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How Financial Services Can Help Those Affected By War

Governments and donors need to consider preparedness, research, and coordination

Nadine Chehade of Consultative Group to Assist the Poor (CGAP)

When a humanitarian crisis strikes, its consequences are devastating. In Southeast Asia, one need not look further than the ongoing battle in Marawi City in the Philippines, which has caused close to 400,000 civilians to flee their homes.

According to the United Nations High Commissioner for Refugees (UNHCR), since 2015, a record 65 million people have been forcibly displaced by war, conflict or natural disaster. The bad news is their frequency, severity and complexity have increased, even if their nature and incidences vary.

However, according to a recent report, if financial inclusion is improved – defined by the access to and use of quality financial services to all income segments of society – it can help support those affected.

The study was published by the Consultative Group to Assist the Poor (CGAP) and the World Bank Group's State and Peacebuilding Fund. “Evidence points to the need for and usefulness of remittances, savings, and insurance during crises,” says Nadine Chehade, one of the main authors of the report entitled “The Role of Financial Services in Humanitarian Crises”.

“Credit is a product where evidence is thinner but that is also in demand and use, often in lieu of insurance (e.g. for emergencies or health expenses) or savings (e.g. for school fees), and it of course plays an enabling role where livelihoods are possible.”

Unfortunately, while the demand is high, access for those services are limited; this despite them helping crisis-affected populations cope in multiple ways. According to the report:

- Remittances sustain livelihoods: In Kenya, people used mobile money service M-Pesa to send remittances to friends and family during post-election violence in 2007 and 2008.
- Savings increase resilience: Households with savings accounts recovered faster from Typhoon Yolanda in the Philippines.
- Insurance reduces vulnerability: Farmers in drought-prone areas of Senegal and Burkina Faso who bought insurance had higher yields.
- Vouchers and cash transfers have multiplier effects on the economy: Digital transfers could speed delivery and reduce leakage.

Chehade says government preparedness is key, encouraging them to adopt planned crises management.

“This often requires embarking on regulatory reforms that allow for a faster response to crises (e.g. simplified customer due diligence, e-money regulations) and investing in resilient payments infrastructure (e.g. the Palestinian Monetary Authority has a network of solar-powered ATMs to mitigate power failures).

“Although solutions are sometimes more political in nature, focus should be maintained on practical and technical solutions that benefit both affected and host populations.”

On the donor front, she points out that governments should explicitly embed financial inclusion as an objective in humanitarian programming – something that is within immediate reach, and could be a way to link short-term humanitarian responses to long-term development goals.

“This is crucially missing today, and getting there will include re-thinking the setup of crises funding mechanisms, staff incentives, and monitoring and evaluation frameworks. With crises lasting between 10 and 15 years on average, the donor community needs to address concerns with other means than a series of short-term funding cycles.

“For example, one recent suggestion is a global risk pooling fund that allows contributions before crises and that countries could tap into after a crisis.”

Despite all that is already being done, Chehade feels that the world has only begun to scratch the surface of what can be done to help those most affected. She summarises the way forward with three words: preparedness (again), research, and coordination.

“Each of those words is a whole program by itself. Digitising humanitarian payments, where possible, should be a priority, and finding actual pathways to financial inclusion another one.

“This means experimenting locally and sharing lessons globally, with the double objective of bridging the humanitarian-development divide, and promoting the economic resilience of crises-affected people.”