Mayada will moderate “Advancing Financial Inclusion for Refugees and Host Communities,” a panel discussion with David Kuijper of FMO, Joe Huxley of FSD Africa, Lev Plaves of Kiva, Pamela Eser of UNCDF, and Phillippe Guichandut of Grameen Credit Agricole Foundation.

This spotlight session will seek to discuss and propose solutions to specific challenges that refugees face in accessing financial services. Panelists will present a number of innovative blended finance interventions currently implemented to support, in a sustainable and scalable way, the undeserved refugee market, along with their host communities.

The first <a href="https://www.unhcr.org/global-refugee-forum.html">Global Refugee Forum</a> is a ministerial-level "opportunity to translate the principle of international responsibility-sharing into concrete action." This discussion will take place at 1:30 pm (CET) on December 18.

Watch the live stream <a href="https://www.facebook.com/events/2367634536861156/">here</a> (Facebook account isn't required).

&nbsp;

Global Refugee Forum

Refugees and Migrants

Underserved Groups

Event

This <a href="https://centerforfinancialinclusion.org/financial-inclusion-week-2019/">Financial Inclusion Week</a>, we’re asking ourselves what the purpose of our work is. For those of us who work with refugees, financial inclusion is often for rebuilding sustainable livelihoods, resilience, and self-reliance.

Driven by necessity and limited employment choices, many refugees decide to start a business once they settle in a host country. However, lack of financial capital represents a major stumbling block on the way to business success. Financial service providers (FSPs) in a number of countries are starting to become aware of the potential of this underserved market, but much of the work is still at an incipient phase. FSPs often have questions related to whether operations adjustments may be required, strategies to follow to reduce credit risk, and supporting non-financial services. While every context is different, some good practices are emerging among a number of FSPs, which have been extending credit and other financial services to refugees. Drawing on their experiences, here are four recommendations for FSPs on how to start including this underserved market in their microfinance portfolio:
<h2>1. Analyze market data for better targeting.</h2>
Refugees aren't a homogeneous group, so FSPs first need to understand the differences of their socio-economic characteristics to be able to make an informed decision regarding which sub-segments they wish to serve. Relevant data for a first screening may be offered by local development and humanitarian agencies, and – in addition to basic demographic information – should ideally include data such as vocational or business training received, access to start-up financing, access to bank accounts, description of enterprises, and membership to any existing saving groups. Sometimes this data may be unavailable or insufficient, and market feasibility studies may be required. Especially in countries with high concentration of refugees living in settlements where FSPs have no presence, this would require set-up costs for branches or delivery channels.
<blockquote>A study revealed that refugee communities had enough financial capacity to be good clients.</blockquote>
To identify the potential market of serving refugee entrepreneurs in the West Nile region, <a href="http://www.visionfund.org/2095/where/africa/uganda/">VisionFund Uganda</a> conducted an <a href="http://www.visionfund.org/222/media/news/article/report---serving-refugee-communities-in-uganda/">assessment</a> of 6,700 refugee members of existing saving groups. The study revealed that the refugee communities had enough financial capacity to be good clients, given the presence of daily and weekly markets in the camps, availability of fairly good network coverage, and mobile money agents and existence of entrepreneurial groups and business activity. The results from this assessment, when considered alongside data collected from a broader <a href="https://www.findevgateway.org/blog/2018/oct/getting-it-right-providing-financial-services-refugees">market survey</a> previously conducted by Microfinanza, convinced the MFI to set-up their first branch in the West Nile and start serving refugees.
<h2>2. Widen the range of acceptable forms of IDs while complying with regulation.</h2>
Depending on FSPs’ internal policies and the host country’s regulatory framework, adjustments to FSPS’ internal procedures may be required to serve refugees clients. <a href="https://corporate.mybucks.com/articles/worlds-first-refugee-camp-bank-a-resounding-success/13TBmOsflyCQsUqyeQoSMI">MyBucks in Malawi</a> is the first financial institution to provide a full range of financial services to clients at a refugee camp. Refugees in the Dzaleka camp had no access to FSP providers until last year and had to travel roughly 40 kilometers to the nearest city of Lilongwe to access financial services. The bank saw the business potential of this untapped market, but in order to serve refugees, MyBucks needed to tailor its offering by widening the acceptable forms of identification. Refugee clients often don't meet KYC policies required by the bank – such as a passport or national ID – and don't own land properties that the bank can use as securities. Therefore, in order to comply with the country’s regulations, MyBucks sought a waiver from the central bank to use refugee forms provided by UNHCR to allow refugees to open bank accounts. Today, the bank, which opened its first branch in April 2018, is offering a full range of banking services to refugees.

As of July 2019, 153 refugee entrepreneurs have received business loans from the bank, which relies on group lending methodology to lower credit risks in extending collateral-free loans to refugees. Each individual has to repay according to his/her amount and repayment schedule. The group guarantees for the members, in case a member can't repay on time. Repayment rates to date are 100 percent. MFIs in other countries which don't have to comply to stringent banking regulations, have also been accepting old refugee IDs and expired passports as means to verify identities. A number of new identification and verification measures through blockchain are also starting to emerge which provide innovative tools to verify people’s identities and monitor risk in financial transactions.

A <a href="https://www.makingcents.com/hawiyati-english">digital identity</a> for refugees has been piloted in Jordan and Lebanon by local MFIs. This provides their clients with a “portable identity” that verifies their foundational identification (government or UNHCR issued) digitally, records their credit history, and uploads other important documents. This identity will be especially useful in case a refugee wishes to access banking services upon return to the home country or in case of resettlement, and can also work as an incentive to repay the loan on time.
<h2>3. Establish alternative procedures to mitigate credit risk.</h2>
FSPs are used to the conventional eligibility requirements that proof of citizenship, identity, and residency cards reduce credit risk. Nevertheless, there can be other ways to monitor risk and to verify IDs by adding some flexibility to documentation required. <a href="https://www.almajmoua.org">AlMajmoua</a> is the biggest MFI in Lebanon, the country with the highest number of refugees relative to its population. The MFI serves over 9,000 refugee borrowers with a loan portfolio of over $9 million and repayment rates of almost 100 percent, making it the financial institution with the highest number of refugee borrowers served in a country. More than half of the loans disbursed by AlMajmoua to refugees are for income generation in the limited sectors were refugees are allowed to work in the country, such as field crops, cleaning services, sewing, selling clothes and hairdressing.
<blockquote>AlMajmoua serves over 9,000 refugee borrowers with a loan portfolio of over $9 million and repayment rates of almost 100 percent.</blockquote>
How did this MFI succeed in reaching thousands of refugee clients – many of which through individual loans, so where no social guarantee can be applied – with excellent repayments? To mitigate credit risk, the MFI primarily relies on a strong communication channel between their loan officers and clients by conducting regular business visits, which also allow it to find out whether refugees may have imminent plans to return to their home country or relocate. Additionally, AlMajmoua exceptionally provides loans up to $1,500 to refugees who don’t hold an active residency permit as long as they have a Lebanese, Palestinian or Syrian guarantor with a valid residency permit.
<h2>4. If you provide enterprise support services, consider what would be relevant for refugees new to business.</h2>
Sometimes credit isn't sufficient to initiate and scale up a business activity and refugees may need the support of incubators and start-up technical assistance. Some FSPs might already have their training curricula well developed, which might have to be adapted to the needs of the foreign-born clients. <a href="http://www.microfund.org.jo/">Microfund for Women</a> (MFW), Jordan’s largest not-for-profit microfinance institution, serves over 7,500 Syrian refugees, approximately 40 percent of whom are involved in income generation activities, mostly commercial and home-based services. For MFW, it proved particularly important to accompany loans with non-financial services tailored around refugee women’s specific needs (most of their Syrian refugee women clients were not working before the war started). The MFI has established a learning academy and developed training curricula for both beneficiaries and staff members related to market ofrientation, business management skills, financial literacy, and marketing. In addition. MFW offers free feasibility studies for start-up entrepreneurial businesses with loan amounts higher than $4,000.

When FSPs don't offer such services, they may be able to partner with organizations offering that do. For example, <a href="https://www.ilo.org/global/lang--en/index.htm">ILO</a> is adapting its <a href="https://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_560493/lang--en/index.htm">business skills development training tools</a> to the needs of the displaced population and the local context, and is now planning to train refugees and host communities to develop their own enterprises and facilitate access to finance. A first training has already been deployed in Kenya through the Danish Refugee Council in the Dadaab refugee camps.
<blockquote>When FSPs don't offer such services, they may be able to partner with organizations that do.</blockquote>
Hopefully, this post will spark FSPs to realize the important role they have in finding solutions to the refugee crisis. By extending their services to the refugee population in their country, FSPs won't only support the resilience and self-reliance of this widely underserved market, they will also assist in overcoming stigma and helping refugees contribute economically and socially to host communities.

How to Include Refugee Entrepreneurs in Microfinance

Jordan

Lebanon

Malawi

Middle East and North Africa

Sub-Saharan Africa

Uganda

Financial Inclusion Week 2019

Financial Service Providers

Microfinance Institutions

Blog Post

In 2014, Ghanshyam, a man in his forties, was barely making ends meet working in a farm he owned in his native Nepal when a landslide devastated his land and constrained the livelihoods of people living in the surrounding area. A year later, twin earthquakes destroyed his house, forcing him and his family to live like slum dwellers for nearly a year inside temporary tarps provided by humanitarian organizations.

As the Nepali government imposed new regulations for the construction of earthquake-safe housing, Ghanshyam found himself unable to afford the construction of a government-standard home. Getting a loan was also next to impossible, as financial institutions did not provide loans against land in the earthquake-affected areas. The elections soon followed and with them, threats to voters to cast ballots for a certain party. Facing political unrest and no hope for economic improvement, Ghanshyam opted to sell his land and pay an agency in Kathmandu $30,000 to get him to the US. He had no idea how difficult the journey ahead of him would be.
<blockquote>Ghanshyam opted to sell his land and pay an agency in Kathmandu $30,000 to get him to the US. He had no idea how difficult the journey ahead of him would be.</blockquote>
Ghanshyam traveled through eight countries before reaching Costa Rica. He was extorted in Peru multiple times by police officers, detained by immigration authorities in Ecuador for four days, extorted again by Colombian police officers three times, and had his money, passport, and other identity documents stolen while in Colombia. This series of unfortunate events all occurred before spending seven days crossing the Darién Gap, a thick mountainous jungle dividing Colombia and Panama riddled with venomous snakes, wild cats, and dangerous paramilitary groups. And yet, Costa Rica was only the half-way mark in a treacherous journey to the US.

Ghanshyam is one of 87 migrants interviewed as part of a study of long-journey migration titled <a href="https://sites.tufts.edu/journeysproject/the-other-migration/">The Other Migration: The Financial Journeys of Asians and Africans Traveling through South and Central America Bound for the United States and Canada</a>. Led by Prof. Kim Wilson, alums and graduate students from the Fletcher School at Tufts University captured these individual migrant stories in Costa Rica and Colombia in 2018 and 2019.

The<a href="https://sites.tufts.edu/journeysproject/financial-biographies/"> experiences shared by these migrants</a> offer evidence of the financial exclusion they faced both in their countries of origin as well as en route to their country of destination. Among the patterns of exclusion uncovered by this study, access to funds before and during their journey and access to livelihood and work opportunities throughout their journey should be of concern to the financial inclusion community.
<h2>Availability of Funds</h2>
The availability of funds was a key determinant of safety. Having the resources to secure an “all-inclusive” smuggling package marked a stark difference between an uncertain and dangerous journey and a partially safe one. As in Ghanshyam’s case, most Nepalis were able to afford this all-inclusive package which included plane tickets, lodging, traditional Nepali meals, and designated smugglers along the way to guide the migrant’s journey. The circumstances of migrants from Africa was worse. They were easy targets for criminal organizations and were confronted with more risk throughout their travels. African journeys were also commonly longer and dependent on procuring work in transit, being gifted money by good Samaritans, or receiving money transfers from loved ones.

Unfortunately, whether traveling with appropriate identity documents or not, formal money transfers were inaccessible to migrants. Researchers of The Other Migration believe this was likely due to money transfer agents not understanding their corporate internal policies and therefore not recognizing certain identification documents as sufficiently compliant with their regulations. Migrants were forced to resort to locals to access their money, requesting these strangers receive the funds in their name. Locals provided their service for a fee that ranged between 10 percent and 20 percent of the transfer amount, in addition to the fees the sender was already incurring. In some cases, migrants told of their funds being stolen by the local who was lending their name and ID for the transaction.

As the report explains, these activities put into question the efficacy of AML/CFT (anti-money laundering/combating the financing of terrorism) standards. To comply with these standards, financial service providers follow a set of procedures called Know Your Customer (KYC). These procedures are supposed to establish the facts and the behaviors of a specific customer. Nevertheless, in this case the customer being examined is not the end customer but a third party serving simply as an identity lender. Such activities create three problems: First, migrants cannot get their money without relying on locals and paying an exorbitant fee. Second, locals – knowingly or unknowingly – become involved in criminal activity, and third, KYC procedures fail to fulfil their purpose.
<h2>Livelihood and Work Opportunities</h2>
Livelihood and work options in transit countries are highly valued by migrants whose travels are piece-meal. Many Africans and Indians found themselves stuck in a transit country after their funds were depleted or stolen. Some were able to request an injection of travel capital from family members back home or living in the US or Europe. Yet for others, the option of receiving remittances was unavailable and they quickly resorted to pleading for odd jobs – often carrying groceries for supermarket patrons – or relying once more on the mercy of locals for aid. African respondents shared their willingness to work with the researchers, expressing frustration at their inability to communicate in the local language and their lack of access to formal employment. The researchers found there is currently no country in the America’s corridor offering temporary work permits for transit migrants.
<h2>Recommendations</h2>
In order to overcome the problems faced by migrants in transit, the report suggests AML/CFT requirements for transferred amounts under $1,000 be relaxed. This would allow money transfer agencies to deal directly with the end customer, adhering to the spirit of KYC requirements and avoiding the excessive fees currently incurred by migrants. As an alternative solution, governments of the transit countries could create an identity corridor, thus supplying migrants with a temporary identification document that is recognized by all or most transit countries, providing for more orderly international mobility, and serving to comply with existing AML/CFT requirements. Including a digital component of such an ID would be important, as many migrants are robbed of IDs in the Darién jungle or during other legs of their journey.

The report also proposes issuing temporary work permits for people in transit. Since most migrants are entering through official ports of entry in Ecuador and Brazil, immigration officials could collect information on migrants’ skills, store these in a regional database, and, in partnership with the transit countries’ labor authorities, allocate labor in needed sectors. This initiative would then be carried out in collaboration with the identity corridor. Work permits would enable migrants to contribute to the formal economy and would allow governments to collect taxes on their labor, generating resources that could fund support services to migrants and their host communities.
<blockquote>Work permits would enable migrants to contribute to the formal economy and would allow governments to collect taxes on their labor, generating resources that could fund support services to migrants and their host communities.</blockquote>
In short, considering transit migrants in efforts towards financial inclusion would provide thousands like Ghanshyam with the opportunity to escape grinding poverty with dignity and safety, while also adhering to financial regulations and contributing to local economies along the journey.

Financial Inclusion for Transit Migrants

Latin America and The Caribbean

Nepal

South Asia

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

Agent Banking

Delivery Channels

Mobile Banking

Payments

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.

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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.

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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.

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

Libya

Emma Morse

Manager, Strategic Projects

Mayada  El-Zoghbi

Managing Director, Center for Financial Inclusion

Amee Parbhoo

Ashley Lewis

Coryell Stout

Libby Morley

Megan Peterson

Rachel Morpeth

Robert Ongodia

Vikas Raj

Chile

Kenya

South Africa

United Arab Emirates

Agricultural and Rural Finance

Appropriate Product Design and Delivery

Blockchain and Cryptocurrency

Challenges and Crises

Consumer Protection

Credit Provision

Customer Centricity

Digital Financial Services

Enabling Environment

Entrepreneurs of MSMEs

Financial Capability

Financial Technology

Human Centered Design

Human Touch

Inclusive insurance

Insurance Companies

Microfinance

Personal Financial Management

Policy, Regulation and Government Initiatives

Resilience

Responsible Digital Finance

Rural Populations

Social Performance

Underwriting

Article

Podcast

Press Release

As wars and calamities have forced people from their homes in Somalia, DR Congo, Rwanda, Southern Sudan, Burundi and other countries, 1.4 million refugees have made their way to Uganda to start a new life. Starting fresh isn't easy when you left your livelihood behind. To help people rebuild, the UN Refugee Agency (UNHCR) has long recommended job training and placement, and increasingly, it's looking to use financial services to help displaced people find new opportunities.

Our portfolio company <a href="https://www.ugafode.co.ug/" target="_blank" rel="noopener noreferrer">UGAFODE Microfinance Limited (MDI)</a> is working with other organizations and governmental agencies in Uganda to help refugees tap into the power of financial services to build a business.

At the beginning of 2019, UGAFODE <a href="/going-digital-to-serve-customers-in-uganda">launched its financial inclusion refugee program</a> as a pilot to serve urban refugees in areas around Kampala. UGAFODE worked alongside many partners to navigate the cultural diversity and sensitivity in serving this population. The Office of the Prime Minister (OPM) helped with verifying refugees' identities, and InterAid Uganda aided in mobilizing urban refugees. Livelihood Resilience Sector, Congolese Refugee Community in Uganda, United South Sudanese Urban Refugee Community, and Jesuit Refugee Services all supported refugees in developing financial literacy and skills. For UGAFODE to implement refugee financing successfully, it also partnered with Kiva, an international nonprofit organization, to provide funds for lending and guaranteeing loan losses so refugees don't need to pledge collateral. UGAFODE resolved the challenge of identification requirements by lobbying the Bank of Uganda to accept official IDs issued by OPM, and the institution worked with credit reference bureau CompuScan to get the OPM-issued IDs included in their system.

Over the past year, UGAFODE’s pilot program has shown that refugee customers are not, in fact, high-risk, and that they need high-quality financial services to succeed. In 2019, 1,251 refugee customers opened accounts with UGAFODE, and they currently have 100 percent repayment rates on loans for this population.

Now, with grant funding from the Swedish International Development Cooperation Agency (SIDA) through Grameen Credit Agricole (one of UGAFODE’s lenders), UGAFODE has opened up a branch within Nakivale, a settlement in Southwest Uganda that is home to more than <a href="https://data2.unhcr.org/en/documents/download/69449" target="_blank" rel="noopener noreferrer">100,000 refugees</a>. With this launch, UGAFODE has become the first financial institution in Uganda to open a branch to serve refugees inside a refugee settlement.

A United Nations decision to switch from providing commodities to giving cash aid means that UGAFODE’s branch in Nakivale is well-timed. UGAFODE will offer a seamless process to deliver financial assistance through physical locations like this one and digital means (UGAFODE Mobile). Once someone has opened an account at the local branch, they will be able to use UGAFODE Mobile, a digital wallet that allows customers to transact between their savings accounts and mobile money wallets. They can even pay bills without visiting a physical branch location. Customers will be able to receive money transfers from agencies directly to their mobile wallets and cash out through mobile money agents if they need to. UGAFODE will also provide an opportunity for refugees to use a portion of their cash aid to open a savings account at UGAFODE. Since the savings from the cash aid is limited, UGAFODE will provide additional credit to refugees looking to start or grow their small businesses.

In addition to providing financial services for refugees in the settlement, the branch also creates jobs — some of the staff are from the refugee community.

We are proud of the work UGAFODE has done to demonstrate that providing financial services to refugees is possible and can make a substantial difference for a vulnerable and often underemployed population. According to the CEO of UGAFODE Mr. Shafi Nambobi, the team hopes to serve 5,000 refugees in 2020, to reach more than 29,000 in the next three years, and to continue UGAFODE’s outreach into other refugee settlements. Mr. Nambobi recognizes that to be successful in the long-term, “we should come up with universal products that not only satisfy refugees’ needs but are also targeting the host communities.” When refugees have the financial tools they need to thrive, communities and countries will be stronger and more resilient in a changing world.

We are thankful to all our partners, including OPM, SIDA, BOU, Kiva, UNHCR, InterAid and local communities.

&nbsp;

Eva Arinaitwe from UGAFODE also contributed to this article.

It's a group effort to help refugees build new lives in Uganda

Ugafode

Financial Service Provider

Institutional Funder

Social Good

Accion Global Investments

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="http://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

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="http://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="http://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="http://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="http://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="http://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="http://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

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

Financial Inclusion Practitioner

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

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Dubai, August 22, 2017 –<a href="http://www.nowmoney.me">NOW Money </a>has secured an investment of $700,000 from two U.S.-based venture capital investors – Accion Venture Lab, the seed-stage investment initiative of financial inclusion leader Accion, and Newid Capital.
Both Accion Venture Lab and Newid Capital make investments that target the financially underserved.Venture Lab invests capital in, and provides support to, innovative fintech start-ups that increase access to, improve the quality of, or reduce the cost of financial services for the underserved at scale. Newid Capital focuses on such investments outside of North America and Western Europe.
NOW Money uses mobile banking technology to provide accounts, financial inclusion and a range of low-cost remittance options to low-income migrant workers in the Gulf region. It aims to provide access to affordable financial services for everyone.
The investment comes a year after NOW Money’s initial seed funding, which allowed the company to expand the team and develop the technology and brand. With the latest investment, also a part of its seed round, the team plans to launch the service across the United Arab Emirates and expand into the other Gulf Cooperation Council (GCC) countries.
Co-founder of NOW Money, Ian Dillon said, “Having what’s understood to be the first early stage investment from U.S. venture capital into the Middle East is testament to the opportunities available here and how far the GCC has come in making itself a destination for investment. We hope this will be the first of many U.S. venture capital investments in the region, and will help to grow the ecosystem further.”
“We’re excited to be making such a big social impact in the region. Accion is one of the leading global institutions promoting financial inclusion, and Newid Capital was co-founded by Nigel Morris, who previously co-founded Capital One Financial Services. We’re excited to be working with them to bring financial inclusion to the 26 million unbanked in the GCC,” he added.
“Each year, migrant workers contribute more than $400 billion to their home economies, and the United Arab Emirates is among the top remittance-sending countries in the world,” said Michael Schlein, CEO and President of Accion. “NOW Money’s innovative approach and digital platform provide a faster and safer option for these workers to support their families and communities.”
“Our partnership with NOW Money marks a number of firsts for Accion Venture Lab – our first investment in the Middle East region, our first investment into a wholly-digital neobank, and our first opportunity to focus on reaching low-income migrant workers,” added Amee Parbhoo, Director of Investments at Accion Venture Lab. “As we reach this new group of financially underserved individuals, we’ll look to apply our learnings to Venture Lab’s work around the world.”
In the last 12 months, NOW Money has won six awards, including Chivas’ “The Venture” for the Gulf region. The co-founders Katharine Budd and Ian Dillon speak regularly at fintech events, such as Payfort and Wamda’s <a href="https://www.wamda.com/2017/06/fintech-middle-east-podcast">State of Fintech </a>report, and are featured regularly in publications such as <a href="https://www.entrepreneur.com/article/291944">Entrepreneur Middle East </a>and on the <a href="https://omny.fm/shows/drive-live/industry-insider-30-07-2017">Dubai Eye </a>radio station.
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About NOW Money
NOW uses mobile banking technology to provide accounts, financial inclusion and a range of low-cost remittance options to low-income migrant workers in the Gulf Cooperation Council (GCC) countries, improving their lives and saving them and their families significant money, in a profitable and sustainable manner.
About Accion Venture Lab
Accion Venture Lab is the world’s leading seed-stage investor in fintech for the underserved. Venture Lab invests capital in, and provides support to, innovative fintech start-ups that increase access to, improve the quality of, or reduce the cost of financial services for the underserved at scale. Since launching in 2012, Venture Lab has deployed over US$10 million across more than 25 start-ups that work in over 20 countries worldwide. Venture Lab is a part of Accion, a global non-profit committed to creating a financially inclusive world, with a pioneering legacy in microfinance and fintech impact investing. Accion catalyzes financial service providers to deliver high-quality, affordable solutions at scale for the three billion people who are left out of – or poorly served by –  the financial sector. For more than 50 years, Accion has helped tens of millions of people through its work with more than 90 partners in 40 countries. For further information, visit <a href="https://www.accion.org/venturelab">https://www.accion.org/venturelab</a>.
About Newid Capital
Newid Capital is a direct-investment fund focused on financial services and financial technology companies in developing markets. Through its investments, Newid Capital aims to expand financial services to currently underserved markets and individuals. Newid actively seeks early- and mid-stage start-ups that are looking for investment and operational assistance. Newid is able to leverage personal experience in building, and exiting, financial services companies from the viewpoint of both the entrepreneur and the investor.
Media Contacts:
Bryony Travers (NOW Money)
050 374 1012
<a href="btr">btravers@nowmoney.me</a>
Katie Mounts (Accion)
+1 202.280.5859
<a href="mailto:kmounts@accion.org">kmounts@accion.org</a>

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UAE-Based Fintech Start-Up Secures $700K Investment to Advance Financial Services Access for Underserved Migrant Workers

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