Financial Inclusion and Resilience for FDPs in the Time of COVID-19

“If ever we needed reminding that we live in an interconnected world, the novel coronavirus has brought that home.” - UN High Commissioner for Refugees Filippo Grandi

In recent weeks, our private and professional lives have been largely dominated by a health crisis triggered by COVID-19 (coronavirus). In light of the virus, we are all vulnerable. At the same time, the implications in terms of health, education, economy and politics are revealing and reinforcing stark inequalities.

Forcibly displaced persons (FDPs) have found themselves in traumatic crisis situations for a long time, with host countries and communities stretching scarce resources to meet expanded needs. Living in crowded conditions without regular and proper access to health and sanitation services, FDPs and vulnerable host communities alike are now facing even higher risks in the age of COVID-19.

Moreover, the effects of this pandemic go beyond immediate health needs, deeply impacting FDPs’ ability to meet their most basic needs. The crisis will have acute impacts on the economic well-being of crisis- and conflict-affected populations as economies stagnate and supply chains are disrupted.

Increased access to financial services can be vital to supporting FDPs and host communities to mitigate economic shocks

Easing access to affordable financial products and services for host and refugee communities has been recognized by the UN Global Compact on Refugees (GCR) as an important aspect of improving FDPs’ livelihoods and self-reliance. The GCR was launched in 2018 as a reaction to the unprecedented scope of global displacement today: UNHCR estimates that there are 70.8 million FDPs worldwide, including 13.6 million newly displaced in 2018. Eighty-four percent of refugees worldwide live in developing countries, where large parts of the host population face significant development challenges, which risk being accelerated by the COVID-19 pandemic. Now more than ever, a coordinated global response and global responsibility-sharing is of the utmost importance.

To guide such a response, together with a coalition of partners from the humanitarian and development sector, BMZ and IRC jointly launched the Roadmap to the Sustainable and Responsible Financial Inclusion of Forcibly Displaced Persons at the 2019 Global Refugee Forum, organized by UNHCR. The Roadmap sets out key recommendations and actions that stakeholders can take to build bridges for the financial inclusion of FDPs. Amidst the COVID-19 crises, the Roadmap identifies action areas that are key to financial inclusion and supporting sustainable livelihoods.

Leveraging digital financial services as part of the COVID-19 response

Specifically and among other recommendations, the Roadmap provides guidance on how to leverage digital financial services in humanitarian contexts to support FDPs. The COVID-19 crisis points to the vital role digital financial services (DFS) can play for vulnerable populations by enabling transactions to occur while communities are in lockdown and supporting social distancing practices.

To promote DFS, the Roadmap calls for actions to:

• Improve the resiliency of financial infrastructure
• Address customer identification issues to enable financial services providers to serve FDPs
• Bridge humanitarian and development approaches with digitized payments
• Promote long-term economic participation to strengthen resilience

Cash assistance has become an essential tool to support vulnerable groups as part of existing government-led crisis response mechanisms, including government-to-person payments and social safety nets. Such mechanisms can and should be leveraged to promote digital financial inclusion for all populations in the long run. Where appropriate, stakeholders should ensure FDPs are able to access assistance funds in a local, regulated financial account while safeguarding consumer and data protection. Easing know-your-customer (KYC) and customer due diligence (CDD) restrictions to enable access to digital financial services and digital cash support during the crisis period would also benefit FDPs.

Appropriate financial services help prepare FDPs for complex situations and emergencies such as the COVID-19 crisis

Financial services help FDPs to support and enable positive coping mechanisms, such as safe savings. They can also support resilience in the face of economic shocks by offering the potential for longer-term planning. With access to the same services and financial infrastructure, displaced people are better equipped to become active members of their host communities and local economies. Moreover, where FDPs and vulnerable local communities are financially included and own bank or mobile money accounts, (digital) cash assistance during times of crisis can be deployed faster.

Bridge financial inclusion, humanitarian and development responses to rebuild economies and livelihoods

Wage labor and self-employment in both formal and informal sectors, especially for vulnerable groups, have come to a halt due to global containment strategies that require non-essential work to stop or due to suspensions of all public and personal transportation in places like Kenya and Uganda. As formal and informal income payments cease, expanded social safety nets provided by governments do not extend to FDPs, who may be excluded or may not have the necessary identity documents to qualify. Thus, now more than ever, it is crucial for financial inclusion actors to join forces with development and humanitarian partners to support FDPs’ access to basic needs, livelihoods and financial service products.

Worldwide policy responses to the pandemic should include affordable, inclusive digitized payments

The recently announced action plan on COVID-19 from the G20 Finance Ministers and Central Bank Governors includes the promotion of financial inclusion through digital means. Donors and partner countries should now seize the opportunity to advance responsible and sustainable financial inclusion of FDPs in the future.

Current measures taken by certain African governments include waiving payment fees on mobile money; however, further consideration and removal of additional barriers needs to be given to the situation of FDPs. In Uganda, prior to the current crisis, refugees awaiting their refugee IDs were allowed to use attestation letters from the government for KYC purposes to access mobile money. In countries like Kenya, however, refugees are not eligible to own mobile wallets. Easier access to mobile money and remittance services can make a big difference in the lives of refugees. As research by the IRC and Tufts University shows in Bidi Bidi camp in Uganda, the small amounts received could ward of hunger or illness, as they were used to buy food, medicine and soap.

Crucial to promoting digital payments is a focus on narrowing gender gaps in digital access and use of mobile phones.

The time is now for international cooperation for financial inclusion among FDPs

The Roadmap can help policy makers understand how the fate of FDPs should be accounted for in the current crisis and the important role financial services can play in resilience. There is a need to further facilitate dialogue and multi-stakeholder action to support the scaling of existing efforts and mobilization of new and innovative approaches. Already, organizations such as UNHCR and WFP are increasingly transferring humanitarian cash assistance and grants to refugees´ mobile wallets. BMZ's immediate response focuses heavily on stabilizing regions affected by displacement (e.g., through securing income of FDPs and host communities).

In addition to scaling up health support, IRC seeks to support the basic needs of FDPs through digital payments while quickly adapting livelihoods services to promote long-term resilience.

“Now more than ever, we need international cooperation and practical, effective responses,” the UN Secretary General António Guterres said when he opened the Global Refugee Forum in December 2019. Four months later, amidst the COVID-19 crisis, this statement has gained enormous relevance and should serve as motivation for our joint endeavors to expand financial inclusion for FDPs.

This is a guest blog post. Natascha Beinker serves as head of division at the Federal Ministry for Economic Cooperation and Development (BMZ). Barri Shorey is the senior director of the Economic Recovery and Development Unit of the International Rescue Committee.