disruption to family, community and cultural life, climate change induced forced displacement also undermines resilience building and financial inclusion efforts. Pre-existing vulnerabilities become magnified and often, a return to ‘normalcy’ is not an option.

For some, disaster displacement is temporary, for others, it can lead to prolonged displacement. Of the 1.5 million people displaced by the 2010 earthquake in Haiti, almost 40,000 people remain in temporary shelters eight years later.

The triple nexus

When compounded with conflict, climate change only worsens pressures on FDPs, a topic of frequent debate   at the UN Security Council. The UN Environment Program (UNEP) calls climate change the ultimate “threat multiplier” as it aggravates existing fragile situations and often contributes to escalating social tensions, disorder and violence, which can further drive forced displacement.

The Intergovernmental Panel on Climate Change (IPCC) warns that changes in climate in resource-dependent countries enhance the risk of localized violent conflict, for example between farmers and herders of different ethnic groups. The insurgency of terrorist groups such as the Islamic State’s West Africa Province (ISWAP),better known as Boko Haram, has been fueled by the climate change-induced food insecurity in the region which had affected more than seven million people by late 2017.

Inclusive Green Finance for FDPs

IGF policies can be applied in forced displacement contexts to build the resilience of and empower FDPs and FDP-led micro-, small- and medium- enterprises (MSMEs), while contributing to climate change mitigation.

In the aftermath of Typhoon Yolanda, Bangko Sentral ng Pilipinas issued a circular to all its regulated entities to relax their Know-Your-Customer (KYC) and Customer Due Diligence (CDD) requirements for those displaced to be financially included despite lacking identification documents. To soundly adhere to global Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) standards, the amount for daily transaction was limited to approximately USD990 and below and the accounts were still subject to monitoring.

In the Middle East and North Africa and the Sub-Saharan Africa regions where the refugee crisis has been prominent for decades, many governments and international organizations have designed FDP programs that leverage renewable energy options, reforestation activities, and access to clean fuels and technology for cooking.

Solar plants built in the Jordanian Azraq and Zaatari refugee camps ensured that refugees have access to clean and affordable energy. In the Zaatari Camp, a 12.9MW solar plant was completed in October 2018 and now provides renewable energy to the entire population of the refugee camp while mitigating an estimated 15,600 tons of CO2 annually.

In Kenya, national and international stakeholders have been extending Pay-as-you-go (PAYG) Solar Home Systems (SHSs) to both refugees in the Kakuma Refugee Camp and the host community for several years now. As a result, refugees in Kakuma are able to make savings and focus on their livelihoods.

Although these initiatives can advance financial inclusion of FDPs while mitigating climate change, replication must be carefully contextualized given the significant variance in absorptive capacity among refugee settings, ranging from camps to urban displacement.

Situating FDPs within IGF policies is still an emerging policy area. However, data and evidence highlight the urgency to include those who are at the bottom of economic pyramid, or who are absent from it altogether in our collective transition to low-carbon economies. There can also be further exploration of how climate risk insurance, green MSMEs, and other IGF areas may be inclusive of FDPs.

With only ten years to achieve our common aims of global equality and sustainable development as defined by the Sustainable Development Goals (SDGs), we need to act now so that FDPs are no longer structurally excluded from our green policy processes and frameworks. Regulators can create greater coordination and harmony between the policy responses to climate change and forced displacement by leveraging IGF policies in the interests of sustainable development for all.

AFI’s Inclusive Green Finance (IGF) workstream is part of the International Climate Initiative (IKI) supported by the German Federal Ministry for the Environment, nature Conservation and Nuclear Safety (BMU), based on a decision of the German Bundestag.

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