Lauren Hendricks of the Grameen Foundation recently spent time at the Bidi Bidi camp. Below are her reflections.

The Bidi Bidi refugee camp, in northwestern Uganda, is the largest refugee settlement in the country, and the second-largest refugee camp in the world, hosting 220,000 refugees who have fled the devastation and humanitarian crisis of the protracted civil war in South Sudan. In contrast to long-established refugee settlements elsewhere in the country, the inhabitants of <a href="https://www.theguardian.com/world/2018/may/19/inside-world-largest-refugee-camp-uganda-south-sudan-civil-war">Bidi Bidi</a> are newcomers: all of them have arrived since the 2016 “<a href="https://reliefweb.int/report/south-sudan/south-sudan-finding-way-forward-after-july-2016-crisis">July Crisis</a>” in South Sudan.

Because of the long-term stability, favorable policy and social environment, and freedom of movement in Uganda, the majority of refugees in more established camps are either already engaging in small businesses or would like to start one (a recent World Bank study cited that 72 percent of refugees are operating some sort of micro or agri-business.) But at Bidi Bidi, the relationships and arrangements among people that create an active economy have not had time to develop, and economic activity remains low. These refugees arrived with literally just the clothes on their back and the few assets they could carry, and are to a greater extent than most refugees in Uganda, still struggling to establish themselves and supplement the limited support NGOs and the UN can provide.

However, there is a potential game changer: mobile phones and mobile money are widely available, and they hold enormous potential for generating economic activity. <a href="https://grameenfoundation.org/where-we-work/sub-saharan-africa">Grameen Foundation</a> is working with <a href="https://www.gsma.com/r/mobileeconomy/sub-saharan-africa/">GSMA</a> (the association of mobile network operators) to develop ways to increase financial inclusion among the refugees. In my visit to Bidi Bidi to consider how mobile money could help kick start the camp economy activity, I found many possibilities.

The challenge is to make it easier for people to make payments. Right now, many people receive transfers from abroad and from relief agencies via mobile money. In order to use this money for purchases, they either need to find an agent who can cash it out or a merchant who accepts mobile payments. Both are in extremely short supply in Bidi Bidi. Currently when refugees receive transfers from abroad, or from relief agencies, it can take up to a week to find an agent with liquidity. The camp has only 17 agents for over 200,000 people. To reach the ideal penetration ratio of 1,000 to 1 it would need ten times as many agents.

Our work has shown that a focus on female agents will pay off, especially because a majority of the refugees are in women-headed families. Increasing the number of agents cannot be done all at once, however. Currently, agents report an average of 20-30 transactions per day, which does not suggest an overwhelming demand. The pace of recruitment of new agents would need to track the development of the payments and transfer ecosystem within the camps.
<blockquote>A focus on female agents will pay off, especially because a majority of the refugees are in women-headed families.</blockquote>
Equally important is acceptance of mobile money payments by local merchants, which will allow refugees to use mobile money to purchase food and essential goods. Currently, merchants in the camps accept only cash. When refugees cannot turn their relief and transfer payments into purchases, they face severe delays in access to food and essentials. Many merchants believe that accepting mobile money is expensive, but new products are on offer that reduce fees significantly.

Another supporting element for creating an active payments ecosystem is to attract a "super agent," such as a microfinance institution (MFI) or bank that can help agents and merchants balance their liquidity, an essential function. One possibility is <a href="https://rufimfi.com/">RUFI</a>, a unique MFI founded by South Sudanese refugees in 2009 and working on both sides of the South Sudan-Uganda border, and the only microfinance institution serving refugees in Bidi Bidi. RUFI is also an agent for Centenary Bank, offering savings and other services. Currently RUFI’s nearest office is over 30 kilometers away, a significant distance barrier for refugees. By locating in Bidi Bidi and becoming a super agent for mobile money, RUFI could not only help manage agent liquidity, it could also get to know agents and merchants that could become credit clients, and move its own credit and savings transactions to digital form. This would position it well to develop a loan product to help <a href="https://reliefweb.int/report/uganda/refugee-entrepreneurs-boost-host-communities">female entrepreneurs</a> finance the capital needed to become agents.
<blockquote>A super agent can help agents and merchants balance their liquidity and get to know potential clients.</blockquote>
Reports by <a href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=1&amp;ved=2ahUKEwiJh6D2mPjiAhXqqFkKHRNtDvAQFjAAegQIAxAC&amp;url=https%3A%2F%2Fwww.uncdf.org%2Fdownload%2Ffile%2F127%2F6633%2Fuganda-refugee-remittances-assessment-report0620v3pdf&amp;usg=AOvVaw1uX4vhWZodJZ-OcUtUJAML">UNCDF</a>, DCA, and Platform for Inclusive Finance indicate that informal savings groups are active in Bidi Bidi settlement, though estimates range widely regarding how many adults participate (from 11 to 49 percent, depending on the report). Working with savings groups could be an effective way to increase digital financial literacy among refugees, increasing their comfort with digital payments. One of the appeals of digital money is its security, and savings groups may be looking for ways to secure their pooled resources, given security issues within the settlement. Encouraging savings groups and their members to use mobile money would help develop the market for mobile money which in turn is needed to support an agent network.

With steps like these, the economy can slowly begin to rev up, providing benefits to all the residents of Bidi Bidi.

A Ugandan Refugee Camp Hosts Potential for Financial Inclusion

South Sudan

Sub-Saharan Africa

Uganda

Agent Banking

Delivery Channels

Mobile Banking

Payments

Refugees and Migrants

Underserved Groups

Blog Post

This <a href="http://www.findevgateway.org/">FinDev Gateway</a> blog repost is part of the series "<a href="http://findevgateway.org/blog-series/getting-inclusion-right-fiw-2018">Getting Inclusion Right: Financial Inclusion Week 2018</a>."

“I attended six vocational trainings including cooking, make-up, how to make soap and hairdressing. But in the end I couldn’t work as I couldn’t buy the necessary equipment. Not even scissors for cutting my son’s hair.”

This testimony came from a Syrian woman at Zaatari Camp in Jordan. She is one of over 200 refugees interviewed in Jordan and Uganda as part of a market study commissioned by Grameen Credit Agricole Foundation and conducted by the consulting firm Microfinanza. The studies, funded by the Swedish International Development Cooperation Agency (Sida), are the first step in the implementation of a joint program between Sida, UNHCR and Grameen Crédit Agricole Foundation designed to expand access to financial and non-financial services for refugees and host communities in Jordan and Uganda.

The research aimed to assess refugees’ demand for and access to financial and non-financial services. While their landscapes differ in terms of market opportunities and regulatory environments, both Jordan and Uganda have protracted refugee populations with similar needs for financial services.

Since the theme of this year’s <a href="http://financialinclusionweek.org/">Financial Inclusion Week</a> is "Getting Inclusion Right," we’d like to share our top five recommendations for financial service providers (FSPs) willing to contribute to getting financial inclusion right for refugees.
<h3>1. Do not develop specific financial products for refugees.</h3>
This recommendation may seem surprising, but findings from the study demonstrate that there are already products on the market that meet the demands identified among refugee clients. You may need to adjust your internal policies and procedures for ID and collateral requirements but there is no need for exclusive “refugee products” to match demand. Just reach out more to the refugees in your area to include them in the products you offer.
<h3>2. Find out what type of credit refugees in your area need, and how much.</h3>
In Uganda and Jordan, we found that while refugees were borrowing regularly from Savings Groups, friends and family, they were not able to borrow enough to cover their business needs. They wanted access to formal credit, they would prefer individual loans, and most were willing to pay interest. The survey also revealed a need for financing green energy products in settlements, as well as the potential to leverage digital financial services, which are already used by refugees in both countries. In Uganda, where land is reasonably available for refugees, there is also demand for agricultural products, both for individuals and for companies looking for raw agricultural products.
<h3>3. Screen their business ideas. Refugees manifest a remarkable spirit of entrepreneurship.</h3>
In Uganda, 78 percent of refugee respondents have plans to start or develop their own businesses, and 60 percent have already taken the first steps - using savings, borrowing informally and enrolling in vocational trainings. In Jordan, most refugees prefer to start their own business over seeking employment in the limited available sectors for non-Jordanians. In terms of gender segmentation, about one every four women interviewed in Jordan have strong plans to start or develop their own, mostly home-based, businesses, a proportion which increases to one every three women in Uganda.
<h3>4. Overcome the fear of flight risk, as data shows that refugees rarely resettle.</h3>
Flight risk is an oft-mentioned concern for FSPs when it comes to considering refugees as a potential target market. However, our studies found that the vast majority of respondents do not have any plans, not even vague ones, to return to their countries or to relocate to another country. Resettlements are also rare within countries. Refugees’ aspirations were much more related to gaining economic independency than to moving on to a new location. Between 2014 and the end of April 2018, only 5 percent of the registered refugee population in Jordan and 1 percent in Uganda have resettled.
<h3>5. Consider adding on non-financial services to complement the credit offer.</h3>
In both countries, non-financial services – primarily financial education and business management support – are particularly relevant for refugees with limited or no prior experience with credit or running a business. FSPs should apply their client segmentation procedures to assess which refugees may need non-financial service provision. Then, consider partnering with existing specialized NGOs which offer these services, or developing your own curriculum.

Getting Financial Services to Refugees Right

Financial Inclusion Week

Are you following the question of how people receive cash assistance in emergencies or protracted crises? If so, hop aboard the listserv of CALP (<a href="http://www.cashlearning.org/">Cash Action Learning Partnership</a>). Brisk discussions, great resources, and important insights circulate weekly, often daily. 

Lately, we have been discussing “frivolous expenses”—money spent on alcohol, cigarettes. Participants in the listserv are making excellent points. They assert that tracing cash uses in hopes of soothing donor concerns that money is not being spent wisely is folly for two reasons: 1) we already have substantial <a href="https://blogs.worldbank.org/impactevaluations/do-poor-waste-transfers-booze-and-cigarettes-no">evidence</a> that an increase in available cash to households does not increase marginal consumption of alcohol or cigarettes and 2) it’s hard to trace actual use since cash assistance typically supplements other sources of household income.

I would like to pose a third reason why a focus on the uses of cash assistance is folly. To do that, I need to take us into the language of financial planners. Rarely do financial planners, at least in the U.S., use the term “frivolous expense.” Instead, they prefer to divide people’s budgets into <a href="https://bizfluent.com/info-8721606-discretionary-vs-committed-fixed-costs.html">committed expenses and discretionary expenses</a>. In this system, the same item can potentially be classified differently at different points in time. For example, a financial planner speaking to my students the other day agreed that purchasing a grande latte at the local Starbucks was a discretionary expense in the fall semester, and should be enjoyed only after committed expenses were budgeted for and met (including any set-asides for savings). But the coffee’s classification could change. Let’s look to the spring. In March, inviting a potential employer to an informational interview might include treating them to a beverage. For each networking week, the grande latte (in fact two) would now be budgeted as a committed expense: it represents an investment in a student’s future.

Perhaps in settings of displacement we should similarly analyze expenditure on cigarettes and alcohol. When are they committed expenses and when are they discretionary? In a qualitative study I led in 2016 and 2017 on the <a href="http://fletcher.tufts.edu/Institute-for-Human-Security/Research/Migration-Crisis-and-State-Fragility/Financial-Mobility-of-Refugees">Financial Journey of Refugees</a>, those receiving cash assistance said they did not use their aid on cigarettes and alcohol.*

Those not receiving cash assistance, and not yet habituated to the games of aid, were forthcoming about their cigarettes budgets. Cigarettes, they claimed, were a condition of their survival. To gather information on affordable apartments or the best routes out of the country, they needed to offer up a smoke to the person in the tent next door. They happily offered a cigarette to the man at the taxi stand to learn the best times to cross a border or where to get the best rates to convert hard currency into local money. When you are a refugee or migrant, information is survival. Investing in information is not a discretionary expense, it’s a committed expense. In Greece, one group of young Afghan men told us that they did not smoke in Afghanistan but budgeted for cigarettes prior to departure. Their informants told them they had to invest in being sociable along their travels across Iran and Turkey. In fact, they took up smoking as a strategy for socializing and planned to quit when they reached their countries of destination.

Both alcohol and cigarettes had benefits beyond their powers to elicit crucial information. They also facilitated bribes. A woman told us of the “special drink” she carried to persuade the guards at a checkpoint to usher her family through without checking their documents, which if examined, would be cause for their arrest or return. Cigarettes were often exchanged in detention centers and safe-houses for favors like an early release from detention or a better placement on the open-back truck. They were also cheaper than cash bribes. Without using the terms “committed expenses” versus “discretionary expenses,” our respondents set us straight on how exactly cigarettes and drinks constituted an investment in their safety, survival and resilience.

Thus we add a third nail in the coffin of donor insistence on tracing the uses of their cash assistance – the utter frivolity of tracking frivolous expenses. I am sure we will find many more nails to pound into the coffin as our discussion advances.

* Incidentally, respondents were confused about whether they should say they used cash assistance on condoms. Did condom expenditure prove that they were responsible adults earnestly trying to prevent disease, or did it prove that they were irresponsible adults interested only in the next conquest. And, no, we did not ask them if they spent their cash assistance on condoms. Our respondents surfaced the topic when we asked what questions asked by other researchers confused them, so that we would not make the same mistakes. They then asked us for tips on how to answer the condom question, which we gladly gave them.

Kim Wilson is a Lecturer in International Business and Human Security at the Fletcher School, Tufts University and is part of the faculty of Fletcher’s <a href="http://fletcher.tufts.edu/Institute-for-Human-Security">Henry J Leir Institute for Human Security</a>.  

Have you read?

<a href="https://cfi-blog.org/2017/03/09/the-digital-demands-of-the-displaced-dont-track-me-dont-expose-me-dont-cut-me-off/">The Digital Demands of the Displaced: Don’t Track Me, Don’t Expose Me, Don’t Cut Me Off</a>

<a href="https://cfi-blog.org/2016/02/09/financial-inclusion-and-immigration-in-europe-disrupting-identity-norms/">Financial Inclusion and Immigration in Europe – Disrupting Identity Norms</a>

<a href="https://cfi-blog.org/2017/09/28/migrations-middlemen-and-how-to-pay-them/">Migration's Middlemen and How to Pay Them</a>

The Frivolity of Frivolous Expenses

AXA shares insights on and solutions to women's unmet insurance needs in emerging economies.

By <a href="https://group.axa.com/en/about-us/profile/garance-wattez-richard">Garance Wattez-Richard</a>, Head of Emerging Customers, AXA Group

Women-focused insurance solutions are a central part of AXA’s Emerging Customers work. In our <a href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=1&amp;cad=rja&amp;uact=8&amp;ved=0ahUKEwiPgJOBxo7XAhUK2oMKHQBJCJMQFgg0MAA&amp;url=https%3A%2F%2Fcdn.axa.com%2Fwww-axa-com%252F57b5a3a4-c7cc-4dea-97c9-5f7d9f47232c_sheforshield_final-web2015.pdf&amp;usg=AOvVaw0YQN3Y_Twiv2ykoHDo86TX">SHEforSHIELD</a> report, launched with the International Finance Corporation in 2015, we found that the market is growing quickly, as women become more risk-aware and willing to invest in protection. We conducted focus groups with women in Indonesia, Nigeria, and the United Arab Emirates (UAE) and learned that women have very specific, yet unmet needs when it comes to insurance. I am happy to share the stories of three of the women we met on our customer insights journey, diving into their fears and desires and the role that inclusive, women-focused insurance solutions could play.



Nurul

”We are in good health, there are no problems,” we hear from Nurul and other women at the beginning of a focus group in rural Indonesia. Nurul, a 33 year old mother of three, is in her 4th loan cycle with a large group micro-lender. She and her husband live just above the national poverty line, earning an average of 3 million Indonesian Rupiah per month (around USD 220) through dairy farming, selling food and doing small jobs in the nearest town.

[gallery ids="24390,24388" type="square" columns="2" link="file"]

When we ask more, we discover that while Nurul does not worry about her own health, she is concerned with that of her husband, children and parents. She shares, “My husband is the head of my family, so if something happened to him, my family would not survive.” While her husband is the primary income earner, Nurul serves as the family’s primary caregiver, ensuring everyone is taken care of—particularly if anyone becomes ill.

This dichotomy is reflected in Nurul’s financial priorities, as well as that of many of her fellow borrowers. Despite the fact that one-fourth of Nurul’s neighbors have experienced pregnancy or newborn complications, with one-third of her fellow group members having given birth at home, our maternal health insurance concept was rejected unanimously during the focus group. Meanwhile, spouse life insurance and family hospitalization coverage a with transport allowance are in high demand among the women in the village.

While we still see a need for maternal health packages, we are adjusting our products to meet the actual desires of community members. We have bundled our family hospitalization coverage and spouse life protection, with health check-ups and basic education during weekly repayment meetings. In addition, we continue to improve our maternal health offerings. Together with medical device manufacturers and telemedicine providers, we have prototyped a solution that would make maternity care, including pre-paid check-ups and insurance for complications, safer and more affordable.

Ifunanya

Across the ocean, we speak with almost-middle-class women in bustling Lagos. Ifunanya, a 36-year old mother of three, graduated from agricultural university and followed her husband 10 years ago when he got an accounting job in Lagos. After maternity break, Ifunanya got back to teaching, and together the couple earns a regular income of 200,000N every month (USD 566)—very close to a middle-class threshold in Nigeria. Ifunanya, along with the other women in the focus group, say all the right things about healthy lifestyle: prevention is better than a cure, good diet is important and physical activity is a must. They laugh when asked if they apply these concepts in practice, but are hungry for more information on how to live a healthy life.

[caption id="attachment_24389" align="aligncenter" width="1024"]<img class="aligncenter size-large wp-image-24389" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/10/photo-17-05-2017-11-24-53-e1509171338285.jpg?w=2048" alt="AXA Photo Nigeria" width="1024" height="700" /> Focus group in Nigeria. Photo credit: AXA[/caption]

“Cancer is a situation that is feared in Nigeria. It is very difficult to handle... It cannot be managed,” admits Ifunanya. She is right. According to the World Health Organization, about 10,000 cancer deaths <a href="http://www.who.int/cancer/country-profiles/nga_en.pdf">are recorded</a> annually in Nigeria, while 250,000 new cases are recorded yearly. Specifically, Nigeria records 14,000 cervical cancer cases annually, part of the 85% of deaths from cervical cancer that occur in low- and middle-income countries. While Ifunanya does not know much about cancer, it is top-of-mind for her, and she and the other women in the group rank cancer as the most difficult health event to manage financially. “You will definitely need to have at least half a million naira to cope with it.” Ifunanya’s husband has a good insurance package from his employer, but it does not cover her at all.

All of this demonstrates demand for a solution that bundles health information, diagnostics and critical illness insurance, which can be delivered on a mobile platform.

Mary

The last stop of our consumer insights journey is the UAE, where we researched the needs of migrant women from Asia. Mary is 34 years old and has worked as a domestic helper in Dubai for the past five years. She earns AED 2,000 every month (USD 283), half of which she sends half home to her husband, two children, mother and sister. Improving the well-being and future prospects for her children is what motivates Mary. She is worried that if something happens to her, they will not be able to prosper. While she is very interested in our diaspora life insurance policy, she would prefer to put her mother or sister as beneficiaries to ensure her children’s welfare. Mary also saves money in a joint account with her sister to make sure she has easy access to funds when she gets back home. Many other Filipino domestic workers in our group in the UAE have accounts for the same purpose, creating a touch point with formal financial services. Migrant workers like Mary have a clear need for life insurance to cover their families in the event of a death, as well as easy ways to save money while they're abroad.

[gallery ids="24387,24391" type="square" columns="2"]

Lessons Learned and Implications 

Nurul, Ifunanya and Mary have many things in common. Being exposed to and unprotected against many risks, they are responsible caregivers with high aspirations for the future of their children. At the same time, they are so different. We need to start with a very simple offering for customers like Nurul in rural Indonesia, but if we build awareness, the solution prototyped for Ifunanya in Lagos might be also relevant for Nurul in the medium-term. Mary shows us that women face specific risks but also have specific preferences that need to be at the center of product and process design. For us, this is a thorny challenge, but also an incredible opportunity to ideate solutions for different stages of the emerging customer journey.

This all might look familiar to those of you who have been in the financial inclusion space for a long time. We are aware of the work done by <a href="https://www.freedomfromhunger.org/microfinance-and-health-protection">Freedom from Hunger</a>, among others, on bundling health and microfinance. Is this a déjà vu? We don’t believe so. We are taking lessons learned in the past and using them to fuel business model innovation. The issues are the same, but the rise of new technology and new health players makes it possible to come up with scalable and affordable solutions. It’s not only about cost anymore, it’s about changing behaviors by offering the right solutions to the right segment at the right time. For us, at AXA Emerging Customers, this is "make it or break it." If we can’t provide health solutions to emerging customers, we won’t be successful in the long term. Join us to make it a reality.

Insuring “Emerging Women” – Old Issues, New Solutions

Indonesia

Insurance

Life Insurance

Women

This was the question that a team of us at The Fletcher School at Tufts University set out to answer in our study “<a href="http://fletcher.tufts.edu/Institute-for-Human-Security/Research/Migration-Crisis-and-State-Fragility/Financial-Mobility-of-Refugees">The Financial Journey of Refugees</a>.” We studied the routes and financial challenges of more than 100 refugees in Greece, Jordan and Turkey, between July 2016 and April 2017. The refugees we interviewed had traveled from South Asia, Central Asia, the Middle East, East Africa and West Africa.

Regardless of their country of origin, with the exception of Syria, a refugee’s biggest expense was the cost of hiring a smuggler. Smuggling expenses ran about 85 percent of the total cost of the journey. The smuggler’s fee included important services: travel by air or overland, depending on the refugee’s budget, guide services across borders, payment of bribes at border crossings, and documentation falsification expenses. Smuggling prices varied widely by country of origin (some borders being porous, others sealed tight), by how deluxe a trip was (air versus ground), by numbers of borders crossed (affecting the number of falsified IDs required). To give an example, journeying overland from Afghanistan through Pakistan, Iran, and Turkey to Greece might cost $7,500 per person, a price that went up or down based on shifting rules and border crackdowns. Traveling from Eritrea to Greece might cost the same amount. Traveling from Syria to Turkey could cost as little as $500.

The price of the journey was one factor in a traveler’s safety – the higher the cost, the better the traveling modes, and the safer the travel. While what refugees paid their smuggler was important, how they paid them was equally important. Did the refugee pre-pay the kingpin smuggler in advance of the journey? Did she post-pay him after arriving safely in Greece or Germany? Did she pay leg by leg? All these strategies were in play and we outline them in our <a href="http://fletcher.tufts.edu/~/media/Fletcher/Microsites/Human%20Security/Final%20Journeys_Briefing%20Paper.pdf">report summary</a> and they are detailed by the refugees themselves in a <a href="http://fletcher.tufts.edu/~/media/Fletcher/Microsites/Human%20Security/Compendium%20Financial%20Journeys%20%20Publication.pdf">Compendium of Field Notes</a>. Below we describe two of many strategies.
<h3>Strategy 1: Guarantee Scheme via a Financial Third Party</h3>
Money agent networks, often informal, span from Pakistan to Germany, and around the world. These networks—dubbed Eastern Union by a Jordanian regulator—do far more than transfer funds from person A to person B. They will store funds for later disbursement or, if instructed, will shunt funds directly to smugglers. For example, a journeyer traveling overland from Kabul to Athens might visit a money agent in Kabul (a saraf) who will take her deposit for $7,500. When she arrives safely to her first waypoint, which could be in Zahedan, Iran, she texts a code to her saraf. The code, incidentally, would have been randomly generated by the saraf’s app before her departure and she would have memorized it. By sending the code, the refugee signals her safe arrival at the Zahedan waypoint. The saraf then forwards a predetermined sum to the kingpin smuggler, using a network of couriers and other money agents to get him his funds. The kingpin in turn deploys a combination of banks and money agents to make sure his local smugglers get paid.

There is no single way this system of guarantee works. It is customized, improvised upon, and individually negotiated by various actors. In some instances, there is no code. In others, there are several codes. In some instances, the kingpin smuggler chooses the saraf. In others, the refugee chooses the saraf. In Syria, the third party is often a shopkeeper who charges $50 to insure the journey. In Iran, the money agent charges a percentage (often 10 percent) of transactions.
<h3>Strategy 2: Crowdsourcing via Kin</h3>
Typically, crowdsourcing via kin is a pre-payment strategy, but not always. We interviewed refugees who were held hostage by smugglers at various points along their routes. When relatives—sometimes a circle of relatives both forward and backward along the route—paid up, the hostage refugee was released to be smuggled farther along her route.

Often crowdsourcing came in the form of pre-payments along various points in a route. For example, traveling from Eritrea to Greece, a journeyer might signal a relative in Khartoum to fund trip expenses. The relative in Khartoum would crowdsource funds from family members in multiple countries across Europe and North America. She might use Zain, a mobile money system, to collect the funds and hold them in Khartoum. She would then secure a smuggling network to help the Eritrean refugee cross to Sudan. The kingpin smuggler would be paid via a courier upon the refugee’s safe arrival in Khartoum. If the Eritrean refugee wanted to continue north to Turkey, Greece or Northern Europe, another round of crowdsourcing would begin. Again, the relative would make payment to the smuggler after the refugee’s safe arrival. In some cases, to ensure compensation, the smuggler will stay with the refugee in a safe house until he has received his payment via Western Union or an informal money agent.

Said one refugee: “It’s a collective system. All Eritreans understand each other on this.” The understanding is that she does not have to pay her relatives back, but she is expected to pay her debt forward: when someone else in her network tries to escape Eritrea, she is expected to do her part to financially support his or her expenses.

What do these strategies mean for providers of financial services? Clearly suppliers cannot legally, knowingly pay smugglers. But, perhaps there are other forms of financial assistance that are perfectly legal.

First, licit travel is often part of a route and could be better insured. For example, a refugee may be able to obtain a visa to a transit country and would like to secure legal travel there. But, because prior legs of the journey may be cobbled together through smugglers, the refugee cannot predict when they will reach the transit country. Insurance could help offset this uncertainty. Too often providers are skeptical that people need financial education to understand sophisticated insurance products. As long as the systems are familiar and offer value, refugees both literate and illiterate, will master them quickly. Second, providers believe that people don’t like to save, but, we found that saving for a purpose—journey preparation—is valuable. Surely, there are many legal ways to assist refugees to accumulate savings for journey purposes. And just as surely, clever suppliers could find ways for refugees to easily access those licit savings along their journey. Third, the ubiquity of informal agents could lead to service expansion. Can trusted informal money agents be co-opted and certified within a legal framework in much the same way that Uber has recruited its drivers?

Have you read?

<a href="https://cfi-blog.org/2017/03/09/the-digital-demands-of-the-displaced-dont-track-me-dont-expose-me-dont-cut-me-off/">The Digital Demands of the Displaced: Don't Track Me, Don't Expose Me, Don't Cut Me Off</a>

<a href="https://cfi-blog.org/2016/02/09/financial-inclusion-and-immigration-in-europe-disrupting-identity-norms/">Financial Inclusion and Immigration in Europe – Disrupting Identity Norms</a>

<a href="https://cfi-blog.org/2016/08/17/a-learners-license-to-master-the-rules-of-the-credit-road/">A Learner's License, To Master the Rules of the Credit Road</a>

Migration’s Middlemen and How to Pay Them

Germany

Greece

Iran, Islamic Rep.

Jordan

Pakistan

Sudan

Syrian Arab Republic

Turkey

The following post was <a href="http://blogs.accion.org/features/7-fintech-trends-to-watch-in-2018/">originally published</a> on the Accion blog.
We’re in the middle of a fintech boom that <a class="markup--anchor markup--p-anchor" href="https://medium.com/accion/trends-that-may-change-the-world-c00f4e500a8c" target="_blank" rel="noopener noreferrer">could change the world</a>. As a seed-stage investor in fintech for the underserved, Accion Venture Lab continues to see innovative startups increasing access to, reducing the cost of, or improving the quality of financial services for underserved individuals and small businesses around the world.
As we kick off a new year, we’re particularly excited about seven areas of startup-led innovation.

<h4>Digital neobanks</h4>
[caption id="attachment_24930" align="aligncenter" width="616"]<img class="wp-image-24930" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2018/01/appsm_mockup2.jpg" alt="" width="616" height="411" /> SmartMEI is a digital neobank serving small businesses in Brazil[/caption]
In the last few years, we’ve seen the emergence of a number of digital neobanks. Neobanks offer a user-friendly digital interface and a platform for financial services without maintaining their own banking licenses. With a focus on user experience and digital applications, neobanks stand to offer faster and better service to the underserved. Moving forward, neobanks will need to provide both a compelling product for a targeted customer segment and a suite of offerings that go beyond basic accounts or credit cards to retain customers and improve unit economics. Innovators in this space include <a class="markup--anchor markup--p-anchor" href="http://nowmoney.me/" target="_blank" rel="nofollow noopener noreferrer">NOW Money</a>, which offers migrant workers in the UAE a platform to more efficiently transfer remittances and access to other products and services over time, and <a class="markup--anchor markup--p-anchor" href="https://www.smartmei.com.br/" target="_blank" rel="nofollow noopener noreferrer">SmartMEI</a>, which offers small businesses in Brazil a free tax tool and access to a broader set of financial services.

<h4>Next gen small business finance solutions</h4>
Around the world, micro, small, and medium enterprises (MSMEs) struggle to access capital. Estimates suggest that <a class="markup--anchor markup--p-anchor" href="https://www.ifc.org/wps/wcm/connect/4d6e6400416896c09494b79e78015671/Closing+the+Credit+Gap+Report-FinalLatest.pdf?MOD=AJPERES" target="_blank" rel="nofollow noopener noreferrer">200 to 245 million formal and informal small businesses</a> either don’t have a loan or have one but are still constrained by their access to financing. Startups have been developing creative ways to acquire, underwrite, and fund these businesses. Some of the most innovative models today are embedding themselves into supply chains and working with a partner in that supply chain to identify MSMEs in need of financing and to obtain existing data that can support credit decision-making. These companies include <a class="markup--anchor markup--p-anchor" href="http://www.tiendapago.com/en/" target="_blank" rel="nofollow noopener noreferrer">Tienda Pago</a>, which partners with major consumer good distributors in Peru and Mexico to extend short-term working capital to small stores for inventory purchases, and <a class="markup--anchor markup--p-anchor" href="https://lidya.co/" target="_blank" rel="nofollow noopener noreferrer">Lidya</a>, which works through partners in Nigeria to provide invoice discounting and supply chain financing to small businesses.

<h4>Insurtech for the underserved</h4>
Low-income consumers in emerging markets need insurance products to manage and mitigate financial risks, but serving those customers poses significant challenges — from cost-effectively reaching and educating consumers, to accurately assessing and pricing risks, to efficiently managing claims. Startups can play a critical role in solving those challenges with products intended to address specific risks for underserved communities, new distribution channels to reach these populations, and new streams of data to more effectively assess and price risk. Insurtech innovators include <a class="markup--anchor markup--p-anchor" href="https://lumkani.com/" target="_blank" rel="nofollow noopener noreferrer">Lumkani</a>, which sells a low-cost heat detector bundled with insurance to households in South African informal settlements that protect against loss of life, shelter, and assets, and <a class="markup--anchor markup--p-anchor" href="https://togarantido.com.br/" target="_blank" rel="nofollow noopener noreferrer">Togarantido</a>, which serves as an online-based insurance broker focused on the underserved in Brazil.

<h4>Financial services for smallholder farmers</h4>
Smallholder farmers remain notoriously difficult to reach and are often considered high-risk clients since their incomes are tied to unpredictable harvests. An estimated <a class="markup--anchor markup--p-anchor" href="https://www.raflearning.org/post/inflection-point-unlocking-growth-era-farmer-finance" target="_blank" rel="nofollow noopener noreferrer">270 million smallholder farmers around the world face a financing gap of $170 billion</a>. Innovators addressing this need can provide real value — by helping farmers finance irrigation pumps, combat pests, or address climate risks. Startups in this space include <a class="markup--anchor markup--p-anchor" href="https://apolloagriculture.com/" target="_blank" rel="nofollow noopener noreferrer">Apollo Agriculture</a>, which leverages satellite imagery, data science, and mobile money to finance fertilizer and seeds needed to increase crop yields, and <a class="markup--anchor markup--p-anchor" href="https://www.pula-advisors.com/" target="_blank" rel="nofollow noopener noreferrer">Pula</a>, which works with large seed and fertilizer suppliers across Africa to bundle crop insurance in with product purchases.

<h4>Asset finance</h4>
[caption id="attachment_24931" align="aligncenter" width="615"]<img class="wp-image-24931" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2018/01/kn_pg_2016_25.jpg" alt="" width="615" height="410" /> The Paygo team at work on their smart meter for cooking gas[/caption]
Individuals and small businesses require financing for assets like medical equipment, smartphones, and solar home systems to increase efficiency and improve lives. One promising innovation in this space is pay-as-you-go financing, which allows consumers and business owners to make small upfront payments and regular “top-ups,” usually sent via mobile money. The model has already led to a rapid expansion in solar home systems across emerging markets. Other scalable models for asset financing leverage new distribution and payment approaches like layaway solutions, leasing models, and peer-to-peer transfers. <a class="markup--anchor markup--p-anchor" href="http://paygoenergy.org/" target="_blank" rel="nofollow noopener noreferrer">PayGo Energy</a> is a promising company in this space; its pay-as-you-go financing model enables low-income customers in Kenya to pre-pay for cleaner and more affordable cooking gas.

<h4>All-digital consumer lending</h4>
Recent years have seen digital consumer lenders emerge and scale by using simple apps to collect and analyze customer data to provide access to credit for underserved populations. The speed and accessibility of digital platforms enable credit access for consumers who are underserved by traditional lenders and who might otherwise be too costly to serve. Innovators could add value to the sector with new approaches to credit underwriting and consumer engagement that lower defaults and improve retention — two of the critical challenges to the app-based lending model. <a class="markup--anchor markup--p-anchor" href="http://smartcoin.co.in/" target="_blank" rel="nofollow noopener noreferrer">SmartCoin</a> offers new engagement tools alongside its mobile lending platform to better understand and serve its customers in India, and <a class="markup--anchor markup--p-anchor" href="https://www.tezfinancialservices.pk/" target="_blank" rel="nofollow noopener noreferrer">Tez</a> provides an all-digital banking platform with a full suite of products to low-income consumers in Pakistan.

<h4>Consumer financial health</h4>
In 2016, the Federal Reserve revealed a concerning statistic about financial health in the U.S.: 46 percent of Americans said they could not pull together <a class="markup--anchor markup--p-anchor" href="https://www.washingtonpost.com/news/wonk/wp/2016/05/25/the-shocking-number-of-americans-who-cant-cover-a-400-expense/?utm_term=.893f79e72c4c" target="_blank" rel="nofollow noopener noreferrer">$400 to cover an emergency</a>. Startups are providing solutions that help consumers manage their day-to-day financial lives and rebound from shocks. There is significant potential for innovators to leverage behavioral science to design new solutions such as clever nudges, useful automation, gamification, or bundling across different financial products. Innovators in this space include <a class="markup--anchor markup--p-anchor" href="https://www.lendstreet.com/" target="_blank" rel="nofollow noopener noreferrer">Lendstreet</a>, which focuses on financial health by providing U.S. consumers a platform to restructure and refinance their distressed debt and rebuild their credit, and <a class="markup--anchor markup--p-anchor" href="https://www.destacame.cl/" target="_blank" rel="nofollow noopener noreferrer">Destacame</a>, which empowers users in Mexico and Chile with control of their data to build their financial capabilities and access better financial products.
Each of these areas of startup-led innovation offers significant potential for both social impact for underserved consumers and financial profit in 2018. We’re excited to see what’s next.
Image credits: Accion

Have you read?

<a href="https://cfi-blog.org/2017/02/27/kopo-kopo-building-on-the-rails-of-mobile-money-in-kenya/">Kopo Kopo: Building on the Rails of Mobile Money in Kenya</a>

<a href="https://cfi-blog.org/2017/08/28/catalyst-fund-lessons-on-getting-early-stage-fintech-startups-investment-ready/">Cataylst Fund: Lessons on Getting Early-Stage Fintech Startups Investment-Ready</a>

<a href="https://cfi-blog.org/2017/07/31/how-financial-institutions-and-fintechs-are-partnering-for-inclusion-lessons-from-the-frontlines/">How Financial Institutions and Fintechs Are Partnering for Financial Inclusion: Lessons from the Frontlines</a>

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7 Fintech Trends to Watch in 2018

Apollo Agriculture

Lidya

Pula

Accion Venture Lab

Alternative Data

Credit

Financial Health

Fintechs

Impact Investing

Insurtech

MSME/SME Finance

Neobanks

PayGo

Remittances

Smallholder Farmers

A <a href="http://www.un.org/apps/news/story.asp?NewsID=57013#.WUkqMevyuM8">record number of people</a>, more than ever in our lifetimes, are fleeing their homes due to wars, persecution, and disasters. Nearly <a href="http://www.unhcr.org/en-us/figures-at-a-glance.html">20 people</a> are forcibly displaced every minute, amounting to 28,300 people each day. Roughly <a href="http://www.unhcr.org/en-us/figures-at-a-glance.html">65 million</a> people are currently displaced worldwide, according to the United Nations Refugee Agency. This figure is about the size of the <a href="http://www.cnn.com/2017/06/20/world/world-refugee-day-worst-crisis-in-history/">population of France</a> or the United Kingdom. About 22 million of the displaced are refugees (displaced across country borders). And more than half of whom are under the age of 18.

Today on World Refugee Day, we call on the international community to provide compassion for the displaced and support and solidarity for those working tirelessly to help them. It’s an opportunity to reflect on what we can do to overcome inaction, indifference, and fear.

Two areas in need of attention, as <a href="http://www.independent.co.uk/news/world/europe/refugees-120-migrants-drown-latest-mediterranean-disaster-boat-sinks-asylum-seekers-nigeria-sudan-a7798961.html">today’s news</a> has so painfully affirmed, <a href="http://www.unhcr.org/news/briefing/2017/6/5948dfb64/world-refugee-day-reports-three-new-shipwrecks-mediterranean-sea.html">are enhanced water rescue operations</a> and more viable and safer alternatives for those in need of international protection. Today we learned that <a href="http://www.unhcr.org/news/briefing/2017/6/5948dfb64/world-refugee-day-reports-three-new-shipwrecks-mediterranean-sea.html">several ships</a> that disembarked from the coast of Libya over the weekend sank and more than 120 refugees are feared to have drowned in the Mediterranean Sea.<a href="https://www.flickr.com/photos/126123741@N03/25780260202/in/album-72157663792457593/"><img class="wp-image-23747 alignright" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/06/25780260202_9b483f09f9_k.jpg" alt="" width="620" height="413" /></a>

The death toll this year of refugees attempting to cross the Mediterranean <a href="http://www.independent.co.uk/news/world/europe/refugees-120-migrants-drown-latest-mediterranean-disaster-boat-sinks-asylum-seekers-nigeria-sudan-a7798961.html">passed 1,000 in April</a>, a number that wasn’t reached until the end of May last year. The International Organization for Migration (IOM) indicates that during 2017 so far, at least 1,850 people have lost their lives trying to cross the Mediterranean.

As we’ve covered extensively on this blog, the financial inclusion industry is well-positioned to support internally displaced individuals and refugees. By offering payments, credit, insurance, and savings products, inclusive finance providers can help refugees stay connected to sources of financial support, transition beyond reliance on economic assistance programs, and ultimately contribute to their host countries.

Here are a few of our previous posts for you to read, or re-read. They offer an introduction to the topic of financial inclusion of refugees, outline the challenges and opportunities to serve this especially vulnerable client segment, including via new technologies and business models, and share success stories for others to learn from.
<ul>
 	<li><a href="https://cfi-blog.org/2016/09/20/financial-inclusion-of-refugees-an-introduction/">Financial Inclusion of Refugees: An Introduction</a>, by Daniel Balson, Lead Specialist for Eurasia and MENA, the Smart Campaign</li>
 	<li><a href="https://cfi-blog.org/2016/09/27/financial-inclusion-of-refugees-azerbaijan-case-study/">Financial Inclusion of Refugees: Azerbaijan Case Study</a>, by Daniel Balson, Lead Specialist for Eurasia and MENA, the Smart Campaign</li>
 	<li><a href="https://cfi-blog.org/2016/10/07/financial-inclusion-of-refugees-al-majmoua-in-lebanon/">Financial Inclusion of Refugees: Al Majmoua in Lebanon</a>, by the Social Performance Task Force (SPTF)</li>
 	<li><a href="https://cfi-blog.org/2017/03/09/the-digital-demands-of-the-displaced-dont-track-me-dont-expose-me-dont-cut-me-off/">The Digital Demands of the Displaced: Don’t Track Me, Don’t Expose Me, Don’t Cut Me Off</a>, by Kim Wilson</li>
 	<li><a href="https://cfi-blog.org/2017/02/14/refugees-and-humanitarian-assistance-which-kind-of-aid-is-best/">Refugees and Humanitarian Assistance: Which Kind of Aid Is Best?</a>, by Jeffrey Riecke, Senior Specialist, CFI</li>
 	<li><a href="https://cfi-blog.org/2016/02/09/financial-inclusion-and-immigration-in-europe-disrupting-identity-norms/">Financial Inclusion and Immigration in Europe – Disrupting Identity Norms</a>, by Brenda Santoro and Ahmed Dermish with Kim Wilson</li>
 	<li><a href="https://cfi-blog.org/2016/11/15/the-future-of-refugee-financial-inclusion/">The Future of Refugee Financial Inclusion</a>, by Daniel Balson, Lead Specialist for Eurasia and MENA, the Smart Campaign</li>
</ul>
Whether you work in the inclusive finance sector or not, we hope you’ll take action. For more information, head to the UN Refugee Agency <a href="http://www.unhcr.org/en-us/get-involved.html">website</a>.

Image credit: <a href="https://www.flickr.com/photos/126123741@N03/25780260202/in/album-72157663792457593/">Julian Buijzen via Flickr.</a>

It’s World Refugee Day - Financial Inclusion Stakeholders Take Note!

Azerbaijan

Lebanon

Libya

Predictably, the long tentacles of <a href="https://www.microfinancegateway.org/library/responses-refugee-crisis-financial-education-and-long-term-integration-refugees-and-migrants">financial inclusion</a> have coiled themselves around the most vulnerable targets of humanitarian aid: low income <a href="http://www.digitalfinanceinstitute.org/?post_projects=childrens-adventure-camps">refugees</a>, migrants and displaced populations (hereon: “refugees”).

Just as predictably, the financial inclusion agenda is driven by suppliers (aid providers, donors, financial intermediaries and governments). Few refugees are demanding to be included in a digital/formal ecosystem. That does not mean they don’t appreciate the shelter, food and cash that humanitarian agencies have mustered on their behalf. They do. They also appreciate the efforts of those same agencies to make cash assistance easier. E-cash that can be transformed into physical cash at convenient times and places is an example. Use of debit cards at ATMs to withdraw cash from digital accounts can cut valuable time otherwise spent waiting in long cash distribution queues. Very appreciated, indeed.

But beyond handily retrieved cash assistance, refugees, obsessed with the business of surviving, aren’t all that interested in being co-opted by yet another development agenda, in this case, financial inclusion. They aren’t demanding a bank account, a mobile wallet, or a branded payment card. Nor are they demanding that their cash retrieval method turn into a savings program. In fact, such programs, however well-intended, can backfire. Some NGOs place restrictions on cash withdrawal amounts – an attempt to force savings or nudge smoother consumption. But such restrictions can lead to cash cards getting swallowed at the ATM; refugees forget, or perhaps never understood, the various constraints layered into their cards.
<blockquote>But beyond handily retrieved cash assistance, refugees, obsessed with the business of surviving, aren’t all that interested in being co-opted by yet another development agenda, in this case, financial inclusion.</blockquote>
Despite the supply-side’s lust for data, refugees, especially older ones, reject the notion of being traced. It’s easy to see why. Some are fleeing such ruthless trackers as the Taliban, ISIS, or their home governments and thus are protective of data that might expose even a whiff of their whereabouts. As a consequence, some reject debit cards, e-vouchers, or e-wallets for anything other than maximum withdrawal of cash as soon as a digital distribution is made.

There’s more. As part of addressing a “<a href="http://nextbillion.net/unlocking-the-power-of-digital-financial-services-for-humanitarian-response/">financial inclusion gap</a>,” agencies and <a href="http://nextbillion.net/unlocking-the-power-of-digital-financial-services-for-humanitarian-response/">donors</a> are examining the closed loop nature of the cards they issue. Wider use of cards and access points across networks is one reason to lengthen the loop. That sounds good. Agencies and donors also promote individually owned e-wallets and cards. Refugee-owned accounts (versus NGO-owned accounts) allow users to top up their cards and wallets with remittances and earnings. That sounds good, too. And agencies hope to increase digital transactions to improve data collection.

Wait, that definitely does not sound good.

Again, data collection is exactly what many aid-receiving refugees fear.  They worry that humanitarian actors (NGOs, UN agencies, governments and commercial intermediaries) will know too much about them, that the full content of their accounts – not just the aid-funded portion – will become visible to anyone with the right permissions, permissions over which refugees have zero control.

The refugee wonders: if aid agencies can track all transactions in my account, which transactions will be deemed “good” (the purchase of milk?), which “bad” (the purchase of cigarettes?), and which up for grabs (the purchase of condoms?)? Will bad purchases signal that I am irresponsible and thus trigger a closure of my cash assistance? If I receive remittances on the same account that holds my e-cash assistance, will my aid agency assume that I no longer need that assistance?

Getting the answer right requires users to fathom a bottomless pit of aid agendas. It’s easier to withdraw cash as soon as it becomes available than to imagine the possibilities that might arise from storing funds digitally.

But what if the world of financial inclusion suddenly were to become relevant to refugees? What might real demand look like?  In the summer of 2016, faculty, students and alumni of the Fletcher School, Tufts University, embarked on a study called the Financial Journey of Refugees. The study was sponsored by CRS Greece, GiZ Jordan, DRC Turkey, and the Trampoline House in Denmark. We researched 109 subjects and dozens of key informants in Greece, Turkey, Jordan, Denmark and Afghanistan. Our primary research question was: how do refugees finance their journeys and manage their money along the way? In the course of our qualitative discussions, they told us far more than we asked. Many confided their financial experiences and their experiences of aid across multiple countries. Results can be found in a recently released <a href="http://fletcher.tufts.edu/CEME/Featured-CEME-Senior-Fellows/~/media/CC882A166CB2476CA6C5DB62739FF5CC.ashx">essay</a>.

So, what are refugees demanding, if not financial inclusion? One way to find out is to understand what they do today to manage their financial tasks. Here are a few highlights: they are using kinship networks to finance their journeys, to store savings and to borrow to fill gaps in income as they settle and make their way. They are using local hawaldars – money traders – to store and release funds to their smugglers at different waypoints in their journeys as well as to settle debts within cross-border kinship networks.  But, perhaps an important takeaway goes beyond use of financial services and peers into the workings of a close cousin of finance: information services. Refugees are using Facebook, Whatsapp, and Viber, enabled by smart phones that they own or borrow. Together these platforms constitute a refugee communications backbone.

Facebook is deeply trusted (maybe more than justified). Refugees use Facebook to check whereabouts of relatives, indicate a need for funds, or refer a good smuggler. With mobile phones ubiquitous and smart phones prevalent, Facebook is accessible (and VPN workarounds possible in places where it is banned, such as <a href="https://www.lostwithpurpose.com/access-facebook-blocked-sites-iran/">Iran</a>). Refugees monitor and update Facebook often, particularly in places where batteries can be charged easily.

The near-ubiquity of Facebook and the perpetual fear of digital financial accounts seem incongruous. Our study does not reconcile these divergent claims. We only acknowledge them and ask: what value proposition makes Facebook so attractive that it overshadows the fear of traceability? Can Facebook move beyond its current third party offerings via <a href="https://www.bloomberg.com/news/articles/2016-06-13/inside-facebook-s-plan-to-get-users-to-buy-flowers-in-messenger">Messenger</a>, out of banked transactions, into bankless P2P transactions, like the hawala? Might they link to a crypto-currency and brand it in a friendly way? What would regulators need to do to make this possible?

But there are other questions, too. Can progressive central banks, such as the Bank of Jordan, focus on a demographic that is unafraid of being digitally tracked, such as <a href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2016/12/GSMA-case-study_Jordan_2016.pdf">young people</a> whose goal is to assimilate and impress? And in good time, could it let the behavior of the young become the norm? Meanwhile, can cash assistance providers applaud their own efforts as humanitarians, shedding concerns about whether their life saving cash and e-cash services – remarkable for what they are – contribute to a financial inclusion agenda?

<a href="https://sites.tufts.edu/kimwilson/">Kim Wilson</a> is on the Faculty of the Fletcher School, Tufts University and oversees Fletcher's participation in the <a href="https://digitalfrontiersinstitute.org/the-institute/certificate-digital-money/">Certificate in Digital Money</a> offered jointly with the Digital Frontiers Institute.

Have you read?

<a href="https://cfi-blog.org/2016/09/20/financial-inclusion-of-refugees-an-introduction/">Financial Inclusion of Refugees: An Introduction</a>

<a href="https://cfi-blog.org/2017/02/14/refugees-and-humanitarian-assistance-which-kind-of-aid-is-best/">Refugees and Humanitarian Assistance: Which Kind of Aid Is Best?</a>

<a href="https://cfi-blog.org/2016/02/09/financial-inclusion-and-immigration-in-europe-disrupting-identity-norms/">Financial Inclusion and Immigration in Europe - Disrupting Identity Norms</a>

The Digital Demands of the Displaced: Don’t Track Me, Don’t Expose Me, Don’t Cut Me Off

Digital Financial Services

If you had to embark on a journey similar to that of the 65 million people who are currently forcibly displaced, what would you bring? Most likely among your provisions would be a smartphone. Phones are the contemporary map and compass, a gateway to critical information, a means for keeping in touch with loved ones, and a financial toolkit. <a href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2017/02/The-Importance-of-mobile-for-refugees_a-landscape-of-new-services-and-approaches.pdf">More and more</a>, aid workers are witnessing refugees arriving at camps with smartphones. For both the refugee journey and the post-journey settlement process, a phone can be vital. With this in mind, you might not be surprised to learn that mobile money usage among refugees, including for cash transfers from governments and NGOs, is on the rise.

GSMA reports that the end of 2015, there were <a href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2016/04/SOTIR_2015.pdf">271 operating mobile money systems</a> across 93 countries, with over 400 million registered accounts globally. At the same time, the Center for Global Development <a href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/">estimates</a> that the vast majority of aid to refugees is given in monetary form. Most aid is provided either through vouchers that can be used for specific purchases or in-kind donations of items like blankets, heaters, and bags of rice. There’s growing evidence suggesting that not only are cash aid transfers <a href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/">superior to vouchers and in-kind aid</a>, but that mobile money is the <a href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2017/02/The-Importance-of-mobile-for-refugees_a-landscape-of-new-services-and-approaches.pdf">optimal vehicle for cash transfers</a>.

Most refugees use mobile phones extensively, with higher internet usage rates than the general population, according to a study from the Oxford University Humanitarian Innovation Project, “<a href="https://www.rsc.ox.ac.uk/refugeeeconomies">Refugee Economies: Rethinking Popular Assumptions</a>”. In some cases refugees even buy a new SIM card <a href="https://www.trulioo.com/blog/financial-support-for-refugees-displaced-people/">each time they enter a new country</a> in order to navigate their way to the next border. Governments and aid agencies are recognizing this trend and re-thinking how they support this vulnerable population. And for their part, mobile network operators (MNOs) increasingly see refugees as a new, viable customer base as well as an opportunity to contribute services to highly vulnerable people.

A <a href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2017/02/The-Importance-of-mobile-for-refugees_a-landscape-of-new-services-and-approaches.pdf">new report from GSMA</a> offers a handful of vignettes that illustrate the growing pervasiveness of phone-based financial services in refugee communities:
<ul>
 	<li>In Pakistan, which has the third-largest refugee community in the world, the government is the primary source of cash assistance for displaced individuals, and the majority of cash transfers are completed via mobile money. Four of the market’s top five MNOs are active participants in the mobile money disbursement programs.</li>
 	<li>In Uganda, GSMA surveyed refugees both in and outside camps and found that almost half of them used mobile money, mainly to receive remittances from family and friends. Recently, the MNO Orange Uganda built a tower in the Nakivale camp to support the launch of its mobile money service targeting the refugee population.</li>
 	<li>Refugees in Rwanda are regular users of mobile money. Some are even working as mobile money agents.</li>
</ul>
Mobile money presents refugees with deepening financial inclusion opportunities. Large barriers persist to refugees adopting and using such services, but when given the opportunity, refugees and internally displaced populations use mobile money in the same ways that other populations do: for remittances, person-to-person payments, merchant payments, loans, and savings.

Potentially most crucial for refugees are international remittances, either to send money home or to receive money from home. The international remittances market has been disrupted by mobile money in recent years, with transfers via phone <a href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2017/02/The-Importance-of-mobile-for-refugees_a-landscape-of-new-services-and-approaches.pdf">21 percent</a> cheaper on average than standard money transfer operations. And such services are spreading fast. In fact, international remittances are the fastest-growing mobile money service. One can now send international remittances via mobile money between more than 20 countries worldwide, particularly in regional markets, i.e., between neighboring countries. High rates of adoption are seen in several markets in which these services recently launched, including Burkina Faso, Ivory Coast, Mali, and Senegal.

Whether in settlement camps or post-settlement, refugees seek to quickly build new lives. To this end, they use person-to-person and merchant payments not only for consumption purposes, but also as livelihood-building and business tools. Eighty-nine percent of refugees in Kampala use their mobile phones to generate income, according to “Rethinking Popular Assumptions”. Phones can help refugees find employment, access market information, and run micro-businesses. A mobile money ecosystem also presents employment opportunities for ancillary services like selling phone charging services, mobile phone repair, and serving as mobile money agents. Mobile money empowers refugees to create or boost existing markets – for food, clothing, financial services, and more.

In addition to mobile money, we’ve seen an array of initiatives from governments and NGOs that pair aid with other digital financial services:
<ul>
 	<li>Lebanon hosts the most refugees per capita in the world with 1.2 million individuals. Aid organizations like the International Rescue Committee (IRC) <a href="https://cfi-blog.org/2016/11/15/the-future-of-refugee-financial-inclusion/">issue ATM cards</a> for refugees to access cash benefits, taking advantage of the fully-functioning distribution networks of merchants and ATMs available in the country.</li>
 	<li>In Syria, the United Nations Relief and Works Agency (UNRWA) <a href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=1&amp;cad=rja&amp;uact=8&amp;ved=0ahUKEwi_nNidh47SAhUqw1QKHUnmAIQQFggcMAA&amp;url=https%3A%2F%2Fcfi-blog.org%2F2016%2F11%2F15%2Fthe-future-of-refugee-financial-inclusion%2F&amp;usg=AFQjCNECigBXaYLGABweP1wabi4C7_sZdA&amp;sig2=CIjwqfD6abOcndsGBat1RA">developed a small fleet</a> of mobile lending units to reach clients in areas without financial infrastructure.</li>
 	<li>On the island of Lesbos, Greece, Mercy Corps <a href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/">offers refugees debit cards</a> that connect to a bank account to help them build banking histories.</li>
 	<li>The Digital Finance Institute launched the <a href="http://www.digitalfinanceinstitute.org/?post_projects=childrens-adventure-camps">Banking on Refugees project</a> which is piloting a cloud-based branchless bank that harnesses biometric identification and digital payment solutions, including prepaid cards and e-wallets.</li>
</ul>
However, a number of challenges impede the spread of mobile money-based humanitarian aid for refugees, as well as their uptake of broader mobile money services. These can come from both the supply and demand side. In some environments the mobile money ecosystem is still too nascent and not yet a viable option. In others, demand is weak, either because services are not sufficiently convenient or robust, or because of lack of customer awareness or familiarity. In its recent study, GSMA found that for refugees using mobile money, convenience and connectivity was more important than familiarity with the service, pointing to the importance of service and agent coverage and agent liquidity.

Proof of identity also poses a serious issue. <a href="https://cfi-blog.org/2016/11/15/the-future-of-refugee-financial-inclusion/">As discussed on this blog previously</a>, refugees often leave their home country without identity documentation, and sometimes even when they have it, the host country government may not have the technology and data needed to authenticate these documents. Lack of identification can impede refugees from buying SIM cards, owning mobile phones, and accessing mobile money and other financial services.

UNHCR in Jordan is mitigating this problem using biometrics. Refugees in the UNHCR program in Jordan <a href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/">receive iris scans</a> which are stored in the cloud. The UNHCR offers bank accounts for refugees through the Cairo Amman Bank. When refugees arrive at the bank’s ATMs, they look into a set of binoculars that scans and verifies their eyes, and they’re able to withdraw the money in their name.

Refugees are also often faced with the loss of the banking and credit histories they built in their home countries. We’ve <a href="https://cfi-blog.org/2016/11/15/the-future-of-refugee-financial-inclusion/">advocated before for credit history portability</a> for refugees, allowing refugees to be able to apply preexisting credit histories in the host country and, if they return home, to bring credit histories accumulated in host countries back with them.

Trulioo, a company that works in identity verification, <a href="https://www.trulioo.com/blog/financial-support-for-refugees-displaced-people/">asserts the potential</a> to use an individual’s cyber identity for identity verification and for enabling access to credit and other financial services. MNOs could serve as centralized, cross-border identifiers, by harnessing the user data and transaction histories linked to specific SIM cards. Additionally, aggregation of an individual’s online interactions, including of mobile money and online transactions could serve in place of credit histories to open financial doors.

But often it all comes back to the initial distribution of relief payments, where governments, NGOs, MNOs, and banks too often conduct business as usual. Although buy-in and coordination from these stakeholders is essential, many remain uncomfortable, unfamiliar, or unconvinced about the merits of cash transfers instead of vouchers or donated items, or about the merits of mobile money. Elizabeth MacBride of Quartz <a href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/">writes</a>, “One of the obstacles to donors shifting their giving to cash has been that the NGO edifice that funnels their money is built to resist its own destruction.” Indeed, mobile money cash transfers might be a more efficient and effective means to offer refugees crucial resources, but there are vested interests in the status quo. For example, in 2013 USAID shipped <a href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/">1.4 million metric tons</a> of food aid as part of the World Food Program. To accomplish this, roughly $70 million was spent on shipping. Food sellers and shippers are likely to be strong advocates of retaining the in-kind system.

A number of studies suggest that not only is cash aid more efficient than other aid forms, it’s ultimately more helpful for refugees. One study estimates that the savings on administration gleaned from the more efficient digital cash transfer programs could help the aid reach 30 percent more people for the same price. In 2014 IRC, in partnership with Yale and the University of Brasilia, published a rigorous evaluation of emergency cash distribution for refugees with the core finding that refugees <a href="http://mastercardcenter.org/action/mobile-money-transforming-financial-inclusion-refugees/">used the money for food as intended</a>, as opposed to spending it on cigarettes or alcohol. Another IRC report in Lebanon found that 87,700 families who were given $575 via ATM cards <a href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/">used the funds for essential purchases</a>, like food, clothing, fuel oil, and so forth. In both of these studies additional findings spoke to the entrepreneurial nature of refugees, who strive against extremely difficult odds to build new lives. In the first study it was calculated that for every $1 of cash assistance, $2 was created in local markets. In the second, with cash transfers instead of other aid forms, more children stayed in school because fewer families had to send their kids to work. Another study of Syrian refugees in Iraq found that <a href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/">70 percent</a> of individuals sold some of the aid they received in the form of rice. Compared to other forms of aid, cash transfers empower refugees to take action on behalf of themselves and smooth entry into their new country.

And digital channels for cash aid – whether mobile money or otherwise – offer a number of benefits over physical cash transfers. Digital finance offers greater transparency and the ability to track cash, which can combat the longstanding problem of corruption surrounding the physical handling of cash. And digital offers refugees greater security and safety from theft.

Sadly, the current refugee crisis is not going away any time soon. In the meantime, we applaud all those working to support these millions of individuals, through cash transfers, financial services, and other means.

Have you read?

<a href="https://cfi-blog.org/2016/09/20/financial-inclusion-of-refugees-an-introduction/">Financial Inclusion of Refugees: An Introduction</a>

<a href="https://cfi-blog.org/2016/09/27/financial-inclusion-of-refugees-azerbaijan-case-study/">Financial Inclusion of Refugees: Azerbaijan Case Study</a>

<a href="https://cfi-blog.org/2016/10/07/financial-inclusion-of-refugees-al-majmoua-in-lebanon/">Financial Inclusion of Refugees: Al Majmoua in Lebanon</a>

Refugees and Humanitarian Assistance: Which Kind of Aid Is Best?

Rwanda

Telcos

[caption id="attachment_22489" align="aligncenter" width="615"]<img class="wp-image-22489" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/12/myanmar-accion-champions-financial-inclusion-fish-seller-ma-san-hew-microfinance-client-of-accion-dawn-image-by-john-rae.jpg" width="615" height="412" /> Accion client Ma San Htwe selling fish in Myanmar, one of the key areas discussed at European Microfinance Week 2016.[/caption]

<a href="http://www.e-mfp.eu/european-microfinance-week-2016">European Microfinance Platform</a> is celebrating 10 years of supporting inclusive finance innovation, and hosted European Microfinance Week 2016 (EMW) in Luxembourg a few weeks ago. At the conference, I joined discussions about key organizations and challenges in the industry. Here are five of the main takeaways from the week:
<h4>1. The Underserved Refugee Population
</h4>
The <a href="http://sptf.info/">Social Performance Task Force</a> (SPTF) is helping to provide financial services to the refugee population, which is now <a href="http://sptf.info/working-groups/refugee-microfinance">approximately 20 million people</a>. In reality we don’t know very much about the socioeconomic needs of refugees, and much of the research is focused on humanitarian efforts. SPTF is working to research and provide guidelines to financial service providers to better serve the financial needs of this population. The guidelines will be published on SPTF’s website in the coming months. Learn more about leading organizations supporting refugees from <a href="https://cfi-blog.org/tag/financial-inclusion-of-refugees-blog-series/">CFI’s blog series</a> on refugees.
<h4>2. Opportunity in Myanmar
</h4>
Representatives from VisionFund, Advans, UNCDF, and M-CRIL provided a look at the economic landscape of Myanmar and the future of financial inclusion there. In Myanmar, 70 percent of the population was excluded from formal financial services <a href="http://partners.wsj.com/metlife/multipliers/articles/myanmars-economic-revolution/">until 2011, when microfinance rapidly </a>expanded. After 2011, 267 licensed Monetary Financial Institutions (MFIs) opened. This<a href="http://partners.wsj.com/metlife/multipliers/articles/enabling-new-business/"> opportunity</a> comes with many barriers to inclusion, such as a lack of government regulation and funds and capacity-building issues. However, there is widespread optimism with an adoption of regulations proposed by the <a href="http://smartcampaign.org/home/1082/1082">Smart Campaign</a>, as well as further demand for microfinance in Myanmar. Investors should consider moving into the region for long term impact.
<h4>3. Offshore Financial Centers
</h4>
The <a href="http://fiecouncil.com/">Financial Inclusion Equity Council</a> (FIEC) hosted a discussion at EMW about their latest research on offshore financial centers. Daniel Rozas and Sam Mendelson of the European Microfinance Platform have been working with FIEC members, raising questions about the key drivers in deciding to domicile funds offshore, and why this is important for the impact investing space. This session was a good introduction to the research, and their publication will be released early next year.
<h4>4. Cyber Security and Digital Finance</h4>
Expanding digital finance is important to everyone working in the financial inclusion space. Unfortunately, operational costs are too high to open banks in remote areas. The threat of cyber-attacks and the challenge of gaining trust in emerging markets are also important topics to review. International Development organizations, investors, regulators, and innovators gathered to highlight the risk. One topic that was discussed was the risks specifically faced by smaller banks: they are much more vulnerable to cyber-attacks and they don’t have enough capital to invest in security measures. Organizations like Suricate Solutions (an electronic banking and IT security firm) and <a href="http://www.uncdf.org/">UNCDF</a> are working with regulators to collect data from the market and set up preventative measures to avoid vulnerability for the financial inclusion sector.
<h4>5. Microfinance and Access to Education
</h4>
This year, access to education was the theme of the European Microfinance Award. It was represented by three finalists from around the world: Kashf Foundation (Pakistan), Fundación Génesis Empresarial (Guatemala), and Opportunity Bank (Uganda). The winner was Kashf Foundation, an organization that provides loans to private schools, training for teaching staff, and educational opportunities for women and girls. In a country where 25 million children are out of school, this €100,000 award by the Luxembourg Ministry of Foreign and European Affairs will make a great impact. The organization is also <a href="http://www.smartcampaign.org/certification/certified-organizations#Kashf">SMART Certified</a> by the Center for Financial Inclusion.

These are just a few of the important discussions about innovations in financial inclusion. Each presents not only challenges but unique opportunities to learn and collaborate to make progress in inclusive finance.

Have you read?

<a href="https://cfi-blog.org/2016/11/15/the-future-of-refugee-financial-inclusion/">The Future of Refugee Financial Inclusion</a>

<a href="https://cfi-blog.org/2015/02/18/myanmars-first-ecommerce-platform-supports-the-transition-from-cash-to-electronic/">Myanmar's First eCommerce Platform Supports the Transition from Cash to Electronic</a>

<a href="https://cfi-blog.org/2016/07/22/more-in-for-impact-whats-up-in-socially-responsible-investing/">"More in for Impact": What's Up in Socially Responsible Investing?</a>

&nbsp;

5 Themes in Financial Inclusion Innovation from European Microfinance Week 2016

Financial Inclusion Equity Council

The Smart Campaign

Myanmar

Youth

Emma Morse

Manager, Strategic Projects

Amee Parbhoo

Ashley Lewis

Coryell Stout

Megan Peterson

Rachel Morpeth

Robert Ongodia

Vikas Raj

Chile

Kenya

South Africa

Agricultural and Rural Finance

Blockchain and Cryptocurrency

Challenges and Crises

Customer Centricity

Entrepreneurs of MSMEs

Human Centered Design

Human Touch

Inclusive insurance

Insurance Companies

Microfinance

Personal Financial Management

Policy, Regulation and Government Initiatives

Resilience

Rural Populations

Social Performance

Article

Podcast

South Africa is a global hub for fintech innovation. Accion supports and advises South African innovators using technology to help entrepreneurs expand their businesses and families protect their homes around the world.

"I’ve been here in this informal settlement for 14 years,” Fundiswa explains as we visit the makeshift home she shares with her sister and their children outside of Cape Town, South Africa. Such neighborhoods, which are home to more than 1 billion of the world’s poorest people, are especially vulnerable to fire, as residents live in crowded conditions and building codes are not enforced. And when a fire does break out, residents lack the resources to rebuild. “If I had to buy everything again after a fire, it would be very hard because I don’t have a lot of money,” says Fundiswa.

<img class="alignleft wp-image-16829" src="https://content.accion.org/wp-content/uploads/2019/01/Lumkani_0007-1024x683.jpg" alt="Lumkani IoT heat detection device" width="500" height="333" />Lumkani, a South African insurtech startup and Accion portfolio company, is offering people like Fundiswa both protection and peace of mind with its innovative fire insurance product. Clients receive a heat sensing device, which sounds an alarm if it detects fire nearby. And the insurance policy helps pay for repairs or replacements if a home does burn.

Fundiswa became a Lumkani client because she wanted to know her family and possessions would be safe in a fire. Lumkani makes the process simple for customers, says Fundiswa: “I pay and then they send me an SMS to say I’m covered for the month with the insurance.”

But even more important than the straightforward process is the sense of safety Lumkani gives its customers. “If the house next door burns, I don’t stress. I just lock my door and run, because I know I’m covered by the insurance,” says Fundiswa. “People even steal from people’s homes when there are fires, but I don’t worry about any of that because I know I’m covered, and I know I will get back what is due to me after I send my claim.”

While Fundiswa hasn’t had to worry about a fire yet, she has already seen the impact of Lumkani in her community: “I know someone who lost everything in the fires and got a voucher, and he got everything back.”

Fire insurance provides peace of mind in South Africa

Lumkani

Institutional Funder

Social Good

The real impact of financial inclusion

“It's really difficult when you immigrate to another country,” says Andrea del Valle. She moved to Chile from Venezuela five years ago with a vision of the future she wanted but uncertainty about how to make it work. One day, a poster for Accion partner <a href="https://www.destacame.cl/">Destacame</a> caught her eye, and when she looked it up online, she was glad to see that it offered an opportunity for online financial education. Launched in 2015, Destacame provides a suite of products that allow consumers to manage their financial life and to build their financial health. 

[caption id="attachment_17174" align="alignleft" width="500"]<img class="wp-image-17174" src="https://content.accion.org/wp-content/uploads/2019/01/2018_Accion_Destacame_Day2__0335-1024x682.jpg" alt="Andrea del Valle in conversation with Destacame co-founder Sebastián Ugarte." width="500" height="333" /> Andrea del Valle in conversation with Destacame co-founder Sebastián Ugarte.[/caption]

Andrea explored Destacame’s offerings and seized the opportunity to build her credit history and applied for a microloan through the platform. She used the money from that loan to buy a food truck. Selling snacks and meals from her new truck helped supplement her expenses as Andrea studied natural therapy and planned for her long-term career. During this time, she was able to learn a lot from Destacame about keeping your expenditures proportional to your income and saving and investing money. “At the beginning, it seemed impossible — now I am able to keep my savings as Destacame suggests,” she says.

As Andrea’s income began to grow and she was building a positive credit history, new opportunities opened up for her. She was able to open a bank account and get her first credit card. This allowed her to achieve her dream of opening her own studio offering natural therapy — making the life she had been chasing since she came to Chile a reality.

[caption id="attachment_19299" align="aligncenter" width="700"]<img class="wp-image-19299" src="https://content.accion.org/wp-content/uploads/2019/07/2018_Accion_Destacame_Day1__0874-1024x682.jpg" alt="Virginia Chacón sitting inside Destacame's office" width="700" height="467" /> Virginia Chacón, Destacame’s head of operations, emphasizes understanding customers to serve them better.[/caption]

Chile has become a magnet for immigration in Latin America, and providing this growing population with useful financial services can help immigrants to rebuild their lives and livelihoods in their new communities. As an immigrant herself, Virginia Chacón, Destacame’s head of operations, understands the challenges displaced people face when they try to access financial services. When she moved from Venezuela to Chile, working at Destacame helped her to understand Chilean society better and to become more involved in her new country. Having employees with diverse backgrounds complements Destacame’s advanced use of data to help them better understand and serve customers. “You get to know the real problems of people and therefore give them real solutions to their needs. The more information you have, the better you can help them,” says Virginia.

As Andrea visits Destacame’s office, she recounts how she was able to overcome hurdles and build her life in Chile. “Those credit records helped me to be able to rent this space and so much more, and everything really started with that microcredit that Destacame offered me.” Andrea recently helped a friend who immigrated find a job and a place to live. She was stuck all over again by the struggle immigrants face without any financial history to help establish themselves and find a home to rent. Andrea was glad to be in a position to help her friend, and as she passes along her success, one more person benefits with new opportunities and a shot to build a new life.

After immigrating to Chile, she built a new life for herself

Destacame

Accion Global Advisory Solutions

At Venture Lab, we are focused on a big problem — the 3 billion people globally who are left out of the financial system. Many of those individuals don't have access to a safe savings account, credit to build their business, or insurance in the case of a health emergency.  But even among this group, refugees and migrants are uniquely vulnerable to financial exclusion. According <a href="https://www.unhcr.org/en-us/figures-at-a-glance.html">to UNHCR</a>, there are 70.8 million displaced people in the world today: 25.9 million refugees living outside their home countries, plus 41.3 million internally displaced people, and 3.5 million asylum seekers. Displaced people are even less likely to have access to the financial tools they need to improve their lives, and many of the inherent challenges that exclude low-income consumers (lack of credit history, lack of collateral, low balances) are only exacerbated for this population. The silver lining is that innovation in fintech can help to change that.

When thinking of the many millions of people needing the very basics of food, shelter, and medical care, access to financial services may not be top of mind. But for a displaced person, being able to protect and access any assets they may own; having a way to receive money from relatives, employers, or organizations; or being able to pay for necessities like cell phone service or clothing can make a difficult situation a little more bearable. And when, at last, a refugee is able to return home or establish a new home, having some savings or a credit history will help them establish a more secure foundation on which to rebuild their life. 

Venture Lab has been keen to support models targeting this customer for some time and has already worked with one fintech firm that was founded with the explicit purpose to provide financial services to refugees. <a href="http://www.leafglobalfintech.com/">Leaf</a> uses blockchain technology to give refugees the chance to convert cash into digital currency before they leave home, so they can protect their assets and access them from their eventual new location. This unique business caught our eye and led us to sponsor Leaf for support through the <a href="https://catalyst-fund.org/">Catalyst Fund</a> accelerator initiative. In <a href="https://www.accion.org/can-blockchain-help-refugees-build-better-lives">a discussion with my colleague Amee Parbhoo last year</a>, Leaf’s founders explained how their expertise in microfinance and refugee relief led them to develop a sustainable model that serves this vulnerable population. 

In fact, as I mentioned during <a href="https://youtu.be/ccPfLFE5jgo">a recent panel on financial inclusion and refugees</a> at the Society for International Development annual conference in Washington, DC, Venture Lab has also invested in other fintechs that don’t specifically serve refugees but provide lessons for how we can leverage innovation to serve these populations. For example, we <a href="https://www.accion.org/invested-in-now-money">invested in</a> <a href="https://nowmoney.me/">NOW Money</a>, a neobank for migrant workers in the United Arab Emirates. There are some 8 million foreign workers in the UAE, most of them from Asian countries and most working low-wage jobs such as construction and domestic labor. Like refugees, these workers are away from their home countries and need secure ways to receive wages and transfer money to relatives back home. By partnering with employers and using scalable technology, NOW Money is able to serve these consumers when they were too small, and too hard to identify, for larger financial institutions. 

Another of our portfolio companies, U.S.-based <a href="https://www.selflender.com/">Self Lender</a>, provides “thin-file” banking customers with ways to <a href="https://www.accion.org/using-fintech-with-a-human-touch-to-improve-credit-scores-in-the-us">establish or improve their credit scores</a>. Self Lender uses an online version of a traditional “credit builder” loan so borrowers can demonstrate their creditworthiness by sticking to a repayment plan. Refugees would generally qualify as “thin-file” customers, having no employment history or financial records in their new locations, so a model like Self Lender’s could be very useful in helping them get started on building the all-important credit score. 

The global refugee crisis is daunting, both in terms of sheer numbers and in the details of human suffering it causes. The challenges of addressing worldwide poverty are similarly huge, yet the companies that Venture Lab supports provide the beginnings of a pathway to solutions. Every day we work with bright, ambitious, and innovative entrepreneurs seeking to use technology to help reach the underserved. We support these companies so they can succeed, and we learn which types of models can work to reach even more excluded customers around the world. I hope to hear of more fintechs like Leaf that are finding an effective way to serve refugees — if you know of any, please <a href="mailto:http://accionventurelab@accion.org">get in touch</a>!

Innovative fintech startups could make refugees’ lives easier

Entrepreneur

Impact Investor

Informal settlements, in which at least 1.4 billion of the world’s poorest people live, are terribly vulnerable to fire. Homes are crowded together and often constructed of flammable materials like wood, plastic, and cloth. Residents without reliable electricity or gas line access resort to cooking on open flames. Building safety codes are not enforced. And if a home catches fire and burns down, the family living there — which already had little — has to start over without any help.

[caption id="attachment_18831" align="alignleft" width="400"]<img class="wp-image-18831" src="https://content.accion.org/wp-content/uploads/2019/06/Lumkani_0026-1024x683.jpg" alt="Lumkani community liaison officer Clive " width="400" height="267" /> Community liaison officer Clive supervises agents for Lumkani[/caption]

South African startup and Accion portfolio partner <a href="http://blogs.accion.org/features/insurtech-fire-protection-south-africa/">Lumkani</a> is offering a form of protection rarely seen in informal settlements: fire insurance. Its policyholders also receive an innovative fire detection device that sounds an alarm triggered by the heat of a nearby fire. The alarm gives residents a chance to seek safety, and the insurance payout helps them repair or replace items damaged in the blaze.

Because insurance is not commonly used by people in informal settlements, it can be hard to explain the concept and get buy-in. Lumkani has found that one effective way to achieve this is by hiring community members themselves as sales agents. Community liaison officer Clive, who supervises agents, explains that community feedback has been an important part of developing the policies and device. He says, “We asked individuals how we could design a product that would fit them and be affordable. I’ve seen where we’ve stopped fires and had an impact on people involved in the fires. It’s satisfying to know we can cover people’s homes and their goods. I believe we are a big answer to these communities.”

[caption id="attachment_17736" align="alignright" width="400"]<img class="wp-image-17736" src="https://content.accion.org/wp-content/uploads/2019/02/Lumkani_0014-e1550780398258-1024x799.jpg" alt="Zoliswa, an agent for Lumkani, in front of an informal settlement in South Africa" width="400" height="312" /> As an agent for Lumkani, Zoliswa helps people in informal settlements obtain fire insurance.[/caption]

Sales agents Kwanda and Zoliswa both spend their days making the rounds in their communities and signing people up for the service. A mobile app makes it easy to enroll new clients wherever they are. Says Zoliswa, “The reason I decided to work with Lumkani is the communication with the people in my community. It keeps me busy and updated.” Kwanda adds, “I saw an opportunity to improve my own community. It changed my life a lot. I earned respect. It helped me also see new directions and I started working around my community more.”

[caption id="attachment_18832" align="alignright" width="400"]<img class="wp-image-18832" src="https://content.accion.org/wp-content/uploads/2019/06/Lumkani_0029-1024x683.jpg" alt="Lumkani software engineer Dinesh" width="400" height="267" /> “I always wanted to do something to help people,” says Lumkani software engineer Dinesh[/caption]

Other staffers who don’t work as closely with clients on the ground have also found a sense of community at Lumkani. Dinesh, a software engineer originally from Brazil, says, “I see humans as social animals, so it’s interesting to see the idea of communities, like townships. A device like this can be used to help improve the sense of community. I always wanted to do something to help people. I want to give back to the world. Because we have this social structure it’s easy to forget how people live, but working here helps you remember and have more empathy in general.”

This insurtech startup takes pride in protecting their community

The majority of Kenyans have mobile money accounts; their activity demonstrates digital financial services’ potential. Accion helps Kenyan innovators harness emerging technologies to create new financial services.

Fintech companies are, of course, technology-driven. The word “tech” is part of their name, after all! And yet, even fintechs usually include elements of human touch in their business models. For example, sales agents may help contact and enroll new customers, or support staffers may be available to help troubleshoot when problems arise.

In our recent paper, <a href="https://www.accion.org/the-tech-touch-balance/">“The Tech Touch Balance: How the Best Fintech Startups Integrate Digital and Human Interaction to Accelerate Financial Inclusion,”</a> we showcase several fintech startups in the Accion Venture Lab portfolio that are finding an optimal balance between tech and human interactions, making their offerings accessible, affordable, and attractive to their target customers. Two are located in Africa: Apollo Agriculture, and Lumkani.

Both companies are innovative in that they offer services that have not previously existed in the market. <a href="https://apolloagriculture.com/">Apollo</a>, based in Kenya, provides high-quality seeds and fertilizers for smallholder farmers. Apollo also provides guidance and information to the farmers so they can improve input yield and better respond to storms or droughts. The second Africa-based company profiled, <a href="https://lumkani.com/">Lumkani</a>, sells fire insurance to residents of informal settlements in South Africa. The insurance package includes an alarm that can detect a fire and then trigger an alert to residents and neighbors, so they have a chance to seek safety. And if a home does catch fire, the insurance payout helps policyholders replace damaged property. Since both Apollo and Lumkani offer products and services that customers are less familiar with, human interaction helps drive adoption and overall retention.

[caption id="attachment_17740" align="alignleft" width="500"]<img class="wp-image-17740" src="https://content.accion.org/wp-content/uploads/2019/02/Kenya_Nakuru_0034-1-1-1024x684.jpg" alt="Apollo agents in Nakuru, Kenya" width="500" height="334" /> Apollo Agriculture balances its high-tech model with field agents to serve smallholder farmers in Kenya.[/caption]

Apollo’s clients, smallholder farmers, are among the world’s most financially underserved populations. They also tend to be less digitally savvy, and many have had negative experiences with financial institutions in the past. At the same time, they are very interested in receiving help to boost their yields and incomes, so Apollo’s model is attractive.

Apollo primarily relies on tech to determine the creditworthiness of its customers: it employs a highly sophisticated, tech-driven underwriting process that leverages data collected from satellite imagery and the farmers themselves. All of Apollo’s loans are repaid through mobile money and require no human touch, which is convenient for farmers in remote, rural areas. Apollo also uses SMS to communicate with farmers for matters ranging from payment reminders to weather alerts.

On the other hand, Apollo field agents are an essential part of the customer journey, especially in the early stages, as they visit potential clients and answer questions. Agents are also available to go in person to handle challenges that can’t be managed through SMS. Call centers and automated Interactive Voice Response (IVR) systems are also part of Apollo’s tech-touch continuum.

In South Africa, mobile money systems are much less available than they are in Kenya, so they are not a good option for Lumkani clients to use to manage policy payments and payouts. Additionally, people in the informal settlements where Lumkani provides its services tend to be limited in both financial literacy and experience with technology, so they need information on what the insurance product is and how it works.

So Lumkani relies on agents — many of whom live in the same settlements — to do face-to-face sales pitches and enrollments. The agents, however, carry smartphones with an app for setting up the new accounts. Agents also collect cash payments in person but send SMS reminders to keep clients up to date. The fire detectors not only sound an alarm to warn people in the home when they sense heat nearby but also report back to Lumkani so that SMS alerts can be sent throughout the community. The company can then follow up with clients, both electronically and in person, to see if any fire damage occurred, and to begin the claims process if so. In combining tech and touch, Lumkani earns the trust of its clients while making the signup and payout processes faster and less expensive than many traditional insurance models.

For more examples of how fintech startups balance tech and touch as they develop their offerings, and general advice on these issues, read the full paper <a href="https://www.accion.org/the-tech-touch-balance">here</a>.

Two African startups where inclusive fintech comes with a human touch

Mastercard Foundation

Financial Service Provider

The tech touch balance

[embed]https://soundcloud.com/accioninternational/lumkani-and-using-fire-insurance-to-protect-families-in-south-africa/s-nZAYy[/embed]

“It’s a daily event in the country — there are people being displaced every single day,” David Gluckman, CEO and co-founder of <a href="https://lumkani.com/">Lumkani</a>, laments in our latest episode of VentureKast. Destructive fires are a regular, and potentially devastating, occurrence for the approximately 10 million South Africans that live in informal settlement communities. These townships are particularly susceptible to the threat of fires due to the use of flammable building materials, the ubiquity of open flame fires, limited space between dwellings, and a lack of road infrastructure for adequate emergency response.

On this episode of <a href="https://soundcloud.com/accioninternational">VentureKast</a>, the podcast about the most innovative and impactful inclusive fintech startups in the world, I sat down with David to discuss Lumkani, a Johannesburg-based startup that leverages proprietary hardware and a tech-enabled agent network to provide customers living in informal settlements within South Africa with insurance products that protect against loss of life, shelter, and assets in the case of a home fire.

Lumkani, which means ‘be careful’ in Xhosa, originally began as a hardware company, deploying its first fire detector in late 2014. Within the first 18 months, they were able to prove that their technology “in 73 percent of cases was able to reduce the spreading of fires [beyond] the first home.” But it was not enough just to alert the community and stop the spreading of fires. David explains, “as we went on the customer was demanding more from us: ‘you can detect the fire but what is the end result?’”

With that problem in mind, Lumkani, partnered with Hollard, a South African-based insurance company, to develop the world’s first hardware-enabled fire insurance specifically designed for informal settlements. To serve clients that had been ignored by traditional financial service providers previously, the company has created an efficient, engaging, and easy to manage experience for its low-income customers. David describes how they designed the customer journey, noting that “the more you commit yourself to being a learning and listening organization, your customer will tell you how to make your business successful because they’ll tell you what they need.”

Lumkani uses fire insurance to protect families in South Africa

In the heart of Kampala, along the bustling Bombo Road, sits the headquarters of UGAFODE Microfinance Limited (MDI). UGAFODE is a small but progressive microfinance institution (MFI) focused on serving peri-urban and rural Uganda, mainly in the agricultural sector. Under the guidance of CEO Shafi Nambobi, who joined in May 2017, UGAFODE has made sweeping transformations. The institution has gone from a primarily manual operation with lengthy loan approval processes, to being a competitive tech-enabled institution with a focus on digital channels and serving microentrepreneurs and “last mile” clients in the Ugandan market.

We recently called Shafi, and even though it was 6 pm in Kampala and he was gathering his bags to head home, he took the time to share his insights on the strategies that have turned the company around. “UGAFODE has always upheld a client-centric focus, and the company maintained this approach while implementing their new strategies,” he said. One of the first changes was bolstering their call center, which has been instrumental in attracting both new and former clients. This has proven to be a key component in maintaining the balance between <a href="https://www.accion.org/the-tech-touch-balance/">digitization and human touch</a>, as it allows customers to engage with a real person without having to make long journeys from rural areas to bank branches.

Most of UGAFODE’s clients are farmers, working in crop and livestock production. More than 80 percent of their clients live in rural areas, and some are as far as 40 kilometers from the nearest UGAFODE branch. Clients often struggled to make the long trips out to the bank when all they needed were simple banking services. To bring banking services to the people, UGAFODE has incorporated more digital products into its business plan. These products include:
<ol>
 	<li>Digital field applications (DFAs), which allow remote approval of loans</li>
 	<li>UGAFODE mobile app, which allows customers to move cash from their mobile wallets to their savings accounts</li>
 	<li>Digital document management for digital verification</li>
 	<li>Digital delinquency management for timely follow up on late payments</li>
</ol>
These new channels have improved customer interaction with UGAFODE’s products, allowing microentrepreneurs to cut costs and time to travel to the bank and spend more time developing their businesses.

The company is also working to improve its loan processing and renewal system. UGAFODE reduced processing time from more than 21 days down to less than a week to ensure that their clients can get their funding when they need it. Another issue in their previous process was that their loan repayment system would automatically prevent clients with delayed payments from applying for another loan. Shafi knows that life can throw curve balls that prevent clients from making payments on time — a family member falls ill, a bicycle part needs to be replaced, a home needs repair. As such, the company changed this policy and adopted more flexible considerations for loan repayment timelines.

Shafi is excited to continue the turn around and watch the company grow, and sees many opportunities for the future. As UGAFODE continues to digitize and expand into rural areas, they expect to onboard more women — currently about 60 percent of their client base. Additionally, Shafi indicated that Uganda has become a home to more than <a href="https://www.unocha.org/southern-and-eastern-africa-rosea/uganda">1.4 million refugees</a> from nearby countries, including Somalia, South Sudan, Burundi, and the DRC. These refugees have been neglected and excluded from financial services, which they need to establish their livelihoods and send remittances to friends and family members. UGAFODE is currently seeking approval to include refugees in their outreach offering.

As UGAFODE continues to find ways to bring more underserved clients financial services that meet their needs, they know that staying customer-centric is crucial. “When we listen to our customers, we are able to make suggestions to the board of what needs to change, and create a better customer experience,” said Shafi. And as UGAFODE’s digital transformation has shown: keeping customer needs in mind is good for business and financial inclusion.

Going digital to serve customers in Uganda

Ugafode

Financial Inclusion Practitioner

Accion Global Investments

Globally, someone was displaced every two seconds in the last year, <a class="markup--anchor markup--p-anchor" href="http://www.un.org/en/events/refugeeday/messages.shtml" target="_blank" rel="noopener noreferrer">according to the UN</a>. Fintech companies and the financial inclusion industry have a significant opportunity to help refugees and internally displaced individuals get the tools they need to build new lives for themselves. One of the companies taking on this challenge is <a class="markup--anchor markup--p-anchor" href="http://www.leafglobalfintech.com/" target="_blank" rel="noopener noreferrer">Leaf</a>. They’re creating integrated virtual financial services to help refugees manage their assets and identity securely and efficiently, and they’re tapping into resources including blockchain and digital currency to support these services. Accion Venture Lab sponsored Leaf for a grant award and technical assistance as part of <a class="markup--anchor markup--p-anchor" href="https://catalyst-fund.org/" target="_blank" rel="noopener noreferrer">Catalyst Fund</a>, an inclusive fintech initiative. We selected Leaf because of their potential to make a difference for the people who need help the most. We interviewed Leaf co-founders Nat Robinson and Tori Samples about how their company supports refugees.

<h4 class="graf graf--p">Q: What inspired you to start Leaf?</h4>
A: There are two billion people around the world without access to financial services, <a class="markup--anchor markup--p-anchor" href="http://www.unhcr.org/en-us/figures-at-a-glance.html" target="_blank" rel="nofollow noopener noreferrer">68.5 million refugees</a>, and <a class="markup--anchor markup--p-anchor" href="http://www.worldbank.org/en/news/press-release/2018/03/19/climate-change-could-force-over-140-million-to-migrate-within-countries-by-2050-world-bank-report" target="_blank" rel="nofollow noopener noreferrer">more than 140 million people</a> who could become displaced in the coming years. That is a substantial problem with no easy solution. Nat spent seven years starting and running microfinance company in Kenya, and Tori has worked with refugees for almost 15 years. Our combined experience has shown us how powerful the role of financial security is in many facets of life, especially for vulnerable populations such as refugees.

<h4 class="graf graf--p">Q: What are the unique financial challenges that refugees face?</h4>
A: Carrying cash (and in many cases, a life’s savings worth of cash) across borders — in the presence of criminals and opportunistic border guards — is very risky. Even if successful crossing the border, a refugee will need to find somewhere to convert that cash to the local currency and pay exorbitant fees to money exchangers. The loss of value and time in trying to protect those savings is something many refugees can’t afford. Refugees also often rely on international remittances to keep them financially secure. However, the current money transfer system is inconvenient, expensive, and sometimes puts the refugee in danger.

<h4 class="graf graf--p">Q: How can blockchain technology help solve these challenges?</h4>
A: Blockchain can facilitate small, low-cost, cross-border movement of assets much better than current systems. Transactions are also almost immediate, which is important for refugees who cannot afford to wait hours or days for a money transfer to go through. Refugees benefit from the balance of transparency and anonymity/security afforded by blockchain. Blockchain also reduces the trust barrier for institutions working with Leaf’s services. Blockchain is just one part of Leaf’s ecosystem but works nicely for this specific population and use case.

<h4 class="graf graf--p">Q: You’re building a mobile-first platform. Why are mobile phones an effective tool for bringing financial services to refugees?</h4>
A: Mobile phone penetration in many of the markets we are exploring is above 80%. Additionally, mobile money accounts are fast outpacing bank accounts. Mobile phones are the platform of the future for financial services, especially for populations fleeing conflict around the world. Mobile phones are often the only way our customers can maintain any connection with their previous life. Due to the limited penetration of smartphones in our markets, it becomes important for us to offer mobile services that are not dependent upon a smartphone or data.

<h4 class="graf graf--p">Q: In the past year of building the company, what have you learned about making an impact for vulnerable populations?</h4>
A: We have learned that vulnerable populations are mostly made up of people just like us who have been put in incredibly difficult situations. The world often underestimates them, but they survive and figure out how to get by, often through relying on strong family networks dispersed throughout the world. Trust is obviously important in these communities. Credibility created through prior experience and willingness to learn goes a long way. We are extremely grateful to work with this population and continue to learn from them every day.

Can blockchain help refugees build better lives?

Leaf

Globally, more than 1.4 billion people are living in informal settlements, and unfortunately, that number is rising rapidly. These communities are prone to overcrowding, they lack even the most basic amenities, and they fail to comply with regulations meant to protect inhabitants from fires and other threats. Natural disasters, conflict, climate change, and lack of affordable housing are <a class="markup--anchor markup--p-anchor" href="http://gsdrc.org/wp-content/uploads/2016/11/UrbanGov_GSDRC.pdf" target="_blank" rel="nofollow noopener noreferrer">among the factors</a> driving more and more people to live in informal settlements. Among the other challenges they face, most community members can’t access high quality, affordable financial services and insurance coverage.
Formal housing allows, and often requires, homeowners and renters to purchase insurance to protect them and their property. But families living in informal settlements have difficulty accessing the same type of coverage because providers can’t quickly locate their homes, assess the value of their assets, and validate and pay claims.
<a class="markup--anchor markup--p-anchor" href="https://lumkani.com/" target="_blank" rel="nofollow noopener noreferrer">Lumkani</a>, one of our latest investments at Accion Venture Lab, leverages proprietary hardware and a tech-enabled agent network to provide consumers living in informal settlements within South Africa with insurance that protects against loss of life, shelter, and assets in the case of a home fire. Lumkani bundles this insurance product with an Internet of Things (IoT) connected heat sensor that detects fire in and around homes, reducing damages from the flames by providing an early warning system that alerts residents and neighbors. Lumkani’s IoT device and proprietary agent network generate data on household value, customer’s location, and demographics that Lumkani can use to underwrite, service, and pay out claims.
At Venture Lab, we’re most excited about the innovative way Lumkani is delivering microinsurance and their use of technology to reach underserved populations such as:
Using IoT to provide financial services to the underserved: Lumkani’s hardware can significantly change the way low-income consumers view insurance. The Lumkani’s IoT heat sensor serves as a reminder of the protection received when paying monthly premiums, resulting in a stickier insurance offering and an increase in retention. Existing clients view the Lumkani heat detector as a way to stay safe in their homes, and it helps create a tangible connection to the insurance product, thus driving customer retention.
Leveraging data for effective underwriting and claims management: On the insurance end, the IoT device and the data received present a new way to underwrite, service, and administer claims by accessing information such as household value, location, and demographic data. Lumkani has distributed nearly 13,000 IoT units and works with their partners to leverage this data when designing new products. They are continuously evolving as their dataset becomes more robust.
Applying a “tech and touch” model to reach into informal settlements: While we are excited about Lumkani’s technology approach, we also believe that for communities that are apprehensive about the value of long-term insurance, a human touchpoint is critical. This model not only builds trust with customers, but it also serves as a constant reminder of the value of the heat sensor and the accompanying insurance. The software they supply their agents and the mobile communications they maintain with their customers allow Lumkani to efficiently manage their clients, ensuring they can scale their operations.
Centering customer needs when developing and updating products: We have been impressed with the Lumkani team’s thoughtfulness and dedication to low-income consumers living in informal settlements. They have purposefully designed this product with the financially excluded in mind, and they have made the necessary adjustments to continue to serve this group better. We envision that the team will keep developing new products to deepen their clients’ overall financial health, and we look forward to seeing how they leverage their network of agents and IoT devices to expand access to financial services throughout South Africa.
We couldn’t be more excited to be working with the Lumkani team on their mission to keep people safe and protected in their homes. David Gluckman, Paul Mesarcik, and Francois Petousis have been building this solution since 2014.
While <a class="markup--anchor markup--p-anchor" href="https://www.pwc.co.za/en/assets/pdf/south-african-insurance-2014.pdf" target="_blank" rel="nofollow noopener noreferrer">insurance penetration rates in South Africa are some of the highest globally</a>, insurance companies have struggled to offer insurance solutions that reach low-income individuals, creating a massive market opportunity. Lumkani is dedicated to designing, delivering, and servicing some of the hardest to reach communities in an innovative way.
We at Venture Lab are looking forward to working with Lumkani and our co-investors, 4Di and Lireas, to bring insurance to the underserved and help to create thriving and secured environments for those who need it most.

Everyone should be able to feel safe in their own home

By Jeffrey Riecke
If you had to embark on a journey similar to that of the 65 million people who are currently forcibly displaced, what would you bring? Most likely among your provisions would be a smartphone. Phones are the contemporary map and compass, a gateway to critical information, a means for keeping in touch with loved ones, and a financial toolkit. <a class="markup--anchor markup--p-anchor" href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2017/02/The-Importance-of-mobile-for-refugees_a-landscape-of-new-services-and-approaches.pdf" target="_blank" rel="noopener noreferrer">More and more</a>, aid workers are witnessing refugees arriving at camps with smartphones. For both the refugee journey and the post-journey settlement process, a phone can be vital. With this in mind, you might not be surprised to learn that mobile money usage among refugees, including for cash transfers from governments and NGOs, is on the rise.
GSMA reports that the end of 2015, there were <a class="markup--anchor markup--p-anchor" href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2016/04/SOTIR_2015.pdf" target="_blank" rel="noopener noreferrer">271 operating mobile money systems</a> across 93 countries, with over 400 million registered accounts globally. At the same time, the Center for Global Development <a class="markup--anchor markup--p-anchor" href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/" target="_blank" rel="noopener noreferrer">estimates</a> that the vast majority of aid to refugees is given in monetary form. Most aid is provided either through vouchers that can be used for specific purchases or in-kind donations of items like blankets, heaters, and bags of rice. There’s growing evidence suggesting that not only are cash aid transfers <a class="markup--anchor markup--p-anchor" href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/" target="_blank" rel="noopener noreferrer">superior to vouchers and in-kind aid</a>, but that mobile money is the <a class="markup--anchor markup--p-anchor" href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2017/02/The-Importance-of-mobile-for-refugees_a-landscape-of-new-services-and-approaches.pdf" target="_blank" rel="noopener noreferrer">optimal vehicle for cash transfers</a>.
Most refugees use mobile phones extensively, with higher internet usage rates than the general population, according to a study from the Oxford University Humanitarian Innovation Project, “<a class="markup--anchor markup--p-anchor" href="https://www.rsc.ox.ac.uk/refugeeeconomies" target="_blank" rel="noopener noreferrer">Refugee Economies: Rethinking Popular Assumptions</a>”. In some cases, refugees even buy a new SIM card <a class="markup--anchor markup--p-anchor" href="https://www.trulioo.com/blog/financial-support-for-refugees-displaced-people/" target="_blank" rel="noopener noreferrer">each time they enter a new country</a> in order to navigate their way to the next border. Governments and aid agencies are recognizing this trend and re-thinking how they support this vulnerable population. And for their part, mobile network operators (MNOs) increasingly see refugees as a new, viable customer base as well as an opportunity to contribute services to highly vulnerable people.
A <a class="markup--anchor markup--p-anchor" href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2017/02/The-Importance-of-mobile-for-refugees_a-landscape-of-new-services-and-approaches.pdf" target="_blank" rel="noopener noreferrer">new report from GSMA</a> offers a handful of vignettes that illustrate the growing pervasiveness of phone-based financial services in refugee communities:

<ul class="postList">
 	<li class="graf graf--li">In Pakistan, which has the third-largest refugee community in the world, the government is the primary source of cash assistance for displaced individuals, and the majority of cash transfers are completed via mobile money. Four of the market’s top five MNOs are active participants in the mobile money disbursement programs.</li>
 	<li class="graf graf--li">In Uganda, GSMA surveyed refugees both in and outside camps and found that almost half of them used mobile money, mainly to receive remittances from family and friends. Recently, the MNO Orange Uganda built a tower in the Nakivale camp to support the launch of its mobile money service targeting the refugee population.</li>
 	<li class="graf graf--li">Refugees in Rwanda are regular users of mobile money. Some are even working as mobile money agents.</li>
</ul>
Mobile money presents refugees with deepening financial inclusion opportunities. Large barriers persist to refugees adopting and using such services, but when given the opportunity, refugees and internally displaced populations use mobile money in the same ways that other populations do: for remittances, person-to-person payments, merchant payments, loans, and savings.
Potentially most crucial for refugees are international remittances, either to send money home or to receive money from home. The international remittances market has been disrupted by mobile money in recent years, with transfers via phone <a class="markup--anchor markup--p-anchor" href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2017/02/The-Importance-of-mobile-for-refugees_a-landscape-of-new-services-and-approaches.pdf" target="_blank" rel="noopener noreferrer">21 percent</a> cheaper on average than standard money transfer operations. And such services are spreading fast. In fact, international remittances are the fastest-growing mobile money service. One can now send international remittances via mobile money between more than 20 countries worldwide, particularly in regional markets, i.e., between neighboring countries. High rates of adoption are seen in several markets in which these services recently launched, including Burkina Faso, Ivory Coast, Mali, and Senegal.
Whether in settlement camps or post-settlement, refugees seek to quickly build new lives. To this end, they use person-to-person and merchant payments not only for consumption purposes but also as livelihood-building and business tools. Eighty-nine percent of refugees in Kampala use their mobile phones to generate income, according to “Rethinking Popular Assumptions”. Phones can help refugees find employment, access market information, and run micro-businesses. A mobile money ecosystem also presents employment opportunities for ancillary services like selling phone charging services, mobile phone repair, and serving as mobile money agents. Mobile money empowers refugees to create or boost existing markets — for food, clothing, financial services, and more.
In addition to mobile money, we’ve seen an array of initiatives from governments and NGOs that pair aid with other digital financial services:

<ul class="postList">
 	<li class="graf graf--li">Lebanon hosts the most refugees per capita in the world with 1.2 million individuals. Aid organizations like the International Rescue Committee (IRC) <a class="markup--anchor markup--li-anchor" href="https://cfi-blog.org/2016/11/15/the-future-of-refugee-financial-inclusion/" target="_blank" rel="noopener noreferrer">issue ATM cards</a> for refugees to access cash benefits, taking advantage of the fully-functioning distribution networks of merchants and ATMs available in the country.</li>
 	<li class="graf graf--li">In Syria, the United Nations Relief and Works Agency (UNRWA) developed a small fleet of mobile lending units to reach clients in areas without financial infrastructure.</li>
 	<li class="graf graf--li">On the island of Lesbos, Greece, Mercy Corps <a class="markup--anchor markup--li-anchor" href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/" target="_blank" rel="noopener noreferrer">offers refugees debit cards</a> that connect to a bank account to help them build banking histories.</li>
 	<li class="graf graf--li">The Digital Finance Institute launched the <a class="markup--anchor markup--li-anchor" href="http://www.digitalfinanceinstitute.org/?post_projects=childrens-adventure-camps" target="_blank" rel="noopener noreferrer">Banking on Refugees project</a> which is piloting a cloud-based branchless bank that harnesses biometric identification and digital payment solutions, including prepaid cards and e-wallets.</li>
</ul>
However, a number of challenges impede the spread of mobile money-based humanitarian aid for refugees, as well as their uptake of broader mobile money services. These can come from both the supply and demand side. In some environments, the mobile money ecosystem is still too nascent and not yet a viable option. In others, demand is weak, either because services are not sufficiently convenient or robust, or because of lack of customer awareness or familiarity. In its recent study, GSMA found that for refugees using mobile money, convenience and connectivity was more important than familiarity with the service, pointing to the importance of service and agent coverage and agent liquidity.
Proof of identity also poses a serious issue. <a class="markup--anchor markup--p-anchor" href="https://cfi-blog.org/2016/11/15/the-future-of-refugee-financial-inclusion/" target="_blank" rel="noopener noreferrer">As discussed on this blog previously</a>, refugees often leave their home country without identity documentation, and sometimes even when they have it, the host country government may not have the technology and data needed to authenticate these documents. Lack of identification can impede refugees from buying SIM cards, owning mobile phones, and accessing mobile money and other financial services.
UNHCR in Jordan is mitigating this problem using biometrics. Refugees in the UNHCR program in Jordan <a class="markup--anchor markup--p-anchor" href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/" target="_blank" rel="noopener noreferrer">receive iris scans</a> which are stored in the cloud. The UNHCR offers bank accounts for refugees through the Cairo Amman Bank. When refugees arrive at the bank’s ATMs, they look into a set of binoculars that scans and verifies their eyes, and they’re able to withdraw the money in their name.
Refugees are also often faced with the loss of the banking and credit histories they built in their home countries. We’ve advocated before for credit history portability for refugees, allowing refugees to be able to apply preexisting credit histories in the host country and, if they return home, to bring credit histories accumulated in host countries back with them.
Trulioo, a company that works in identity verification, <a class="markup--anchor markup--p-anchor" href="https://www.trulioo.com/blog/financial-support-for-refugees-displaced-people/" target="_blank" rel="noopener noreferrer">asserts the potential</a> to use an individual’s cyber identity for identity verification and for enabling access to credit and other financial services. MNOs could serve as centralized, cross-border identifiers, by harnessing the user data and transaction histories linked to specific SIM cards. Additionally, aggregation of an individual’s online interactions, including mobile money and online transactions, could serve in place of credit histories to open financial doors.
But often it all comes back to the initial distribution of relief payments, where governments, NGOs, MNOs, and banks too often conduct business as usual. Although buy-in and coordination from these stakeholders are essential, many remain uncomfortable, unfamiliar, or unconvinced about the merits of cash transfers instead of vouchers or donated items, or about the merits of mobile money. Elizabeth MacBride of Quartz <a class="markup--anchor markup--p-anchor" href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/" target="_blank" rel="noopener noreferrer">writes</a>, “One of the obstacles to donors shifting their giving to cash has been that the NGO edifice that funnels their money is built to resist its own destruction.” Indeed, mobile money cash transfers might be a more efficient and effective means to offer refugees crucial resources, but there are vested interests in the status quo. For example, in 2013 USAID shipped <a class="markup--anchor markup--p-anchor" href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/" target="_blank" rel="noopener noreferrer">1.4 million metric tons</a> of food aid as part of the World Food Program. To accomplish this, roughly $70 million was spent on shipping. Food sellers and shippers are likely to be strong advocates of retaining the in-kind system.
A number of studies suggest that not only is cash aid more efficient than other aid forms, it’s ultimately more helpful for refugees. One study estimates that the savings on administration gleaned from the more efficient digital cash transfer programs could help the aid reach 30 percent more people for the same price. In 2014, IRC, in partnership with Yale and the University of Brasilia, published a rigorous evaluation of emergency cash distribution for refugees with the core finding that refugees <a class="markup--anchor markup--p-anchor" href="http://mastercardcenter.org/action/mobile-money-transforming-financial-inclusion-refugees/" target="_blank" rel="noopener noreferrer">used the money for food as intended</a>, as opposed to spending it on cigarettes or alcohol. Another IRC report in Lebanon found that 87,700 families who were given $575 via ATM cards <a class="markup--anchor markup--p-anchor" href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/" target="_blank" rel="noopener noreferrer">used the funds for essential purchases</a>, like food, clothing, fuel oil, and so forth. In both of these studies, additional findings spoke to the entrepreneurial nature of refugees, who strive against extremely difficult odds to build new lives. In the first study it was calculated that for every $1 of cash assistance, $2 was created in local markets. In the second, with cash transfers instead of other aid forms, more children stayed in school because fewer families had to send their kids to work. Another study of Syrian refugees in Iraq found that <a class="markup--anchor markup--p-anchor" href="https://qz.com/750020/the-deceptively-simple-economic-case-for-giving-refugees-cash-not-stuff/" target="_blank" rel="noopener noreferrer">70 percent</a> of individuals sold some of the aid they received in the form of rice. Compared to other forms of aid, cash transfers empower refugees to take action on behalf of themselves and smooth entry into their new country.
And digital channels for cash aid — whether mobile money or otherwise — offer a number of benefits over physical cash transfers. Digital finance offers greater transparency and the ability to track cash, which can combat the longstanding problem of corruption surrounding the physical handling of cash. And digital offers refugees greater security and safety from theft.
Sadly, the current refugee crisis is not going away any time soon. In the meantime, we applaud all those working to support these millions of individuals, through cash transfers, financial services, and other means.
This post previously appeared on the <a class="markup--anchor markup--p-anchor" href="https://cfi-blog.org/2017/02/14/refugees-and-humanitarian-assistance-which-kind-of-aid-is-best/" target="_blank" rel="noopener noreferrer">Center for Financial Inclusion blog</a>.

Refugees and mobile money: Services and initiatives that support those in crisis