Connecting Venezuelan Migrants With the Financial System in Colombia

Although various efforts have been made to facilitate the economic and financial inclusion of Venezuelan migrants in Colombia, there are still important gaps to overcome. While access to financial services is almost universal for Colombians, at 94.6%, the reality is very different for the Venezuelan migrant population. Only 27.6% of the almost three million migrants that have arrived from Venezuela have some kind of formal financial account.

Venezuelan migrants experience many barriers to accessing formal financial services, including:

• Challenges in verifying identity documents.
• Financial institutions’ lack of information about the migrant population to help them understand, characterize and evaluate risk.
• Migrants’ lack of credit history.
• Migrants’ lack of knowledge about the Colombian financial system and the particularities of the local economy.
• The phenomenon of self-exclusion.

This challenging context led Banca de las Oportunidades to design a strategy to stimulate demand for financial services, looking for solutions to overcome the barriers faced by Venezuelan migrants. 

How can we overcome these barriers?

The Banca de las Oportunidades project called “El Parche Financiero” or “The Financial Patch,” implemented by Fundación Capital with the support of Humanity & Inclusion and Voices of Venezuela, aims to promote financial inclusion for the 100,000 Venezuelan migrants in the country. To achieve this, we developed a proposal based on three components:

1. Peer training methodology through which civil society organizations and leaders promote tools to strengthen financial abilities.
2. Multi-channel communication through social media, with the aim of sharing information about financial health and financial services.
3. Awareness raising campaigns about financial and social services to help bring supply and demand closer together.

A solution in fintech and mobile wallets

Through this initiative, participants learned about the wide range of possibilities that mobile wallets offer beyond just sending money, including: paying for public services, sending and receiving remittances, online purchases, saving, and even as a useful payment method for their businesses. Compared to informal financial services for sending remittances, migrants found that the mobile wallets offered comparative advantages in terms of cost and security. 

“I didn’t know about mobile wallets, I didn’t know how to manage them. I was not good with technology, but thank God with these platforms I have many possibilities to work and to manage my money safely, to send and receive money and to pay for services from home.” 
      -- “Financial Patch” participant in Barranquilla, Colombia.

Some mobile wallets have updated their information systems to recognize the Temporary Protection Permit, allowing them to put in place very practical and expedient processes for registration and acquisition of self-managed products. These updated digital processes help to minimize frictions in interactions with loan officers, reducing the effects of unconscious biases about migrants.

As we’ve implemented this strategy, it has become clear that the fintech sector and mobile wallets have a vital role to play in promoting financial inclusion for migrants for three main reasons: efficiency in access, bias reduction and savings in time and money . 

Beyond financial inclusion: promoting financial health

While financial inclusion has made advances, there is increasing recognition of the need for work on improving financial health and wellbeing. The first approaches to measuring wellbeing, such as those done by Mexico and Colombia through financial inclusion surveys, show very low levels of financial health, with negative financial balances, little control over spending, lack of liquidity and a feeling of uncertainty about fulfilling goals. 

Through our experience with the Financial Patch, we have identified three key elements that can help to promote financial health:

1 – Financial self-assessments are a powerful starting tool. Prior to implementing financial education plans, we conducted a financial health survey which allowed people to see their score to identify their strengths and opportunities for improvement. This assessment helped people reflect on the importance of balancing their expenses and income and of saving to achieve personal goals. It also helped us to improve financial education interventions, as we saw that the financial education needs of the unattended migrant population are quite different from those of Colombians in terms of financial knowledge, skills and aptitude. 

“With the Financial Health form, we realized that we didn’t have goals and we hadn’t thought about them. Now we do. Now we don’t think: ‘I’ll spend it today and tomorrow I’ll make it back.’ Now if I have a goal, I have to save to be able to achieve it. Now that I have a mobile wallet and there is a cushion where I’m saving to accomplish my goal.”
      -- “Financial Patch” participant en Cúcuta, Colombia.

2 – The triple combination of support for 1) controlling spending, 2) identifying goals and 3) using accessible financial instruments, leads to improved savings habits. Participants identified the promotion of savings as one of the primary benefits of the Financial Patch. Having guidance on how to control spending, understanding the role of goals for their financial health, and learning that some mobile wallets offer attractive interest rates, all combined to motivate savings through formal financial products such as the mobile wallets.

3 –Guidance is needed on the concepts of responsible debt and payment capacity. In our experience with the Financial Patch, we have found that migrants held diametrically opposed viewpoints on credits and indebtedness. On the one hand, there are people who think debt should be avoided at all costs because “debts are difficult to pay back,” due to their experiences with informal moneylenders in Colombia. On the other hand, there are people who, having had easy access to credit in Venezuela, have an idealized image of credit, perceiving it as a “necessary help” to get their businesses off the ground, without paying attention to the interest rate costs or their payment capacity. Financial education promoting a more balanced viewpoint is needed. It is also important to further develop the credit offer for migrants, which is still limited.

A path to greater financial inclusion and financial health

The Financial Patch has demonstrated the potential of digital financial services to promote financial inclusion for the Venezuelan migrant population in Colombia, providing the benefits of accessibility, savings and reduction of discriminatory biases. The experience shows that access to timely and practical information helps to stimulate demand for formal financial services. However, we still need to strengthen financial health, making information about existing financial products more accessible and working to promote responsible debt practices.