In the financial services sector, we often talk about solving the "financial inclusion problem." The problem, at its most basic level, is the denial of banking services. But there's work to be done to recast the definition of financial inclusion so individuals like refugees are no longer left out of the discussion.
At the Digital Finance Institute, a think tank for fintech, we have looked at, studied, analyzed and pontificated over the definition for the good part of a year as we prepare a white paper on financial inclusion of refugees, or the lack thereof. We have discovered two surprising things. First, there appear to be no previous studies, reports or papers that have ever looked at the financial exclusion of refugees. But if there were ever a segment of society that is left out of the financial system, it is refugees. They are the poorest of the poor. In Lebanon, for instance, a typical Syrian refugee family lives on approximately $2 per day, less than the cost of a cup of coffee.
Secondly, we have learned that the term financial inclusion is not inclusive at all or particularly relevant in today's world because of the way it is defined by various organizations.
Among the problems with some accepted definitions of financial inclusion is that they measure the availability of services — such as credit or insurance — that are irrelevant for a poor person. Those services may be desirable but they are not essential to a family trying to survive for another day or another week. Other definitions, meanwhile, refer to financial services that are provided in a stable, competitive market. Maybe that works on Wall Street, but certainly not on the streets of Kabul or Baghdad, or even in the makeshift refugee settlements of Calais, France, where there is no such thing as security, let alone stability.
Other definitions of financial inclusion exclude children and teenagers altogether, only measuring the financial exclusion of adults. Young people represent huge opportunities for growth in the global economy, but they face enormous financial inclusion barriers. Of the more than 1.2 billion individuals who are 15 to 24 years old, only 4.2 million of them use a bank.
If we look at refugee children, it is particularly distressing that they are excluded from financial inclusion considerations and programs. Annually, more than 34,000 refugee teenagers become the heads of their households after their parents are killed. Many millions more manage the family's affairs because their parents are disabled or are lacking physical or mental capacity from war injuries or trauma. Children need banking services wherever they are located, but they are excluded because age, lack of identification and often poverty. Our definition of financial inclusion ought not to discriminate against capable children.
Some organizations and countries that define financial inclusion go so far as to exclude anyone who is not a citizen where they live. That's not very inclusive when it wipes out significant numbers of people from the U.S. and parts of the European Union. For example, 22% of Switzerland's population is foreigners. Ireland has 10%. By definition, those individuals are not counted as financially excluded even though they may be. A citizenship-based definition of financial inclusion makes no sense in the modern context of global trade and migration.
Finally, many financial inclusion definitions, and indeed studies and reports, fail altogether to include businesses. There are myriad businesses such as digital currency businesses and money-services businesses that are denied banking services for a variety of concerns purportedly related to financial crime.
We may think it does not matter how we define financial inclusion. But if we can't define it correctly, how can we possibly fix it? It also matters because programs on financial inclusion around the world have targets and goals that are based on noninclusive definitions. In other words, those who most need essential banking services won't get them because programs won't, by definition, target them.
Every person and business has a right to essential banking services. That may not have been true 50 years ago when people and businesses primarily used cash for commerce. But those days are long gone. Now it is almost impossible to survive without a bank account no matter where you live in the world.
So how should we define financial inclusion? According to the Digital Finance Institute, it should be defined as "sustained access to regulated and affordable essential banking services by competent natural and legal persons." And that is regardless of age, gender, race, location and economic means. It's time to put the inclusion back in financial inclusion.
Christine Duhaime, a Canadian lawyer specializing in financial regulation, is the founder and executive director of the Digital Finance Institute, a FinTech think tank that is launching a digital bank for refugees to address financial inclusion.