By Micol Pistelli, Senior Financial Inclusion Coordinator, UNHCR
Access to financial services in host countries is indispensable to refugees’ economic survival. Without it, refugees cannot open a bank account to receive wages, safeguard savings, securely receive or send money, and get credit to start a business. For refugees looking to return home or resettle elsewhere, transferable credit histories is also important.
But in most countries, regulatory and documentation hurdles prevent forcibly displaced persons from creating bank or mobile money accounts, limiting their economic inclusion and integration with local communities.
UNHCR is working to change that. Guided by three main objectives, UNHCR and its partners are building upon current initiatives and piloting new ones to break down barriers to financial services for refugees.
1. Strengthening protection and resilience against emergencies and shocks
UNHCR and its partners invest significantly in refugees’ access to digital cash transfers, which deliver life-saving cash while offering an entry point to financial inclusion early in the displacement phase. As a result, in 2021, six million forcibly displaced persons accessed digital payments. Digital innovations have opened up other ways to access financial services. In Ukraine, UNHCR is disbursing cash to displaced persons using a pilot blockchain-based payment system. This technology can be leveraged beyond humanitarian assistance to support setting up digital wallets and facilitate access to payments and remittances at lower costs.
In parallel, UNHCR is raising awareness of refugees’ rights to access financial services. Refugees are often unaware of their legal rights or unfamiliar with financial service providers’ requirements and procedures to serve them. In Brazil and Colombia, UNHCR, government authorities, and development actors have produced guidance booklets for migrants and refugees to build their knowledge on local market opportunities, starting a business, and general information regarding the countries’ financial landscape.
Table: Range of financial services that refugees may need during each displacement phase
| Displacement phase | Financial Service Demands |
| Phase 1: arrival | Survival cash for food, housing, medical services and to repay debt incurred during escape. |
| Phase 2: initial displacement | Savings products, remittances, microcredit for consumption, health insurance. |
| Phase 3: stable/protracted displacement | Savings products, microcredit for business and consumption, mortgage/home improvement loans, transactional accounts for cross-border payments, remittances, health insurance. |
| Phase 4: permanence | Savings products, microcredit for business and consumption, pension plans, insurance products. If return/resettlement is the goal: savings for journey, transferrable credit history, transferable pension schemes. |
2. Promoting inclusion within host countries’ economic and financial systems
Refugees experience specific issues due to their particular legal status. In some countries, they have limited rights to work and move, further restricting their access to mainstream financial service providers. Even where refugees have the legal right to open a financial account, there is often regulatory inconsistencies and misalignment between policy and and the practices of financial service providers. At times financial service providers may also be slow in adapting to new rules such as those allowing refugee IDs as valid proof of identity.
A concerted effort is needed to overcome existing barriers to banking services for displaced populations. Among key initiatives, financial regulators can follow a risk-based approach to Know-Your-Customer (KYC) and customer due diligence (CDD) requirements in line with Financial Action Task Force (FATF) recommendations, easing the documentation requirements for refugees.
Further, UNHCR advocates for governments to recognize refugees’ documentation for a range of essential services including banking and issuance of SIM cards for mobile money accounts and money transfer services. There are several positive examples of jurisdictions hosting refugees which have permitted the use of UNHCR-issued IDs to satisfy KYC and CDD requirements. In Zambia, the Central Bank allows mobile money service providers to serve persons who present refugee ID cards or registration documents issued by the Ministry of Home Affairs. In Uganda, the Communications Commission issued a policy directive enabling the majority of refugees with valid IDs to obtain SIM cards.
3. Bolstering self-reliance and entrepreneurial opportunities
Driven by necessity and limited employment choices, many refugees start a business once they settle in a host country. However, a lack of financial capital often curtails their ability to grow their businesses.
UNHCR engages with financial service providers to raise awareness of refugees’ legal rights and socio-economic and financial profiles, and the business case for serving them. While every context is different, emerging good practices by financial service providers in Malawi, Jordan and Lebanon have resulted in opening up credit and other financial services to refugees.
Last but not least, partnerships with development institutions, impact investors and governments are game changers when it comes to addressing economic and social challenges faced by refugees and host communities alike. Recent innovative programmes include:
- A first of its kind blended finance facility was established in Uganda by UNHCR, the Swedish International Development Cooperation Agency (Sida), and Grameen Crédit Agricole Foundation to incentivize microfinance investors and financial service providers to extend their services to refugee and host populations.
- An IFC-UNHCR joint initiative aims to mobilize private sector to create jobs and provide financial services and business capital for refugees and host communities. Lessons from market assessments and programmes in South America will be shared in 2023, along with an actionable agenda for replication tailored to the different country contexts.
- The first Equity Fund for Forcibly Displaced by Developing World Markets, when operational in 2023, aims to invest in businesses serving forcibly displaced and migrant populations.
- Through an Innovation Norway initiative, UNHCR identified financial mechanisms that would allow refugees in Kenya and Jordan to access credit or reimbursable grants in their country of asylum and pay it back in the country where they will move to pursue job opportunities (Australia, Canada, and the United Kingdom).
- UNHCR’s partnership with KIVA leverages its microfinance crowdfunding platform to provide risk-tolerant capital to refugees. The data KIVA has collected since it started mobilizing capital for refugee loans in 2016 shows that with over 95% repayment rates, refugees are as creditworthy as non-refugee microfinance clients.
- ILO’s new training course “Making finance work for refugees and host communities”, under the PROSPECTS partnership of which UNHCR is part, targeting managers of financial services providers that currently serve or consider serving refugees and host communities with financial services.
Refugees’ financial needs evolve over time. Access to affordable and useful financial services enables their socioeconomic inclusion and helps them better plan for their future – whether they remain in their country of asylum, return home, or resettle in a third country.
Working with governments of host countries, UNHCR and its partners are progressively improving the financial landscape, creating enabling market environments and fostering economic inclusion for refugees and host communities.