Around 630.000 refugees running away from their conflict-affected countries, mainly Syria, are holding up in Jordan. The Jordanian government has to deal with the new economic outlook presented by this emergency situation through The Jordan Response Plan 2015. This plan is unfortunately underfunded by the emergency international agencies and should be complemented by a system which could guarantee the quality and security of the services provided. One of the main issues to be addressed remains the access of these refugees to financial services.
The Syrian refugees and the underprivileged Jordanian people are receiving financial help from their relatives, from the government or from international organisations such as NGOs. However they remain deprived of access to proper financial services. Until now, informal channels are being preferred over formal ones and this situation increases the risk of money laundering and terrorism financing. Thus, regulation and supervision of digital payment has to be improved.
PHB Development and CGAP have recently worked with GIZ in Jordan to design GIZ’s technical assistance plans to improve access to remittances and other financial services through digital solutions. This will benefit both the refugees in hosting communities and urban areas, but also the financially underserved Jordanians.
The project is scheduled to start in January 2016 and to end in 2018, with a total contribution of up to 2.3 million euros by the German Federal Ministry for Economic Cooperation and Development (BMZ). There are three steps in this project execution: first, research was conducted this past spring; a second phase of assistance and dialogue which is running hand by hand with work on financial education; third, a pilot to support the setting up of the project over the long term.
Jordan digital finance is now more regulated and secured
Remittances and Mobile Transfer providers are a source of income for the host countries of Syrian refugees. The objective of digital finance is to offer a very comprehensive platform at “no cost”. Currently, fees paid are proportionally high (12%) and the Ministry of Finance has set a tax on mobile payment and this is one important barrier to the development of digital finance. As a result, money is either not remitted or remitted through insecure informal channels.
For the assistance transfers, humanitarian organizations use two different digital payment schemes. UNHCR uses IRIS scanning recognition at ATMs, while World Food Program (WFP) and Care International use ATM Cards to disburse assistance cash. These two schemes are provided by innovative banks with a strong sense of their corporate social responsibility: Cairo Amman Bank (CAB) and Jordan Ahli Bank (JAB). They unfortunately open the prepaid accounts to UNHCR and WFP and not directly to the refugees, thus blocking the refugees’ capacities to receive (international) remittances. The refugees can only withdraw the full amount, limiting their capacities to manage their money and benefit from additional services.
The international transfers with prepaid cards are not a priority for the CBJ. Therefore the project can start by facilitating the national payments to the Syrian refugees and the Jordanian hosting communities. Interviewing members from different relevant government bodies helped to understand the refugees and the underprivileged Jordanian people’s need for digital finance. Inside each of these ministries, there are also obvious applications for digital services. For example, the Ministry of Social Security wishes to make it possible for voluntary social security contributions and for benefit payments from the Ministry to be made electronically. There is a clear will from the Ministry of Planning and International Cooperation to respond to the Syrian crisis, with the Jordan Mobile Payment system.
The CBJ (Central Bank of Jordan) is trusted and therefore, has an important role in leading the development and regulation of financial services. Thanks to the CBJ, national mobile payment has been opened in February 2014 with the Bank of Jordan (BoJ) launching JoMoPay, the Jordan Mobile Payment, which could benefit from some adjustments on the ground. The Visa prepaid cards are already being used in Jordan for many NGOs in refugees programs but it would first need to be implemented with a bank. They should be directly connected to JoMoPay. A first step could be the use of Mobile Wallets for clients to deposit money and receive money from families in Jordan.
The influence of culture in the setting up of digital finance
An alternative financial system becomes more and more urgent as cohabitation between refugees and Jordanian people brings new money flows. There are tensions between Jordanian hosting communities and Syrian refugees because of competition for income-generating opportunities. Unemployment in Jordan has increased from 14.5% to 22% between 2011 and 2014. There is a risk that, with the humanitarian aid scaling down, a large number of refugees enter into the labour market. The development of new economic activities make it necessary for both target groups to have access to reliable financial services.
The cultural factor should be taken into account. In Syria, there is a strong culture of saving but refugees are not allowed to have a saving account. 75% of Jordan’s adult population does not have a bank account. None of the card systems suit the refugees because of their limited services. However, they are open to phone based financial services and a lot of them own a smartphone. Therefore they need to be taught about this channel. Moreover, the population is totally ignorant of digital finance. There is a real need to support the transition to financial inclusion and to educate the target populations to digital finance. A partnership with NGOs and the government could provide financial education to the target population. In May 2015, JoMoPay led an awareness campaign to talk about the Central Bank reputation as guarantor of the payment system security. In particular women could be the first target population because they head households and receive remittances. Last but not least, religious reasons such as those within Islamic finance need to be taken into account.