Banking on Refugees

In Finland, MONI, a blockchain startup, and the Finnish Immigration Service have issued refugees a digital ID stored on the blockchain. With a MONI account, refugees can access government benefits, even if they have lost their passports. Such uses of the blockchain reduce reliance on government-issued identification, as they encourage the acceptance of other forms, such as a UN-issued refugee ID.

There is another, long-term rationale for FSPs to expand services to refugees. Doing so would allow them to collect data and learn valuable lessons that can help shape their approach to increasingly mobile global customers, who are shifting from full-time jobs to remote and freelance work in the “gig economy.”

The creditworthiness of freelancers – expected to represent 43% of the workforce by 2020 – can be difficult to determine, owing to their irregular and unpredictable incomes. And so-called digital nomads often lack a permanent address, making it difficult to conduct credit checks. These workers of the future thus raise many of the same challenges for traditional financial services that refugees do. Alternative credit-scoring methods that are created for refugees today could be applied much more widely in the future.

Given all of this, banks should act now to expand their services to refugees. They could follow the example of the financial-technology (fintech) company MyBucks, which has already opened a banking branch in Malawi’s Dzaleka refugee camp to provide loans, mobile banking, and training services.

Of course, resolving the refugee crisis and tapping the economic potential of the more than 25 million refugees worldwide will also require changes in other areas, beginning with destination-country political narratives. In many countries, politicians and the media have been portraying refugees as a threat to security, cultural cohesion, and public resources.

Former US Secretary of State Hillary Clinton blamed her loss to Donald Trump in the 2016 presidential election, and the Brexit vote that preceded it, on the public backlash against immigration, and recently suggested that Europe should admit fewer refugees, in order to stem the rise of populism. Gunter Nooke, Germany’s Africa Commissioner, had an even more unpalatable proposal: African countries should cede land to be administered by the European Union as special economic zones, in what would amount to “voluntary colonialism.”

Such solutions are not only unethical; they would not end the crisis. Humanitarian aid alone will not work, either, except as a stopgap measure. To preserve long-term stability and dynamism, host countries must unlock economic opportunities for refugees. FSPs and fintech companies, known for their capacity for disruption, can play a key role in that process.

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Jacqueline Musiitwa, a 2014 Aspen New Voices Fellow, is a regulatory attorney and an inclusive finance specialist in Uganda.

 Copyright: Project Syndicate, 2019.