Yemen Financial Service Providers Assessment Report January 2019 Financial Service Provider Assessment – January 2019 Cover Image: © Wolfgang Gressmann https://ocha.smugmug.com/Countries/Yemen/Humanitarian-Crisis/i-fXFzk95 About REACH REACH facilitates the development of information tools and products that enhance the capacity of aid actors to make evidence-based decision in emergency, recovery, and development contexts. All REACH activities make are conducted through inter-agency aid coordination mechanisms. For more information, you can write to our in-country office: [email protected]. You can view all our reports, maps, and factsheets on our resource center: reachsourcecentre.info, visit our website at reach-initiative.org and follow us @REACH_info. 2 Financial Service Provider Assessment – January 2019 ACKNOWLEDGMENTS Cash and Market Working Group Partners The following organizations contributed to the production of this report as members of the Cash and Market Working Group (CMWG). 3 Financial Service Provider Assessment – January 2019 EXECUTIVE SUMMARY Assessment In 2017, to understand the perceptions of the Yemeni population towards cash transfer programmes, the Cash and Market Working Group (CMWG), in collaboration with REACH, initiated the Inter-Agency Joint Cash Study.1 The study was designed to determine the suitability of cash-based intervention into the Yemen context, in response to the widespread liquidity shortages, price inflation, and falling of purchasing power. Little evidence was found to determine which method of financial assistance was the most suitable in the context of Yemen. As cash-based programming becomes increasingly prominent in the humanitarian response to the ongoing Yemen conflict, there is a growing need for the humanitarian community to build a more comprehensive understanding of the most suitable methods for delivering cash-based interventions, both in terms of the capacity of financial institutions and the feasibility of different transfer mechanisms. The Financial Service Providers (FSP) Assessment was designed to be a continuation of the CMWG and REACH Inter-Agency Joint Cash Study, with the aim of understanding the most appropriate method of cash-based interventions to be used by humanitarian actors. Methodology The methodology of the FSP Assessment was developed through the Yemen CMWG. Ahead of the data collection phase, participating partners were asked to identify FSPs operating in the districts and governorates in which they had operations. From this list, Key Informants (KIs) were selected by data collection partners for participation in the study. The assessment was implemented through a non-statistically representative KI survey administered across 45 districts and 9 governorates. A total of 76 FSP KIIs were interviewed for this study. Primary data collection took place between November 2018 and January 2019 and was facilitated by five CMWG partners.2 Finally, due to the explorative nature of the assessment and the above-mentioned limitation, all results should be understood as indicative, rather than statistically representative. Research Scope The following research questions are addressed in this report: 1. What is the capacity and experience of financial institutions to facilitate cash-based interventions at the governorate and district level, and what delivery mechanisms are the most used? 2. Are there any specific groups that are at risk of being excluded from accessing financial assistance due to the lack of identification papers, bank accounts, or electronic communication mechanisms? 3. What is the speed and cost of delivering cash transfers? 4. What are institutions’ resilience to change in context, what risks are likely to arise, and what mitigation and monitoring protocols are in place? 5. What contextual factors will influence the feasibility of each cash delivery modality? Limitations Given the inherently volatile nature of the Yemeni political context, partners were often confronted with challenges that limited their access to FSP KIs, thus limiting the scope of data collection. Moreover, given the sensitivity of certain information, the assessed KIs asked for their responses to be anonymized, and the names of the assessed FSPs have also been excluded from the report. Therefore, this study only presents findings aggregated at the district and governorate level. Finally, due to the explorative nature of the assessment and the above-mentioned limitation, all results should be understood as indicative, rather than statistically representative. 1 REACH (2017), “Inter-Agency Joint Cash Study”. https://bit.ly/2WTJmDY 2 Data collection partners included: ADRA, Oxfam, Save the Children, Mercy Corps, and CARE International. 4 Financial Service Provider Assessment – January 2019 Findings Capacity and experience Based on the information provided by the KIs in the assessed areas, FSPs have a network of branches supported by mobile agents, the number of which varied according to their location. Moreover, all FSP KIs reported that, when necessary, their agency was able to recruit more agents to fit the needs of any cash-based initiative. Moreover, findings showed that financial capacity (defined as the amount of liquidity the FSP has and is able to harness at any given time) was not highlighted as a central issue. FSP KIs reported being able to access additional liquidity when necessary but noted that transporting funds between the central branch and local branches, or to agents located in hard-to-reach areas could represent a security risk. Overall, the study found that within the assessed areas, cash-based initiatives of any size and magnitude are possible and FSPs are able to harness the necessary liquidity and provide enough agents to reach beneficiaries living in remote areas. Physical cash distribution at the central or local branch was found to be the preferred method of cash delivery (reported by 100% of the assessed KIs), followed by direct transfer to bank accounts (reported by 50% of the assessed KIs), and mobile agents delivering money to beneficiaries directly (reported by 35% of the assessed KIs).3 Regarding the implementation of cash-activities in the past two years, all assessed governorates were reported to have had some cash-based programming, though the scale of these programmes differed across districts and governorates. KIs also reported that most assessed governorates currently have some form of active cash- programming, the most commonly reported being the Emergency Cash Transfer Program (ECTP). Access to vulnerable groups The majority of KIs reported providing training and customer services to beneficiaries. The quality and type of the reported services varied across governorates, but the majority of KIs noted that FSPs were providing a toll-free contact number, and would assist beneficiaries in setting up bank accounts, as well as training them on how to receive transfers. Where relevant, KIs reported that training on the financial service mobile app functionalities was also provided.4 In terms of identification documents, FSP KIs reported a preference for beneficiaries being able to provide an official ID such as a national ID, a verified family ID, or a passport in order to claim their cash assistance. However, the majority of KIs also reported that, in those cases where the beneficiary was not in possession of an official ID because it had been stolen, destroyed, or confiscated, they would accept a replacement ID so long as it had been provided by the organization managing the cash-distribution program, or another recognized authority. Moreover, in those areas where cash distribution at the local branch was not possible, most of the assessed FSPs noted being able to provide beneficiaries with agents that could visit them directly. Cost and speed of delivering cash assistance The time needed to respond to a call for tenders was reported to vary across governorates, with one-third of assessed KIs indicating that they could provide an initial response in one to two days. Overall, every assessed FSP KIs reported being able to formally respond to a call for tenders within one week. On the other hand, the periods needed to disburse payments were said to be affected by multiple factors, including the amount of cash to be disbursed, the number of agents involved, the total number of beneficiaries being served, and the location of the cash distribution. FSP KIs reported being able to prepare the necessary logistical arrangements at the main branch in less than one day, but the effective distribution of cash was reported to sometimes last up to a month depending on the above factors. 3 The assessed KIs were able to select multiple options. 4 Not all of the assessed FSPs reported being able to offer beneficiaries a mobile app. Those that are able to offer the option of an app also reported being able to provide training on how to use its functionalities. 5 Financial Service Provider Assessment – January 2019 The cost to the beneficiary in receiving cash payments – expressed in United States Dollars (USD) - was reported to be between 0 USD and 1.5 USD based on the most updated exchange rate monitored in the market5 and the type of methodology used for cash distribution. Physical cash distribution was always reported to have no added cost for the beneficiary. On the other hand, the cost for the FSP associated with distributing cash-assistance was shown to vary between 0.3 USD to 1.7 USD, depending on the methodology used. Moreover, while the majority