by Kim Wilson, CEME Senior Fellow
Posted originally by the Center for Financial Inclusion
How do refugees finance their journeys and which expenses need financing? This was the question that a team of us at Fletcher set out to answer in our study “The Financial Journey of Refugees.” We studied the routes and financial challenges of more than 100 refugees in Greece, Jordan and Turkey, between July 2016 and April 2017. The refugees we interviewed had traveled from South Asia, Central Asia, the Middle East, East Africa and West Africa.
Regardless of their country of origin, with the exception of Syria, a refugee’s biggest expense was the cost of hiring a smuggler. Smuggling expenses ran about 85 percent of the total cost of the journey. The smuggler’s fee included important services: travel by air or overland, depending on the refugee’s budget, guide services across borders, payment of bribes at border crossings, and documentation falsification expenses. Smuggling prices varied widely by country of origin (some borders being porous, others sealed tight), by how deluxe a trip was (air versus ground), by numbers of borders crossed (affecting the number of falsified IDs required). To give an example, journeying overland from Afghanistan through Pakistan, Iran, and Turkey to Greece might cost $7,500 per person, a price that went up or down based on shifting rules and border crackdowns. Traveling from Eritrea to Greece might cost the same amount. Traveling from Syria to Turkey could cost as little as $500.
The price of the journey was one factor in a traveler’s safety – the higher the cost, the better the traveling modes, and the safer the travel. While what refugees paid their smuggler was important, how they paid them was equally important. Did the refugee pre-pay the kingpin smuggler in advance of the journey? Did she post-pay him after arriving safely in Greece or Germany? Did she pay leg by leg? All these strategies were in play and we outline them in our report summary and they are detailed by the refugees themselves in a Compendium of Field Notes. Below we describe two of many strategies.
Strategy 1: Guarantee Scheme via a Financial Third Party
This App Helps Refugees Get Bank Accounts By Giving Them A Digital Identity
by Adele Peters
…Regulatory approval is a massive challenge to overcome, and though the company is in discussions with regulators, it’s unclear how long the process may take. “I am afraid the idea is good, but it’s all in the implementation and they don’t seem to have gotten very far,” says Kim Wilson, a lecturer in international business and human security at Tufts University who is currently studying refugee issues in Greece. “[Solving regulatory problems] is, of course, the problem, and if that were solved there would be a rush of fintech.”
Read the full piece with quotes from Prof. Kim Wilson in Fast Company
by Ignacio Mas, CEME Senior Fellow
Sometimes small experiences can shake your confidence to the bone by exposing the fragility of things you took for granted. Such was the case with my recent trouble accessing my bank account with Simple, a new-generation digital only bank, which I described here. I’ve lost my money, simply because I can’t remember the address on record associated with the account. (I was at a transient stage in my life back then and I gave a friends’ – but which one?). I can’t be me if I don’t know my address – that thing that usually everyone else around you knows!
The financial stake for me was small, but it triggered two overwhelming thoughts.
First, your entire financial situation can change by failing to answer what in most circumstances would seem like a reasonable, straight-forward question. Who knew that in this fast-paced, information-rich digital age, something as banal as an old address can stand between you and your money? Next time it won’t be for forgetting an address, but now I can’t help worrying about what other seemingly trivial test I might fail in the future that will cause me to lose all the money in my main bank accounts. A new type of financial insecurity looms.
by Kim Wilson, CEME Senior Fellow & Lecturer, The Fletcher School
Predictably, the long tentacles of financial inclusion have coiled themselves around the most vulnerable targets of humanitarian aid: low income refugees, migrants and displaced populations (hereon: “refugees”).
Just as predictably, the financial inclusion agenda is driven by suppliers (aid providers, donors, financial intermediaries and governments). Few refugees are demanding to be included in a digital/formal ecosystem. That does not mean they don’t appreciate the shelter, food and cash that humanitarian agencies have mustered on their behalf. They do. They also appreciate the efforts of those same agencies to make cash assistance easier. E-cash that can be transformed into physical cash at convenient times and places is an example. Use of debit cards at ATMs to withdraw cash from digital accounts can cut valuable time otherwise spent waiting in long cash distribution queues. Very appreciated, indeed.
by Ignacio Mas, CEME Senior Fellow & Academic Director for the Certificate in Digital Money
Our brains are imperfect calculating machines: who could argue otherwise? There are cognitive biases galore: I get that. So psychology matters: sure.
But I have always had a hard time with run-of-the-mill behavioral economics, which portrays these cognitive biases as deviations from the straight path, as disturbances from some kind of ideal rationality that people need to be somehow brought back (or nudged) towards. Through trickery, if necessary: framing, setting defaults, etc. Your psychology is your problem; we can save you from yourself. If only one could find the mental switch that finally makes you want to care appropriately about the future and save…
The behavioral economics industry is having a field day with financial inclusion, and development more broadly. It comes down to this: how can we help poor people be and act more like us, or at least more like the person we wish we were? This smacks of the kind of paternalism that development economists have always had a hard time escaping. But before rejecting this approach, we need to understand two things: whether it is the case that poor informally employed people are often less rational, and if so, whether this makes them more vulnerable to their own psychology.
Tomorrow at 9:30AM EST Dean James Stavridis will go LIVE with alumnus, author and CEME Senior Fellow Steven Koltai! Tune in and watch on The Fletcher School Facebook page as the pair discuss Koltai’s latest book, “Peace through Entrepreneurship.”
Can’t make the event? Stay tuned for an archived version of the chat!
by Ignacio Mas & Kim Wilson, CEME Senior Fellows
Money is a complex human convention with deep cultural derivations and an elaborate social etiquette. It is part of the fabric of bonds within family and community. It is also mired in psychological biases and mental heuristics through which we personally come to terms with the barrage of decisions we need to make on a frequent basis.
Given this contextual cocktail, it is not surprising that behaviors around money often appear irrational on first analysis. However, there is always some hidden logic that explains, without necessarily justifying, most observed behaviors. (Critical distinction here: you can explain why a thief took something, but that doesn´t necessarily justify it.) These behavioral idiosyncrasies operate in the background and we easily identify them in others, but we rarely confront them in our own lives.
In our courses on digital money and financial inclusion, we find that getting students to think about their own idiosyncrasies around money is the best antidote against developing excessively judgmental attitudes in interpreting how others, and especially poor people, manage their money. In the Fletcher School´s Leadership Program for Financial Inclusion aimed at financial regulators and the DFI-Fletcher Certificate in Digital Money aimed at emerging market fintech professionals, we ask our students to tell us an interesting story from their own lives or those close to them that has to do with money, which made them look at money in a special or different light. We thought we’d show you the kind of stories that come up.
by Brenda Santoro and Ahmed Dermish
with the support of Kim Wilson, CEME Senior Fellow
In uncertain times do developed economies have the resiliency in their financial inclusion processes to withstand rapid change without risking systemic stability and consumer protection?
Modern, nationally integrated systems, high-capacity supervision, and flexible policymaking are helping Germany turn the refugee crisis into an economic opportunity.
The German Federal Financial Supervisory Authority, commonly known as BAFIN, this fall relaxed requirements for opening a bank account. The new rules allow accounts to be opened with a stamped document from an appropriate German authority, such as BAFIN, along with a picture and personal information. Transitional rules are in effect until the approval of the law, expected this year. A directive in the European Union, which will begin in September 2016, will require similar access to bank accounts across the EU.
When it comes to ISIL, Europe is repeating the sins of its fathers
While candidate Trump spouts anti-Muslim rants, elected officials on both sides of the Atlantic are pressing ahead with plans for military action that will shed real blood. The British Parliament just voted to join French airstrikes in Syria. US lawmakers, prominent democratic senators included, are pressing for a formal declaration of war against ISIL.
European powers have learned the virtues of peace at home. But, as the UK vote shows, the curse of waging war in faraway lands continues.
Read the full op-ed from Prof. Bhidé in Quartz
by Ignacio Mas & Kim Wilson
Most of us in the digital financial services space have had to learn about digital payments and digital financial services on the job. While there are business school courses in banking and supermarket distribution networks, they don’t prepare you for a career in building the basic 21st century infrastructure of Digital Money. Digital money is our term for any transaction that securely enables the sending, receiving, storing, or tracing of money on digital networks.
As a result, the increasing number of companies building out teams in the emerging Digital Financial Services space face severe capacity bottlenecks, especially in developing countries. Their employees may come to develop deep operational expertise in the specific aspect of the industry they are involved in, but often lack a broader perspective of industry trends and issues, and remain unaware of alternative models that exist elsewhere.
In order to address this, the Digital Frontiers Institute (DFI), which was recently co-founded by David Porteous, Gavin Krugel and Ignacio Mas, is partnering with the Fletcher School to create the first university-certified course in Digital Money. This is an intensive, 12-week online course, and it will be offered for the first time this February, in English (see the course brochure).