A recently published memo from the US Department of Homeland Security suggests using credit scores to determine suitability for immigration status in those applying to resettle in the US. While the proposal is still in draft stage, the concerns it raises over the power of credit scores for those experiencing a diaspora are significant and troubling.
When refugees have to flee their country due to environmental catastrophe, war or conflict, ethnic violence, and other common situations that threaten the safety of people and their families, they nearly always experience a period of economic dislocation. Many people cannot work in their previous professions or jobs, and it is common to not have access to the usual documents that people in stable societies take for granted to establish their identity and credentials. In many cases, people are forced to change or hide their identity to avoid the types of ethnic and religious violence that are so problematic. Requiring the use of a credit score for these displaced people is a back-door way to avoid international efforts at placement.
With previously financially stable refugees entering the world of the unbanked and impoverished, traditional methods of credit scoring are falling short. In addition to resettlement, language barriers and lack of familiarity with new social customs and financial systems create significant barriers to refugees reestablishing their financial stability quickly.
Some new methods of scoring credit risk for the unbanked can be used to help re-establish financial security for refugees. Microcredit, in addition to other financial services products such as insurance and savings, can help develop patterns that can help build a credit risk score. Microcredit does depend on having strong relationships with outreach and loan officers, which is a very labor intensive practice. At this time, this outreach is being used in Africa and Latin America.
Big data applications can use the new power of machine learning platforms to collect and analyse data. Assessing mobile phone usage for utility bill payment and other payments based on mobile money can help establish a pattern of paying bills or repaying loans. As these machine learning systems become more accurate, and biometric data begins to be encoded in various forms of government identification, it may be possible to track financial history across regions.
This ability to establish identity and financial history across regions is a critical piece in the international efforts to assist women and youth to financial security. Using biometric identification embedded in government identification can begin to change the narrative and traditions that keep women from establishing both identity and financial history without the sponsorship or permission of a male relative. Young people who are displaced and separated from the traditional family and tribal structures have significantly more difficulty in establishing forms of economic support through small business ventures. Having the ability to establish identity and personal financial history through biometric-encoded identification may ease some of the challenges this marginalized group faces.
Though the US government is seen as contributing to the barriers that refugee populations face when coming to North America, many other partnerships between financial institutions and refugee support organisations are developing resources, capacity building, and best practices initiatives. With the clear understanding that new small business development in America is strongly women and immigrant-led, many large and small financial services companies are partnering with agencies that offer intensive support and education services, such as the IRC’s partnership with JP Morgan Chase. It is clear through these efforts that more research is needed to support the gender-specific challenges that women and youth continue to face.
At this time, many refugees lose access to their previous financial histories when forced to flee from environmental disasters or conflict. Establishing credit in the new country is only part of a need for comprehensive education, support, and financial inclusion efforts, especially for women and youth. With their strong history of establishing and successfully running new small businesses, refugees and new immigrants can bring change and a new vitality to their adopted countries.
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