The Consultative Group to Assist the Poor (CGAP) and the World Bank Group's State and Peacebuilding Fund released a timely report that sheds light on the importance of quality financial services during periods of humanitarian crises. Global emergencies, such as the Syrian crisis, place many vulnerable people at risk. The report provides specific guidance to development actors, government and financial players on how to bridge short-term humanitarian assistance and longer-term financial inclusion.
UNHCR estimates that a record 65 million people have been forcibly displaced by war, conflict or natural disaster since 2015. While the nature and incidences of these crises vary, they have steadily increased in frequency, severity and complexity. Developing countries host more than 90 percent of refugees, straining their infrastructure, public services and markets. Humanitarian crises pose a formidable development challenge and financial inclusion — access to and use of quality financial services to all income segments of society — is one potentially foundational opportunity to support people affected by such crises.
The report, titled " The Role of Financial Services in Humanitarian Crises ," synthesizes empirical evidence and lessons from the ground. For populations affected by crisis, the ability to cope with a shock is particularly vital, given that the destabilizing impact of shocks is often magnified by fragile and unstable environments. Although there is high demand for formal financial services during times of crises, access to these services is limited. Financial services help crisis-affected populations cope in multiple ways:
- Remittances help 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.
Despite the positive role financial services can have on people affected by crisis, there are important barriers that still need to be addressed. These include a limited or weak financial infrastructure that is ill prepared to handle increased volumes after a crisis; poor policy and regulatory frameworks that limit the ability of some actors, such as mobile network operators, to offer mobile money as a distribution channel for aid; and financial service providers that have not sufficiently put in place risk-management systems to withstand liquidity and infrastructure strains that often go hand-in-hand with crisis.
Mayada El-Zoghbi, Lead, Strategy, Research, and Development at CGAP, said: "There is enormous potential to leverage the financial system to support crisis preparedness and response. As a community of practitioners and donors, we have only begun to scratch the surface of what can be done to help the most affected by crisis situations. We hope this report will help practitioners, donors and policymakers make the right investments and policy choices."
The report describes how donors and other key players can leverage financial services as tools to prepare for and manage crisis situations by explicitly embedding financial inclusion objectives into humanitarian programming.
Ceyla Pazarbasioglu, Senior Director, Finance and Markets Global Practice at the World Bank Group, said, "This report has made a significant contribution that will help advance the global policy discussion and encourage further research into the role of financial services in building sustainable livelihoods for people in crisis."
CGAP (Consultative Group to Assist the Poor) is a global partnership of more than 30 leading organizations that seek to advance financial inclusion. CGAP develops innovative solutions through practical research and active engagement with financial service providers, policy makers and funders to enable approaches at scale. Housed at the World Bank, CGAP combines a pragmatic approach to responsible market development with an evidence-based advocacy platform to increase access to the financial services the poor need to improve their lives. More at www.cgap.org .
Created in 2008, the State and Peacebuilding Trust Fund (SPF) is the World Bank Group's largest global, multi-donor trust fund established to finance innovative approaches to state and peace-building in regions affected by fragility, conflict and violence. More at http://www.worldbank.org/en/programs/state-and-peace-building-fund
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