A Family in Mahmur Refugee Camp, Iraq/Shutterstock

5 November 2021

Collaboration crucial to financial inclusion of forcibly displaced

Financial policymakers and regulators must work together with public, humanitarian, development and private sector stakeholders to drive the inclusion of forcibly displaced persons (FDPs) into formal financial systems, including by prioritizing them in national strategies and financial literacy campaigns.

More than 80 million people worldwide are forcibly displaced, according to the United Nations High Commissioner for Refugees, with the vast majority (86 percent) living in developing countries. Many survive in invisible economies that, according to the Roadmap to the Sustainable and Responsible Financial Inclusion of FDPs, lack the necessary tools to “rebuild their economic livelihoods, including affordable access and use of quality, responsible formal financial services that can help them to safely store money, build up savings, send or receive money transfers and carry out day-to-day financial transactions”.

With the unique ability of financial policymakers and regulators to address policy and regulatory challenges – such as in customer identification – it is critical that they adopt a holistic approach that embraces collaboration towards the creation and implementation of effective policy change, and that builds trust in the financial system.

This includes by cooperating with other government entities, humanitarian and development organizations, civil society and private sector players, that provide fundamental and interconnecting support towards ensuring that FDPs are not left behind.

Mounting hurdles

But the challenges faced are far from straightforward. FDPs are a highly diverse group requiring solutions tailored towards their unique circumstances and phases of displacement, particularly with many facing heightened stigmatization and xenophobia compared with other low-income groups.

The outbreak of COVID-19 has only worsened their plight, especially forcibly displaced women and youth, who now find themselves at greater risk of being forgotten by governments pushing isolationist policies to tackle pandemic-related economic downturns. The pandemic has also underscored inequalities in the financial system with various mitigation efforts, including improvements to digital financial services, often excluding the most disadvantaged populations, including FDPs.

“The crisis presents a risk of countries turning away from FDPs during the recovery,” AFI’s executive director, Dr. Alfred Hannig, told participants at a virtual workshop co-hosted with Central Bank of Iraq (CBI) on the financial inclusion of FDPs. “This would be catastrophic to FDPs, and we need to challenge these tendencies towards isolationism.”

“This is a global problem that requires global cooperation and drive to ensure an inclusive economic recovery,” he said, particularly as financial inclusion also contributes to achieving national anti-money laundering and combating the financing of terrorism policy objectives, given that it would bring them into the formal economy.

Driving home the point was Bank of Uganda’s Tilda Nabbanja, who, summarized some of the key lessons from the central bank’s financial literacy programs as “collaboration, collaboration, collaboration.”

The central bank coordinated the development of a five-year strategy that was helping refugees make informed financial decisions and encouraging the use formal financial services and products that meet their evolving financial needs.

Crucial to any long-term planning, added International Rescue Committee’s Stefanie Plant, was the need for regulation to support the documentation that displaced people typically possess. Given that many refugees lose documents when they flee to a host country, policymakers can work towards relaxing KYC requirements for tools targeted at refugees.

On the supply side, financial service providers can be better incentivized to support financial access to displaced persons, helping them rebuild their financial histories to tap into better economic opportunities.

Data-driven policies

Adopting a holistic approach that combines financial and non-financial aspects would create a lasting impact, BMZ Senior Policy Officer Linnea Kreibohm said, given existing knowledge gaps in understanding the financial wants of refugees and the need for evidence-based policymaking.

BMZ has been a key supporter of AFI’s FDP workstream, having collaborated with the network on various milestone events and publications that are shaping global dialogue..

These efforts have often showcased the accomplishments of AFI members – including Bank of Uganda, Banque Centrale de Mauritanie, Central Bank of Jordan, Eswatini Ministry of Finance Center for Financial Inclusion and National Bank of Rwanda – that are championing financial inclusion as a viable solution to what is traditionally viewed as a humanitarian policy challenge.

They, AFI’s Dr. Hannig said, have promoted the collection of sex- and age- disaggregated financial inclusion data on FDPs, included FDPs in their national financial inclusion strategies, implemented proportionate Know Your Customer (KYC) requirements for FDPs, delivered financial literacy programs for FDPs and established new relationships with crucial stakeholders, such as those from the humanitarian sector.

Also making headway was CBI, which is preparing its national strategy for financial inclusion. According to Deputy Governor Dr. Ammar Khalaf, the strategy will be considered the “mainstay for enhancing the usage and access to financial and banking services and raising the financial and banking awareness for the purpose of increasing the supply side and demand side for services.

It aims to target marginalized and low-income groups, “the most important of these people are FDPs in Iraq who have suffered a lot, especially economically.”


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