Development Analytics Studied the Feasibility of Using Digital ID and Alternative Data Sources to Support the Financial Inclusion of Refugees in Turkey through a Project Financed by EBRD

With almost 4 million Syrian refugees in Turkey, the country hosts the largest refugee population in the world.¹ However, barriers to accessing formal commercial structures place refugees at higher risk of turning to informal work and prevent them from benefiting from formal rights in public life that is required for a stable future. As a result, self-reliance remains a challenge in practice, and difficulties related to employment and accessing finance become Syrians' most commonly cited problems. The financial inclusion of Syrian refugees is one of the most vital issues of the Turkish refugee response and, by extension, an important topic for Europe to address the vulnerability of refugees without access to financial structures. 

Given the importance of supporting refugees in access to financial services, Development Analytics has recently carried out a project on "Exploring the Use of Digital ID and Big Data for the Financial Inclusion of Refugees in Istanbul" for the European Bank for Reconstruction and Development (EBRD) and Istanbul Metropolitan Municipality (IMM) in collaboration with the Oxford Centre for Technology and Development (OCTD).

The goal of this project was twofold to better engage with stakeholders and to discuss alternative ways of credit scoring and affordability tests for refugees in Turkey. Accordingly, the study's first phase aimed to raise awareness of the key stakeholders among Turkish authorities and financial institutions to incite action that enhances Turkey's refugee response to financial inclusion, examined their approaches and provided alternative digital identity solutions to overcome challenges with the support of frontier technologies. The aim of the project's second phase was to assess the feasibility of applying digital ID technologies and using machine learning models and alternative data sources to foster the financial inclusion of Syrian refugee entrepreneurs in Turkey. The methodological aspect of this study involved an extensive literature review, key informant interviews and a roundtable discussion that was held and attended by 40+ individuals representing various organisations and sectors, from central and local authorities and international and financial institutions to technology providers, academics, UN agencies and NGOs Organisations.

The study comprehensively discussed data security and privacy practices along with ethical considerations that would potentially promote inclusiveness and empower refugees. Furthermore, with a special focus on refugees living in Istanbul, the study investigated the alternative data sources through various and reliable channels ranging from mobility data to the enrolment records of occupational activities/training. Addressing those alternative data sources, the study discussed the potential of using machine learning algorithms to predict the income level of refugees and develop credit scoring models. With the aspiration of offering innovative solutions for the financial inclusion of refugees, the study also provided a comprehensive analysis of case studies and international studies in various countries such as Jordan, Colombia and Kenya, where alternative data sources and digital identity projects were previously considered.