Ten years ago, Rushd Averroës moved from Yemen to the UK to study. Keen to start settling into the country straightaway, one of his first steps was to try to set up a bank account. But, as he soon found out, getting access to finance wasn’t as easy as he had hoped.
“It was very hard,” says Mr Averroës. “Almost every traditional bank I went to didn’t let me open an account because they said I couldn’t prove my identity. Even though there were many ways to prove who I was, the banks only wanted to use the system they had been working with for years. This is where immigrants can feel excluded because a bank account is a basic human right.”
His difficulty in accessing traditional banking services is a common one among the world’s nearly 30 million refugees and asylum seekers. Their financial inclusion is being restricted by banking rules that prevent access to finance, not only opening a current account, but also getting a business loan. This therefore impacts how quickly new arrivals can start growing financial roots.
People can be unbanked but still financially savvy
Swati Mehta Dhawan, researcher and consultant on the financial inclusion of low-income households, has studied access to finance for refugees and asylum seekers in Germany, where immigration has significantly increased over the last few years, amid the arrival of nearly one million people, notably from Syria and Afghanistan.
“As people get into the system and integrate, they will end up performing a lot of financial firsts, like getting a rental contract, opening a bank account or registering a business,” she says. “They are bound to make mistakes because they don’t understand the system or the new language very well. While support for integration in the labour market was in place, we found that when it came to financial aspects, the support was not there.”
This gap within the context of immigration can, however, be filled by fintech solutions. In the past few years, companies such as Leaf, a virtual bank that allows refugees to save and transport assets securely across borders, and Now Money, a digital bank for migrants in the United Arab Emirates that helps them send remittances cheaply and easily, are playing a role in banking the unbanked.
US-based Accion Venture Lab, the seed-stage investment initiative of global non-profit organisation Accion, is supporting Leaf and has just launched a $23-million fund for inclusive fintech companies.
Vikas Raj, managing director of Accion Venture Lab, says: “From our perspective, the opportunity is twofold. There is more opportunity for fintechs working with migrants and refugees by using the same tools that others are already leveraging. Leaf, for example, is using a whole set of tools that didn’t exist ten years ago, including mobile money and blockchain. That would not have been possible before because not everybody had a mobile phone and blockchain was just an idea. We have these tools now.”