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India’s transformation to a cashless society: what does this mean for the financial inclusion of refugees?

Posted on 27/06/2018
By Aman

The Ara Trust is a women-led organisation that seeks to use innovative methods to expand the space available for forced migrants and refugees in India. Aman, Financial Consultant at The Ara Trust, discusses the transformation of India into a cashless society and the access of refugees to financial services.

With over 200,000 asylum-seekers and refugees, India is at the heart of refugee movements in the South-Asian region. As per the UN High Commissioner for Refugees (UNHCR), the majority are from Tibet, Sri Lanka, and neighboring countries other than Myanmar, and are issued documentation directly by the Indian Government. The others, such as those from Afghanistan, Myanmar, Somalia and DRC, are supported and issued documentation by the UNHCR. Despite these numbers, refugees, particularly the ones under the UNHCR mandate,  encounter difficulties in accessing the formal labour market due to ambiguity around their legal status. As a result, this has led to them encounter difficulties in accessing mainstream systems, including financial services.

India: Aadhaar and Financial Inclusion for refugees from Migration & Asylum Project on Vimeo.

Our project, conceived by The Ara Trust under its Migration and Asylum Project (M.A.P), aims to assist in the integration of refugees into the financial system, particularly after the move, by the Indian government’s November 2018 demonetization policy. The policy sought to remove existing 500 rupee and 1000 rupee notes from circulation, rendering them illegal.  As per the Government, besides targeting black-money, this was also a step towards achieving complete financial inclusion by transforming India into a cashless economy. Every individual would need a bank account, thereby eliminating the underground economy.  With no access to banking services because of the lack of identity documents, cash savings that were rendered worthless, and the difficulty in acquiring the new currency – the impact of the policy was severely felt by the country’s refugee population . The project, thus, focuses on refugees, especially women refugees, who work in the informal sector and earn their income exclusively in cash.

Aadhaar, the government-issued biometric identification card has been designated as an almost-indispensable proof of legal residence, and as a core tool of the government’s drive for socio-economic inclusion. Over the past 9-months of the initial project implementation, it has emerged that those who lack access to Aadhaar, including refugees, are unable to access financial services (including bank accounts) and find themselves excluded from the economy and relegated further to the margins. The Aadhaar Act is not linked to citizenship, and states that anyone residing in India for at least 6 of the 12 months preceding the date of application is eligible to enrol if they furnish proof of identity and address from a  wide range of options available. It should follow that refugees are issued Aadhaar if they meet the residence and the documentation requirements. However, many refugees report that they have been turned away by Aadhaar centres. To add to this, many have not applied for Aadhaar due to the fear of being wrongly prosecuted, as local authorities often incorrectly equate them with illegal immigrants.

‘The project, thus, focuses on refugees, especially women refugees, who work in the informal sector and earn their income exclusively in cash.’

The lack of Aadhaar has paralyzed refugees. Post-demonetization, employers are reluctant to pay wages in cash; thus, even refugees with professional qualifications are confined to the informal sector as daily-wage laborers because of the lack of bank accounts.  Aadhaar is also being increasingly enforced as a precondition to access many services that they could once avail – such as education and healthcare. Further, many refugees report facing day-to-day difficulties like getting a SIM card, leasing accommodation, or receiving money transfers from outside India. This is resulting in refugees being steadily excluded from mainstream systems and leaving them extremely vulnerable to exploitation.

At M.A.P, we carried out a pilot study to assess the roadblocks refugees face in enrolling for Aadhaar. We discovered that most enrolment centres were not clear about whether refugees were eligible, and refugees reported that they were turned away by centres due to the lack of clarity on their legal status. Further to this, we observed that their documents were also not recognised as valid proof of identity or residence; it did not help that these refugees presented varying sets of documentation (stay visas issued by the government, others their UNHCR-issued refugee cards, yet others with their national passports or rent agreements).

Above: Members of The Ara Trust with colleagues from the Commonwealth Foundation.

The requirement of Aadhaar for accessing essential services has been challenged before the Indian Supreme Court, and its decision is pending. However, for now, we acknowledge that Aadhaar is indispensable in allowing refugees to access essential services, and, in turn, integrate them into the mainstream economy. We at M.A.P therefore, find it necessary at this stage to sensitize and seek clarity from the relevant authorities, so that standardized guidance can be issued to include refugees within the purview of Aadhaar and consequently ensure their socio-economic inclusion.

Aman is a Legal Consultant for Ara Trust. 


Pioneering financial inclusion for refugees

Refugees in India were hit badly by the government's demonetisation policy in 2016. With no access to banking services, the policy lead to loss of livelihoods and increased precariousness.