Aid agencies worry regulations will impede digital cash lifeline to refugees

(Credit: Sean MacEntee/flickr)

As the world races to contain the growing threat from terrorist groups like the Islamic State, aid organizations worry about the impact new financial regulations may have on much-needed aid to Syrian refugees.

The day before President Obama and his French counterpart, Francois Hollande, met to discuss a more aggressive response to the Islamic State, France’s finance minister told a news conference in Paris he would seek new ways to clamp down on terrorist financing.

“The struggle against terrorism … is first and foremost [for us]a struggle against its financing,” Michel Sapin, France’s finance minister, told reporters Monday. The proposal would include stricter regulation of prepaid debit cards, which Sapin says were used in the Nov. 13 attacks that killed 130 people.

Increased regulation of digital money comes at an inopportune time for humanitarian organizations, many of which have been working to expand their use prepaid debit card to help the of millions of refugees around the world.

Just two months ago, a high-level report compiled by the London-based think tank the Overseas Development Institute, urged the humanitarian community to move away from in-kind donations (giving out physical items such as food, clothing, tents, etc.) and instead focus on providing unconditional cash transfers – delivering that cash digitally wherever possible. Research suggests such an approach is both more effective and a way to stretch limited aid budgets.

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U.N. World Food Program (WFP) is one of the largest agencies providing cash transfers for refugees. In 2014, the agency transferred cash and vouchers to 8.9 million people across 53 countries. WFP’s budget for cash-based transfers last year was $1.49 billion, representing about 21 percent of the agency’s total planned food assistance.

“A large proportion of the cash transfers go to countries neighboring Syria, for Syrian refugees – particularly Lebanon, Jordan and Turkey,” said Gerald Bourke, senior communications officer for WFP in an interview with Humanosphere. “Much of that is digital.”

WFP does not believe new regulations would impact its aid operations because the cash transfers are not across borders and they are regulated by the central banks in the countries where they operate.

For aid organizations working in Europe, however, a push for new regulations is already being felt.

“It has come up as a potential issue for us,” said Sara Murray, electronic cash transfer program manager for Mercy Corps, which is preparing to deliver prepaid debit cards to Syrian refugees on the Greek island of Kos. “Some recent statements by policymakers and financial institutions in reaction to this news concern us, and we’re worried that it might make getting efficient support to refugees more difficult,” said Murray.

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Mercy Corps plans to distribute approximately 2,000 prepaid debit cards for Syrian refugees, each loaded with approximately 90 Euros for an individual or 250 Euros for a family.

While greater caution is understandable, aid agencies like Mercy Corps already have extensive safeguards in place when it comes to distributing cash aid. Agencies check the documents of each refugee before handing out prepaid cards, and there are also strict limits on the amount of money that can be transferred.

Providing the aid in digital form also lets aid agencies spot patterns in purchasing behavior, which gives them greater insight into refugees’ most urgent needs. Not only that, digital cash provides greater security, because they don’t have to put staff in the position of transporting large amounts of cash.

“Digital services by their nature enable humanitarian program officers to exercise audit and control practices,” wrote Paul Musser, vice president of public private partnerships at MasterCard, in an email to Humanosphere. “These include capabilities like scheduling the release of funds, various levels of control over the use of those funds, and revoking access to funds if necessary.”

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Andie Long

Andie is a writer and PR/marketing consultant, based in Seattle. She focuses on inclusive solutions to poverty and climate change. She's also a certified game designer. Follow her on Twitter @andielong