Senior Fellow Spotlight: Jayshree Venkatesan

What role, if any, should financial inclusion play in shaping states’ immigration policies? How might financial inclusion be leveraged in support of more equitable pathways to migration?

Digital financial products need some building blocks to become operational–consumers need digital IDs, access to a bank or mobile money account where they can send and receive payments, and ways to access these accounts, either through mobiles or agents. For people to start using these services and benefiting from them, they have to be able to use them regularly, which means they have to work or have a source of income.

So, for financial services to see business value from catering to the needs of refugees, migrants and asylum seekers, we need states’ immigration policies to allow three things:

• Provide people with digital IDs so they can integrate and start accessing financial services immediately. Technically, neobanks can help with opening accounts almost instantly, but they need IDs to help with Know Your Client (KYC) checks, too. Actors in the humanitarian space like World Food Programme (WFP) can help create the case for providing IDs on arrival.
• Allow refugees, asylum seekers and migrants the right to work. Imposing restrictions on labor markets can be detrimental to economies in the long run. The argument that labor markets have a limited capacity to absorb new labor and can lead to reduction of wages and working conditions can be addressed by encouraging enterprise and imposing minimum wage conditions for all work.
• Relatedly, policies should facilitate the recognition of qualifications and skills across borders or provide opportunities for skill building in the host country.

Financial inclusion intersects with many other drivers of migration, like climate change, conflict, and economic opportunity. What role might DFS providers play in addressing these drivers while also meeting migrants’ financial needs?

Indeed, migration today has several drivers ranging from climate change, political conflict and the search for better economic opportunity. In each of these scenarios, the role of financial inclusion stems from what we hope to help migrants achieve in the face of these larger forces- what are the desired outcomes?

There are three main outcomes really:

• The ability to withstand shocks–these are immediate expenses related to health care and other exigencies
• The ability to cope with the new reality these changes force–the ability to re-start life in a new location
• The ability to achieve life goals in the long run–the ability to acquire new skills to meet the needs of a changed workforce

In the context of climate change, the Center for Financial Inclusion uses a framework that outlines four pathways–resilience, adaptation, mitigation and transition.

When DFS providers start thinking of the need for financial services to help consumers meet their desired outcomes, you start developing innovative products and services. Financial services play an essential role but the other pieces that need to be in place are regulatory and policy frameworks–ease of getting IDs, providing migrants/refugees with the right to work, ease of starting business, etc.

Digital financial services (DFS) for migrants often bring one thing to mind: remittances. Beyond remittances, what do you see as the biggest opportunities for DFS providers to improve migrants’ financial inclusion?

Remittances are the most researched financial service in the context of migrants, and while they play a crucial role in helping families in the home countries, they do not offer a full solution to migrants’ inclusion in their host countries. Even with remittances, one has to think more broadly beyond the resilience and risk management roles it plays in recipients lives, to helping communities adapt to climate change by investing diaspora funds in sustainable rural livelihoods, or climate smart agriculture.  

The opportunity that DFS offers in the context of migrant lives is the ability to think beyond geographical borders to various points at which financial services are required. When we start mapping the migrant money system end-to-end, we can think of opportunities that will help with their inclusion, and bottlenecks that need regulatory or policy advocacy. For instance, migrants often don’t have access to portable credit histories from their home countries and lack access to portable insurance and pension services. This reduces their resilience in both their home countries, should they choose to return, and in their destination countries.

Some solutions are beginning to emerge from the private sector for insurance though. AXA’s Emerging Customers team has been working to address these gaps. AXA launched accident and hospitalization coverage for migrants living in Malaysia. They have also partnered with Hello Paisa, an international money transfer operator in the Middle East, and Democrance, an insuretech, to provide free accident and total permanent disability cover to migrants from the Middle East, Asia and East Africa who send remittances through Hello Paisa. AXA has a similar partnership with Western Union to provide inclusive insurance products to customers of Western Union in France, which covers the sender with a life and disability insurance, so recipients can receive payments even if their family member meets with an unfortunate life or disability event. In the UK, Pillar is a fintech that aims to address the challenges posed by credit histories that are not portable.

Many more opportunities exist because of the digital nature of solutions. However, there is also a lot that needs to be done on the regulatory and policy front, especially with cross border open digital payments. We have to work with regulators to streamline KYC authentication, and have better redressal/customer communication channels for long term products like insurance and pension.