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Financial Inclusion for Forcibly Displaced Persons (FDPs)

Nadine Chehade

17th June 2020

• Why financial inclusion for FDPs?

• What do we know?

• What is the latest?

• What can municipalities do?

2

Agenda

• Why financial inclusion for FDPs?

• What do we know?

• What is the latest?

• What can municipalities do?

3

Agenda

4

Because forced displacement levels are on the rise

0M

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IDPs Refugees and Asylum Seekers Stateless Others of concern

Conflict-Related Displacement Figures: 1951-2015

Source: UNHCR. Palestinians excluded

70.8million

as of 2018

5

8,9

2,2 2 2,2

0,2

5,1

1-4 years 5-9 years 10-34 years 35-37 years 38-55 years Palestinians(>60 years)

Re

fug

ee

s (

mil

lio

ns

)

Length of Displacement

Source: Devictor & Do, 2016. Duration of the situation for Palestinians and not duration of individuals’ displacement.

10 to 15 years

of displacement

on average

since 1990

Because longer displacement calls for longer-term solutions

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Because forced displacement is a developing country issue

Source: UNHCR 2018. Palestinians excluded

85%of FDPs live in

developing

countries

57%of refugees

worldwide came

from three countries

2.3mSouth Sudan

2.7mAfghanistan

6.7mSyria

• Why financial inclusion for FDPs?

• What do we know?

• What is the latest?

• What can municipalities do?

7

Agenda

Remittances help cope with

shocks & stimulate economic

activity at community level

Financial services do play a role in mitigating crises

8

Savings increase resilience

(formal & informal)

Insurance reduces vulnerability

(especially disaster insurance

e.g. index-based)

Credit needs to be further

researched

9

At an aggregate level: access (supply) is low…

Source: Findex

54%

24%

39%

17%

15%

12%

11%

10%

6%

Low & middle income

Countries with humanitarian crisis

Somalia

Congo, Dem. Rep.

Sudan

Cameroon

Iraq

Afghanistan

Yemen, Rep.

Account penetration in selected countries with humanitarian crisis

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This is also partly due to under-developed financial sectors

… yet demand is high, so informal services dominate

Formal and informal savings (% of adults)

0%

10%

20%

30%

40%

50%

60%

70%

Congo, Dem. Rep. Cameroon Low & middleincome

Iraq Countries withsevere humanitarian

crisis

Sudan Somalia Afghanistan Yemen, Rep.

Saved using other method Saved using a savings club or person outside the family Saved at financial institution

~5x

Source: Findex

FDPs are not a homogenous group:

Segmentation is needed in each country

11

• Why financial inclusion for FDPs?

• What do we know?

• What is the latest?

• What can municipalities do?

12

Agenda

The move from in-kind to cash transfer is a huge opportunity

13

Humanitarian assistance

In-kind transfers

Cash & Voucher Assistance

(cash transfer)

Physical cash or paper voucher

Digital transfers

90%

10%

Majority

Minority

Cash out or restricted

purchase

Access & use

of financial

services

28

bn$

Digital cash transfers have proven to be particularly

relevant in the Covid-19 global response

1. An enabling environment for digital financial services

• Established national payments infrastructure

• Proportional regulatory environment

2. A business case or incentive for financial service providers to have a

direct relationship with cash transfer recipients

3. Trust and digital literacy from the recipient themselves

4. Donors and governments who consider financial inclusion a priority,

enabling agencies to make decisions based on financial inclusion objectives

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To reach financial inclusion, hence resilience, several factors

must be in place

Even before Covid-19, health issues have been a key concern

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Most mentioned

shocks

Illness

Health emergencies

Accommodation

issues

Health emergencies

Illness

Loss of assets

Retirement

Coping

mechanisms

used

Formal financial

services

Debt

Community assistance

Social Security

Selling assets

Sunduqs

Social Security

Savings

Insurance

Debt

No access Limited access Social Security

Private insurance

Illness

Health emergencies

Damaged/broken assets

˂---- Illness & Health emergencies ----˃

Debt

UNHCR health coverage

Selling assets

Sunduqs

˂---- Debt ----˃

More Vulnerable Less Vulnerable

At a higher level: there are numerous issues to solve

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• FDPs prioritize privacy over price or convenience in digital / formal financial

transactions

• Access is the largest barrier, often linked to CDD / AML-CFT issues

• Incentives need to be aligned for development programs to complement

humanitarian interventions (e.g. graduation as a way of sequencing

interventions to promote resilience or cash transfers through an account)

• Preparation is key (investment in financial inclusion ecosystem and crises

mitigation efforts e.g. crisis-adapted regulation)

• Credit is linked to livelihood opportunities, which in turn linked to right to

workLivelihoods

Ecosystem

Incentives

Access

Privacy

Financial

services

need to work

for the host

communities

to also work

for FDPs

CDD: Customer Due Diligence

AML-CFT: Anti-Money Laundering and Countering the Financing of Terrorism

Questions remain

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1How could digital cash transfers effectively become an entry point to

broader financial services?

How can financial services mitigate health shocks, a primary concern?2

What is the importance of financial services in promoting livelihoods??3

How can emerging digital identities facilitate financial inclusion and financial

history portability while protecting privacy?4

• Why financial inclusion for FDPs?

• What do we know?

• What is the latest?

• What can municipalities do?

18

Agenda

1. Accelerate infrastructure work

• Request connectivity if need be

• Request branches or agents of financial service providers (banks, microfinance

institutions, payment service providers…)

2. Digitize services to residents

• Trust comes with use

3. Promote the use of digital financial services by digitizing payments

• To employees and contractors

• To and from residents

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Digitization and digital payments act as mitigation measures during pandemics

Municipalities have a big role to play in digitization

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To learn more, please visit

cgap.org/displacement

Thank you

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