Thu, Mar 14, 2019 - Page 9 News List

Banking could help with the refugee crisis

New technologies have made the lack of an identity card, loan collateral or a fixed address irrelevant

By Jacqueline Musiitwa

Every minute, on average, 31 people are displaced — forced to leave their jobs, homes and even their families. These refugees often arrive, after arduous journeys, in new countries with no money or identification, and few possessions.

Yet, far from securing a safer, more prosperous future, they often find themselves marginalized, excluded and even demonized, denied opportunities to integrate into their host societies or contribute to the local economy.

One straightforward way to empower refugees is to give them access to financial services.

Financial services providers have long neglected this population, owing to accessibility and identification challenges, together with perceptions of refugees as a high-risk group.

However, technological advances in the past decade have made providing financial services to refugees easier, safer and more cost-effective than ever.

Thanks to digital and mobile technologies, banking no longer happens primarily in brick-and-mortar branches, but rather on people’s phones, wherever they are. This has facilitated the rise of digital wallets that enable users to receive, store and spend money using only their phones.

In the past few years, mobile money has become wildly popular in sub-Saharan Africa in particular, and it can be a game changer for the world’s massive unbanked population — 1.7 billion people — two-thirds of whom already own a mobile phone that could act as a gateway to financial services.

There is little reason to distinguish refugees from the rest of the world’s unbanked. Contrary to popular belief, refugees are not a higher-risk demographic: The Kiva World Refugee Fund Impact Report found that, when it comes to loan repayment, refugees are on par with non-refugees.

Moreover, thanks to facial recognition and artificial intelligence technologies, banks can now instantly verify users’ identities, using, for example, a quick iris scan run through an open-source identity verification application programming interface (API).

As a result, refugees’ lack of an identity card, loan collateral and/or a fixed address is becoming irrelevant. This is likely to be all the more true with the introduction of ID2020, a collaboration among Microsoft, Accenture and the UN that will use biometric data and blockchain — distributed ledgers — to create an encrypted, permanent and shareable means of identification for all refugees.

It is in the interest of financial services providers themselves to make use of blockchain. True, the technology — which facilitates direct transactions among parties, creating a permanent and immutable record — has the potential to displace financial services providers in the long term, by ending their monopoly on intermediating trust.

Yet, in the short term, its adoption by banks could slash costs and reduce the risk of fraud, thereby enabling the rapid expansion of services to refugees, among others. In this sense, blockchain could revolutionize credit access for refugees.

Already, blockchain is being used to help refugees. For example, in Jordan, the Zaatari refugee camp distributes humanitarian aid using blockchain and cryptocurrency. Each refugee is issued a digital wallet, into which money for food and supplies is deposited, with facial recognition being used to verify transactions.

The results have been compelling: fair and accurate aid distribution, a 98 percent reduction in transaction fees and fewer cases of misappropriation of funds.

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