In late 2015, Finnish fintech Moni was about to launch a MasterCard prepaid card programme when it was contacted by the Finnish Immigration Services. Some 35,000 refugees had arrived in Finland that year, compared to 3,400 in 2014. They needed a very quick solution to a large problem – how were they going to get the €93 of cash assistance a month safely and efficiently to each of the new arrivals who were spread out in schools, conference centres and reception centres around the country?
“They wanted a payment solution in plastic. It took us a few weeks to put together a demo, two weeks for it to be accepted, and six weeks later the first set of cards were issued in a pilot,” says Antti Pennanen, founder and CEO of Moni. Since then 10,000 cards have been issued.
Moni’s card can be used at any ATM across Finland, in any Finnish store, and if a refugee client has a phone, then their sub-account that is held within Moni’s bank account can be accessed by mobile to pay bills and check balances, all in Arabic, from anywhere with cellphone reception – which in Finland is pretty much everywhere. Not only that, but those seeking asylum in Finland have the right to work for six months while their application is being processed – and their salaries are paid to them through Moni – which, given the ease and credibility of Moni, means employers are more likely to hire them.
Then, if asylum is granted, Moni upgrades the account so that clients can send money to other people with Moni accounts, and based on that data, Moni then starts to create a credit score for clients. “That way, a history starts to be gathered that puts people on a journey to being able to have access to our full suite of services including a loan,” says Pennanen. That would also give them the option to join a bank down the line. “There is a clear path from arriving with no access to financial services all the way to full financial inclusion.”
Everyone wins says Pennanen. “People can support themselves, and Finland benefits from having people in the economy and paying taxes.”
It is an important leap forward for financial inclusion, particularly for refugees and asylum-seekers that are often turned down by banks. While most countries will require banks to accept refugees and asylum-seekers with the right documents, in many countries it’s not a rule that is implemented.
Anna Jones, co-founder at non-profit RefuAid points to the challenges that refugees in the UK, for example, have had with banks. “We identified a loan for a trained accountant in Syria. He set up an account at a high-street bank which means he can receive the funds once they process, but a month later they closed it with no explanation. There are a lot of examples like this. Yet having a bank account, or something similar, is crucial for this vulnerable sector. You can’t do anything without it.”
Moni’s model is an ideal solution, and there are many more fintechs and digital financial service providers that are offering long-term possibilities of bringing refugees – and their host country’s unbanked – into a financial services system.
One of the biggest hurdles for banks in taking on refugee or asylum-seekers as clients has been around identification and KYC regulations, which are often unspecific and vary from country to country.
“Any discussion around financial inclusion always comes back down to the ID,” says Kilian Kleinschmidt, the former UNHCR manager for Jordan’s largest refugee camp, Za’atari. “There seems to be no common ground among aid workers who register refugees, governments that process them, and those that regulate the financial services system as to what ‘security’ means when it comes to ID.”
But that is changing slowly. There is a growing realization as borders are crossed more frequently, as an increasing number of migrants are on the move, and as millions of refugees are being introduced to new countries, that regulations around ID and customer due diligence have to evolve, and a banking system has to be created that works for everyone.
|Maha Bahou, Central Bank of Jordan|
In May, the central bank outlined in detail the exact requirements for identification to be accepted by all financial institutions to clear up confusion. Before that, Bahou allowed banks that had iris-scan ATMs to enrol refugees so they could receive their cash aid from the UNHCR sub-account. In 2013 the UNHCR started collecting biometrics (iris data) itself, and Bahou cleared the ID as being suitable to open JoMoPay sub-account mobile wallets with mobile money providers. As Bahou points out: “Better that people are in the system than out of it. Because the risks do not lie within financial inclusion – they lie within financial exclusion.”
Biometrics has been a game changer when it comes to ID. Often when refugees arrive in a new country, their ID has been lost or destroyed, or they did not have time to bring it with them. Sometimes they are nervous to share their real identity. The iris scan enables refugees to have a trusted source of identification.
It is important, however, for the UNHCR and authorities to protect the identities of those that do arrive. Now that the UNHCR collects its own biometrics, refugees no longer have to give their data to the banks. “The ATM iris camera at a bank can connect to our database for identity verification. It affords refugees the dignity of using an ATM like anyone else in Jordan, while keeping their personal data private,” says Elizabeth Barnhart, senior cash-based interventions coordinator, at the UNHCR in Jordan.
Similarly, the identity of the refugees in Finland is not shared with Moni, but rather is masked. Moni uses a case number from the Ministry of International Affairs and police records to establish an account.
There have been larger discussions about whether it would make financial inclusion easier if an ID was developed that has financial data within it rather than ID that is held by the UNHCR alone. For example, if a refugee could use their UNHCR ID to also collect data on spending patterns, could that provide the foundation of a credit history?
It’s not something NGOs say they’re comfortable with at present, so other options are springing up, like BanQu. The fintech firm wants to use blockchain to enable those currently out of the banking system to build up a credit history. Essentially it would allow individuals to have a “digital locker” of data they can take across borders and own themselves.
Shailee Adinolfi, head of marketing at BanQu, says: “Someone can show different levels of ID – perhaps just their name and phone number, or their financial history, or their humanitarian aid history, a land registry, a vehicle licence, or who they have worked with.”
That kind of ID via blockchain would put the privacy in the hands of the owner to choose what they want to be shared. At the simplest level, the ID could show how many vaccines a family has had so that NGOs don’t replicate shots unnecessarily, and at a more holistic level, it allows the owner to control the information they need to set up a bank account.
Nadine Chehade is the representative in the MENA region for CGAP, a global partnership housed at the World Bank that seeks to advance financial inclusion. “Ideally we want to get to a place where people can carry their own financial history with them wherever they go – so that it’s not held by one institution that is not recognized cross-border or by certain service providers,” she says, pointing out that it might never be perfect when it comes to security – but that they can’t hold back 99% of people for a possible 1% of error. “We can instead accept that there will be some uncertainty and introduce tiered systems such as basic accounts with capped transaction sizes for those with less of a documented history.”
Moni and the Finnish government, for example, have limited the card so that online purchases are not possible, and the card cannot be used outside Finland.
It's part of a larger realization that for greater efficiency, and to better empower vulnerable individuals, change has to be made within the humanitarian sector, and technology is bringing that change. Biometrics have been a big positive – particularly in the camps.
At the Norwegian Refugee Council’s (NRC) operations in Za’atari camp – Jordan’s largest camp and fourth largest ‘city’ now with 80,000 refugees – people arrive to pick up their monthly allowance of diapers and women’s sanitary items. A machine quickly scans their irises and pulls up their data on NRC’s screens linking them to the UNHCR database. There it logs how many of each item the individual will receive, and a voucher is distributed for people to exchange for products in the tented warehouse next door. In the same warehouse there are Perspex screens nailed into a wall denoting the “ATMs”. On cash distribution days, the same process is followed, but NRC workers will sit in the office behind the screens and hand out cash instead.
The machines were introduced to the camps last year.
“It now takes just 17 seconds to be processed instead of say five minutes,” says Fares Mismar, shelter project coordinator for the NRC in Za’atari camp. It is the main distributor of relief items, including diapers, mattresses, blankets, and other items as needed. “In this camp of 80,000 people, you can imagine what the lines used to be like and how long people waited before the iris scan arrived,” he says. For women who wear a niqab the iris scan has had a second positive impact – they can keep their discretion and no longer remove their headwear during distribution days.
At the camp supermarket, there are no vouchers – refugees can pay for items with their assistance from the World Food Programme (WFP) by simply scanning their iris. “It feels more secure for people. They know if they lose their card or if someone takes it, then it won’t mean they would have to wait for weeks to get a new e-card. Women also feel more secure as they don’t need to carry around a handbag,” says Shaza Moghraby, of the WFP in Jordan. And it also means that NGOs know that the right person is getting assistance. “Given donor fatigue, it’s more important than ever to make sure the cash is going to the most vulnerable people and the biometrics give us that comfort,” says Barnhart. About 32,000 families in Jordan receive cash through the UNHCR.
Changes are coming thick and fast. “In 2012 we were distributing food parcels; in 2013 we had moved to paper vouchers, and now those on our assistance have prepaid e-cards or can pay by iris scan,” says Moghraby. The prepaid cards also now have several NGOs’ assistance combined into one card that uses the MasterCard network.
The move from in-kind to cash assistance plays into the ability to start to build a financial history – if that data is captured. It’s also a much more sustainable solution to a refugee crisis – it allows refugees to better plan for their needs, and it also puts money back into the local host economy to alleviate some of the strain felt there. There are over 200 stores in Jordan where refugees can use their prepaid card, for example, that have all been vetted by the WFP. And one would assume it saves aid agencies large amounts in storage costs of items, or security costs of transporting cash – agencies can’t pinpoint how much exactly. “It’s imperative we move to cash,” says Kleinschmidt. “Some estimates point to asylum-seekers in Greece receiving €14,000 in assistance. If that large sum had instead been received in cash, and then put back into the local economy – imagine how much better the asylum-seekers lives would be, and the lives of the local people. Instead it gets lost in costs and provisions.”
According to CGAP, only 6% of all humanitarian assistance globally is channelled through cash. If greater financial inclusion (and a more efficient humanitarian aid system) is going to happen, the shift to cash has to occur at a greater rate. And while the use of prepaid cards or iris scanners can introduce those typically unbanked to financial services, there’s not enough of a clear path to make a transition to full inclusion, and there are still many valuable services that refugees cannot access.
Valerie Nkamgang Bemo, is director of emergency response in the Gates Foundation’s global development programme. The foundation has been working with financial inclusion advisory firm, Enclude, alongside the Central Bank of Jordan to support the bank’s financial inclusion efforts.
“Within the humanitarian sector, the prepaid cards are a great start,” she says. “But how can we make that more open? How can we turn that product into something that can help people save, for example?” she says. At present savings are typically kept in the form of gold jewellery, and it is only through loans from an multilateral financial institution (MFI) that refugees could start to build a history outside of having a bank account.
The Central Bank’s Bahou is hoping that JoMoPay will become broadly adopted within Jordan, and a mobile wallet within JoMoPay could serve refugees that are unable to get a bank account. JoMoPay launched in 2014, and is the only fully interoperable system in the world.
A bank, mobile network operator, or a wallet issuer (or a consortium) can offer mobile financial services by applying for a licence with the central bank. It’s also integrated with other national payment systems, like JoNet, the interoperable ATM and point of sale switch, as well as the centralized bill payment platform.
With JoMoPay, individuals can use a pre-paid card, iris scans, or a mobile wallet. Bahou’s vision is that, eventually through sub-accounts with mobile money providers, refugees could open a savings account with a capped limit.
“There wouldn’t be interest on the wallets initially because of Shariah law for example, but it would be a way to save money safely,” she says. When wallets become connected to bank accounts with a higher tier of customer due diligence, interest would be possible at non-Islamic banks. “Down the line, we are looking forward to developing credit scoring, and building a lending platform into JoMoPay working with a financial institution or microfinance institutions to offer small loans. We could also work with insurance companies to design a micro-insurance product that is deducted from the wallet. That way we create a way of bringing people into the system.”
She adds that maybe even further down the line the central bank can offer formal courses within certain sectors through mobile to help people prepare for jobs. Maybe even digital financial services will play a role in renewable energy development, and for small farmers for water saving mechanisms in Jordan, she says.
For financial inclusion initiatives to take off and be sustainable, we have to think about how we can develop a system that can be commercialized- Valerie Nkamgang Bemo, Gates Foundation
If it’s doable anywhere, it will be in Jordan. Already the country has proved itself as a leader in innovation, and many digital service providers, private sector companies and non-profits have stepped forward to offer their assistance. In no small part it is because Bahou has shown that when it comes to digital innovation, she is fully committed. “And I welcome all help,” she says. “The more people we have looking at this the better.”
It’s early to tell if Bahou’s dreams will come true. There are five licenced mobile money providers but only two are active in the cities of Jerash, Irbid and Mafraq, and there are 97,000 wallets in pilot stage among Jordanians and Syrian refugees.
But the use of the wallets has so far been disappointing. For those refugees in the pilot that receive cash-for-work wages to their mobile wallet, the tendency has been to cash out immediately and not use the wallet again until the next payday. In part that is because still only a few merchants accept mobile payments, but also because people don’t fully understand how to use it, or trust that the money will stay in the account. And people’s enthusiasm has waned. Over six years, they’ve already had to come to grips with vouchers, then pre-paid cards, then iris scans – and now are being asked to learn a new platform.
So how can people be convinced to make the move from the very simple and loved iris scan to a mobile wallet? The answer may lie in remittances. Deutsche Gesellschaft fur Internationale Zusammenarbeit (GIZ), an international development agency that is linked to the German government, is working with the Central Bank of Jordan to introduce education and training around mobile wallets, as well as advice on marketing around JoMoPay. What GIZ has also been key in looking at however, is developing digital remittances through the platform.
Katharina Braun heads the ‘Digittances’ project. “The rationale in the project was that Jordan is a net receiver of funds. Some of those funds come from Germany, but most come from Gulf countries,” says Braun. “If we can help people receive remittances more cheaply and easily from abroad we can strengthen resilience in Jordan among refugees and also Jordanians.”
At present refugees, particularly in camps, often use the hawala system where a sender gives, say, $200 to an agent in his city who calls an agent in another city and asks him to give $200 to a recipient. It works well, and is cheaper than traditional money transfer companies, but Digittances would certainly be less clunky, would lower risk, and would prevent the need to hold large sums of cash. So far JoMoPay allows for remittances within Jordan only, but
it is hoping to open it up to cross-border in 2018.
It’s something Western Union is also looking into. In June this year Western Union and MasterCard released a report on digital solutions within refugee camps, based on 12 months of research in northern Kenya’s Kakuma and Kalobeyei camps. Among its suggestions was to work with mobile money operator, M-Pesa, so that Western Union remittances which are popular among refugees could be sent directly to a mobile wallet. Maureen Sigliano, head of customer relationship management at Western Union believes digitizing the remittance process for refugees would accelerate a path towards financial inclusion.
Moni is also moving into cross-border remittances. It is rolling out a similar card within the MasterCard network across Europe this month for anyone who is 18 with an address. It will have tiered use limits depending on levels of identification, as well as cost free transactions and offering remittances between Moni users on any mobile device within seconds. Balances will also be available to view on devices. The company anticipates the first adopters to be those with limited choices and migrant workers. According to the World Bank there are about 250 million migrants worldwide, who sent around $601 billion to their families in their home countries last year, with developing countries receiving $441 billion.
'Issue beyond refugees'
While the challenges of humanitarian crises may have spurred innovation in digital financial services for refugees, those technologies can be used for the financially excluded at large. Fintech Taqanu is an example. Hungarian Balázs Némethi founded Taqanu to offer banking services to refugees in Europe.
He was upset at his country’s response to refugees and saw the challenge of providing identification to meet a bank’s requirements as a big obstacle to creating a new life in Europe. But “it was also an issue beyond refugees,” he says, which means solutions can be tested in environments which are less competitive. That spurred him to look into a project in the Philippines that collects phone data to create a profile for the unbanked there. “If it works there, we can think about offering it in different countries to other vulnerable communities,” he says.
What that means of course is that fintech providers and digital financial services companies have a better chance of scaling up. There are 21 million refugees worldwide, but 1.5 billion are unbanked.
It is just the beginning. Digital financial services are disrupting financial inclusion just as they are disrupting other parts of the financial sector. MasterCard’s head of private/public partnerships, Tara Nathan points to an initiative by the credit card company on a project to keep children in school, where a money distribution is triggered for students that attend classes through data tracked on a wristband. And in Kenya, it is looking at how to digitize bus payments so that refugees can ride the shuttle bus between the camps. At present they are paid cash in vouchers which are not accepted for transport.
It’s a new era where fintechs, financial institutions, and aid agencies, non-profits and governments are coming together to tackle the world’s challenges. The European Civil Protection and Humanitarian Aid Operations (ECHO) for example is in a consultation period to look for a provider for a digital tool for cash delivery in emergency response situations.
It goes beyond CSR, highlights Nathan. “We’re looking at public-private partnerships and trying to come up with models that are profitable, but that also create efficiency and savings.” And as Gates’ Nkamgang Bemo says, “for financial inclusion initiatives to take off and be sustainable, we have to think about how we can develop a system that can be commercialized.”
That will be a challenging shift for NGOs. Western Union’s Sigliano points out that NGOs often hesitate to work with companies that will make profits. “But it’s an opportunity for everyone. They can save and pass on those savings, and the private sector can reinvest in innovation. I think the world’s crises are reaching a point where we’re all realizing we have to work together.”