Their YES! topic
New in the country – how can refugees be prepared for the German financial system?
by Clara Albrecht, Sarah Reiter, Tanja Stitteneder and Yvonne Giesing, ifo Institute – Leibniz Institute for Economic Research at the University of Munich
“I don’t have my own account, but my husband had a card made for me, but I don’t use it, I don’t know how to use it, I can’t use a machine. […] To be honest, I’ve never tried it before. I’m scared. I don’t know anything about banks and money transfers and everything, not in Syria anyway.” Mona (name changed, 34). [Arnold et al. 2018]
Many refugees are confronted with these and similar problems. Once the time-consuming and nerve-wracking asylum application has been accepted, they face a new mountain of challenges: Language, school, job, adapting to the social norms of the host country – too often, financial education is neglected.
Financial education means transferring and acquiring knowledge and skills in dealing with financial matters (e.g. budgeting, investing, financing, taking out insurance, etc.). In addition, it pursues the goal of equipping people with the necessary self-confidence to obtain information and advice on money and financial topics and, based on this, to make thoroughly considered and economically sensible financial decisions [OECD 2005, Fuhrmann 2013].
Many asylum seekers already accumulate high debts due to the costs of flight [Brücker et al. 2016], and their first jobs or payments from the jobcentre are hardly sufficient to repay them. In addition, there are financial and consumer law questions regarding the first account, investments, insurance, rental and mobile phone contracts, or even daily consumer behaviour. On average, financial literacy is far less developed in many countries of origin than in Germany [Reiter & Beckmann 2020; Klapper et al. 2015].
Finally, many refugees had no or only limited access to the money and capital markets in their countries of origin. They often did not have their own current and savings accounts – as the above quote makes clear. Also, some financial products commonly used in Germany are less accessible in other countries or do not exist at all. In addition, some population groups systematically have comparatively lower financial literacy, regardless of the country’s level of economic development.
In addition, tax and social security systems, for example, differ significantly from country to country. People living in Germany are often overwhelmed with the local system themselves, so how should someone unfamiliar with the system and language fare?
How can refugees in Germany be supported in money and financial matters in the best possible way?
Although various organisations offer introductory financial education programmes for refugees, these are rarely taken up [Arnold et al. 2018; Majid et al. 2017]. So how can existing programmes become more popular?
While access to bank accounts is rarely a problem, they are hardly used [Grohmann 2018]. So how can refugees, especially women and those with lower incomes, be encouraged to use the bank accounts and cards necessary for everyday financial life?