By Swati Mehta Dhawan and Hans-Martin Zademach
In recent years, but especially since the start of the COVID-19 pandemic,governments worldwide have increased policy support for digital financialservices with the aims of making payments more efficient and making bankingsafer while formalizing large informal sectors. To this end, payment fees havebeen waived and financial service providers have been allowed to onboard newcustomers remotely.
Mobile wallets are increasingly promoted for payments, including forsocial protection measures in times of crisis such as the COVID-19 lockdowns. Despitethe increased support and use of mobile wallets, especially for aid and cashassistance disbursem*nts, barriers to access persist for many refugeepopulations in Jordan.
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The rise of mobile wallets in Jordan during Covid-19
In Jordan, thegovernment has promoted the use of electronic financial accounts through mobilewallets. These “m-wallets” are digital reservoirs on mobile phones where userscan store money that they can later release as payments, remittances, or cashwithdrawals. In 2017, the NationalFinancial Inclusion Strategy promoted m-wallets as the primary tool for the financialinclusion of low-income Jordanians and refugees. However, until recently, morespecifically before the pandemic, m-wallets were far from mainstream. When weconducted our first round of interviews in 2019, almost none of ourparticipants knew about m-wallets.
However,things have changed quite dramatically since then. Asthe country went into a lockdown due to COVID-19, the Central Bank of Jordan(CBJ) took prompt measures to allow onlineregistration and electronic know your customer (KYC) verification for m-wallets.CBJ partneredwith the National Aid Fund (NAF) and Social Security Corporation (SSC) todistribute aid to vulnerable Jordanians through m-wallets. This was supported bymajor efforts to raise awarenessthrough social media platforms and television.
Between March and July 2020, the country saw a 40% increase in thenumber of registered wallets, with more than one million wallets registered (and1.47million as of May 2021), or 10% of the country’s population. The increasein the transactions, both by volume and value, has been impressive as well. Mostof this use is attributed to the capture of salaries and aiddistributed through NAF and SSC, which means users’ primary motivation to usetheir m-wallets is to make cash withdrawals. Notable in the increase ofm-wallet usage for NAF and SSC distributions is thatsuch assistance is received by the “head of household” which is a male in thevast majority of cases, resulting in a massive gender gap inthe receipt of assistance and likewise, the ownership and use of m-wallets.
A recent nationalsurvey found other use cases gaining popularity aswell, such as paying phone bills or airtime top-ups, person-to-persontransfers, paying for utilities, and even making other online purchases. Still,the survey confirmed that most Jordanian users opened their m-wallets toreceive government aid.
The use of mobile wallets by refugees in Jordan
Like Jordanians, we saw that among our Syrian participants,m-wallets were of most interest due to anticipation of receiving aid. During Round2 of our interviews in May 2020, there were already rumors within Syrianparticipant networks that they might need an m-wallet to receive monthlymulti-purpose cash assistance or other aid under COVID-19 response programs.
Ultimately,however, cash assistance was distributed through the regular channels ofIris-enabled ATMs. Thus, while Syrian participants may have gone as far asdownloading or even registering for an m-wallet, they did not use it at thattime.
None of our non-Syrian refugee participantsopened a wallet. Being largely excluded from the humanitarian responses inJordan, they did not see the need for one. Even those who did need one, such asthose who receive regular or one-time cash assistance, were unable to open theirwallets because they lacked a valid passport—the minimum KYC requirement forall foreigners. Unlike Syrians, non-Syrian refugees do not qualify for Ministryof Interior IDs, another acceptable KYC for m-wallets.
Pilot programs for m-wallet cash disbursem*nt to refugees
Inthe push towards utilizing digital payments, including humanitarian transfers,a few organizations have run pilots to disburse cash assistance to refugeesthrough m-wallets. Although small in scale, these have provided someinteresting early lessons. For instance:
- A ‘digitalexperiment’ run by JoPACC and SEPdisbursing payments to 262 Palestinian women refugees in the Gaza Camp inJerash found money transfer to be the key m-wallet use. This digital experimentand a survey runby ILO also highlighted challenges people face inshifting to m-wallets, including difficulty in registration, overcharging byagents, and denial by agents to withdraw small amounts.
- A pilot by GIZ and Zain Cash todistribute payments under the Cash for Work programme has been implemented inFifa, Azraq, Dibeen, Ajloun, and Yarmouk. About 1,948 workers (vulnerableJordanians and refugees) benefited from the usage of m-wallets.
- The UNHCR ran a small pilot withMahfazati where 782 refugees were paid through m-wallets and reportedsimilar challenges on network outreach and fees.
- An assessmentby the NGO, Collateral Repair Project (CRP), highlightedhow non-Syrian refugees, who comprise more than 80% of CRP’s beneficiaries, areexcluded from shifting to mobile wallets as the majority of them do not have avalid passport. That said, none expressed a need for m-wallets in the firstplace. However, as more humanitarian transfers shift to this channel, NGOsserving these populations will not be able to take advantage of this financialinfrastructure.
Making m-wallets relevant for refugee households
Althoughexpected in any nascent mobile money market, operational challenges and networkissues as identified in the pilot programs mentioned above affect earlyperceptions of trust and safety. These challenges are addressed as systemsimprove and recourse mechanisms are implemented. There are also behavioralbarriers that are difficult to overcome. In the context of refugees there areadditional barriers as refugees lack secure legal status—making them wary offormal institutions and long-term investments in the country.”
However,as observed in our research sample, the more prevalent reason for the lowuptake of m-wallets among refugee households was their perception of m-wallet usefulnessor, more to the point, its lack of usefulness.
The key reason for the lack of usefulness ofm-wallets for refugees is that they did not offer relief from the financial incomechallenges most refugees faced, except for a Syrian minority who could receivehumanitarian assistance more easily than other Syrians and all non-Syrians. Forthe majority of refugees unable to receive humanitarian assistance, m-wallets’primary function would be cashless transfers. With unstable incomes and lack ofwork opportunities, what kept the majority of research participants up at nightwas not how they could make a payment more conveniently in a cashless way, butrather how they could get the resources they needed to pay bills, repaymounting debts, smooth consumption of food and basic necessities, betterprepare for the next health shock, and improve income in the future (see figure1 below).
Hence, what they faced was not a ‘finance’problem but rather an ‘income’ problem. Could we then think of how m-walletscould be made relevant to refugees’ ability to generate income and improveresilience?
While payments such as the distribution ofhumanitarian assistance could be an entry point into the formal financialsystem, further tools are needed to support real financial inclusion,including those that improve livelihoods, smooth consumption, and strengthen resilienceamong low-income households.
For instance, the Digiances project at GIZ Jordan has been supporting two pilots with AyaPay and Dinarak for inbound and outbound cross-border remittances that went live in June 2020. This adds a critical digital income source that is potentially much greater than humanitarian payments. We did see a few interesting possibilities emerging from the FIND data where the financial strategies used by participants could be made more efficient if done digitally using m-wallets (see Figure 2 below).
E-commerce and online marketplaces
With the increase ine-commerce, gig economy platforms, and other online marketplaces, m-walletsplay an essential role in facilitating payments. Instead of financial serviceproviders pushing for cashless payments, they could encourage uptake with morefocus on promoting ecosystems that support livelihoods for refugees andlow-income Jordanians.
Mobile money awareness campaigns linked to such use cases might also produce a greater impact than stand-alone financial literacy programs. However, such efforts require collaboration with platforms that support the onboarding of refugee entrepreneurs or gig workers. One such example is the partnership between Mercy Corps and Bilforon, an app-based aggregator for home-cooked meal delivery. Together they are running a pilot to help Syrian refugee women sell home-cooked meals where they can be paid remotely via mobile wallets.
Digital fundraising
Interpersonal domestic remittances are alreadyseen as a relevant use case of m-wallets, especially during the pandemic whenmobility has been severely affected. One modified use case for this purpose couldbe digital fundraising.
Occasionally research participants werecrowdfunding money for urgent medical expenses. We saw this among Somali,Yemeni, and Sudanese right after arrival. We even saw this in the later phasesamong Syrians with relatively wider networks with other Syrians and Jordanians.Anotherstudy with Syrian refugees found many examplesof kinship finance where Syrian families scatteredhither and yon, borrowed from, or lent to help each other out, sometimes incomplicated transactions that could be eased with a fintech solution thattackles KYC issues.
An m-wallet could ease these fundraising transactionsand even help refugees to reach out to a broader network. Similarplatforms implemented in East Africa are alsoinstructive. In Kenya, domestic digital fundraising platforms show that it ismore cost-effective for such services to be offered by existing trusted paymentplatforms rather than third-party providers.
Also, such services appear more successful once network effects have set in, as it might not necessarily encourage more users to sign up. But once the user base widens, m-wallet fundraising tools can be a valuable service for refugees (and low-income Jordanians).
Digital savings
Our participants also expressed their wish tosave. Despite the financial hardships they faced, we did see that most keptaside small amounts of money to be used for an emergency or unplannedexpenditure at the end of the month. For those with irregular incomes, savingup for rent—a considerable lump-sum required every month—was ubiquitous.
Even though refugees might not refer to theseas “savings” and their under-the-mattress balances remain small, we do see a cycle ofsavings, i.e., putting away money regularly for aspecific purpose.
M-walletproviders could design products that support this savings cycle for refugees,low-income Jordanians, and migrants. This means digitizing what cash-basedinformal savings currently offer, e.g., allowing flexible savings at low or nocost and providing the option of “mental accounting” for users, meaning they cankeep separate savings with different purposes. Theproduct design must ensure that these savings remain highly liquid—able tobe withdrawn when needed unexpectedly or for a specific goal, as well asreplenished as is possible.
One possible productcould be a labeled m-wallet with sub-accounts based on aspecific savings goal or purpose, to address the inadequacies of mentalaccounting. Such a product would combine behavioral prompts such as setting asavings goal and then issuing scheduled reminders. Such account should beoffered without withdrawal restrictions.
Another example could be todigitize saving groups, allowing for flexible contributions while still makingbookkeeping easy and providing a safe place to save through institutional guaranteesfor pay-outs. One such product is being piloted by a start-up called TANDA in Jordan.
Does mobile money offer hope to financial inclusion for refugees or is it just hype?
Thereis little doubt that m-wallets with their current use cases are nottransformative for refugees in Jordan. They might improve their financial livesonly marginally by, for example, delivering humanitarian payments or offeringconvenient bill payments.
However,as network effects set in and the mobile payments ecosystem matures, financialservice providers and the private sector could build up on the digital rails tooffer use cases relevant to improving refugees’ livelihoods and financialresilience. Indoing so, instead of asking “Why refugees (or host population) could use m-walletsfor, say, merchant payments?” we must first ask, “What outcomes do refugees (orhost populations) want to achieve and how could m-wallets support that?”.
As we do this, it isimportant to consider that refugees are not a hom*ogeneous group, but verydiverse with a wide range of desired financial outcomes. Apart from differenteconomic segments, it is also crucial to consider the gender differences in thedesired outcomes to identify appropriate use cases.
In otherwords: The key here is to gain a thoroughunderstanding of the financial outcomes that refugees desire, put those at thevery center, and identify solutions that help in achieving them mosteffectively.
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SWATI MEHTA DHAWAN
Swati MehtaDhawan is a Research Associate at the Department of Economic Geography at theCatholic University of Eichstätt-Ingolstadt. She is leading the research inJordan under the Finance in Displacement (FIND) project.
HANS-MARTIN ZADEMACH
Hans-MartinZademach is Professor of Economic Geography at the Catholic University ofEichstätt-Ingolstadt. He currently focuses his research on the fundamentalprocesses shaping social and spatial inequalities and (strong) sustainabledevel- opment with a particular focus on financial issues.
We would liketo thank our colleagues from GIZ, Joscha Albert and Florian Henrich, for theircollaboration and review of this essay.
Fresh FINDings is made possiblethrough a partnership among Tufts University, the Katholische UniversitätEichstätt – Ingolstadt (Catholic University or KU), the International RescueCommittee and GIZ. Fresh FINDings also features work sponsored by CatholicRelief Services, Mercy Corps, and the International Organization for Migration.
Contact: Kimberley.Wilson@tufts.edu
