Immigrants
Immigrants have to live, work and raise their families in a country that is new to them; a country with another language, other customs, another way of life, and often a more sophisticated and complex financial system. Everyday, they face many obstacles, such as lack of necessary documents, lack of credit history, as well as specific objective difficulties such as understanding the language, stereotyped social perceptions, different laws, the risk of fraud and so on.
Immigrants are undoubtedly a very vulnerable social group. Therefore, their smooth integration requires a special emphasis on their financial education from the very first time they come to the host country, with a tailored approach.
One of the most vulnerable social groups in today’s global environment is immigrants. This category faces many challenges on a daily base, such as adapting to a new social environment with a different language, religion, customs, as well as a complex financial environment.
Therefore, immigrants should be able to manage their finances in their host country, understand the characteristics and risks of the various financial products and services (including savings and insurance products), as well as online payment services. They should also understand the risks and particularities of their loan and contracts and finally be able to know and understand their employment rights.
The aforementioned daily problems tend to persist and be transferred from older generations of immigrants to younger ones. The OECD PISA study shows that students with immigrant background have lower levels of financial literacy compared to national students.
Regardless of their access to financial products, refugees and immigrants must be able to effectively manage their financial situation, income and expenditure, directly and in the long run. Even if most transactions are in cash, it is useful to understand and know how to calculate exchange rates, the way to set up a budget, and how to use the various financial resources efficiently, keeping track of the money they send and receive, smoothing out the fluctuations in their cash inflows and outflows. They also need to be aware of the money transfer fees even when they send money through informal channels and how they are deducted from the final amount received by the recipient. Managing migration concerns a range of issues such as different currency and inflation level, different taxation rules and different labour rights and makes the financial education of the immigrants particularly important in the long-term.
Proper financial education of immigrants helps to alleviate poverty, increase their financial well-being, eliminate social inequalities and smoothly integrate them into society.
The most serious challenges that the immigrants face are:
- In the use of basic financial services. Many immigrant families do not trust financial institutions because of their past experiences with them in their host country. Specifically, in cases when consumers did not know or understand all the potential fees or when consumers felt that fees and bank charges were insufficiently explained, some immigrants expressed their disappointment regarding their experience with various commercial banks. Also, for low-income immigrant households, the potential benefits from savings accounts and other financial products associated with them can be eliminated if the household does not understand all the possible fees and charges but also the necessary steps to avoid them.
- The lack of credit history or bad credit history in the host country. Without access to consumer credit information, banks and credit rating agencies cannot compile a descent credit history record, resulting to financial exclusion. Additionally, the low creditworthiness of immigrants can also be a problem for those who have received credit in the past without fully understanding the characteristics and risks of managing their debt. Relatively new immigrants in the host country may not understand the cost or impact of an outstanding balance on credit card or the impact of due loan installment payments resulting in high interest rates.
- In the limited lending for small businesses. Foreign small business owners often face problems of financial exclusion from borrowing money in other ways than credit cards and personal loans.
- The documentation and identification requirements. It seems there is confusion about the documents required to open accounts between immigrants and financial institutions and concerns about the immigrants’ place of origin. In addition to the confusion over identification requirements, immigrants sometimes worry that banks will investigate their immigration status and/or share their information with the state immigration authorities. Some are also afraid of losing the money in their account in case the identification mean they used to open the account expire or if they are expelled from the country. Thus they choose to keep their savings out of the banking system.
- The lack of familiarity with the host country’s financial system. Recent immigrants may not be familiar with the financial products and the various fees and charges in the host country. Furthermore, the tax system can be a major challenge as taxes in their country of origin may be very different.
- The lack of confidence in financial institutions. Immigrants coming to the host country may already be biased against financial institutions based on experiences in their home countries.
- Their expectations of permanent return to their countries. Immigrants who remain in the host country for a short period of time usually save money in their country of origin. At the same time, they feel they do not really need to know about the country’s financial system, increasing the risks of long-term money placement such as buying a home or saving for retirement, due to ignorance.
- The accommodation in nationally separated/concentrated neighbourhoods. Studies show that immigrants living in neighbourhoods that are nationally separated/concentrated are sometimes less likely to join the official national financial system because they are affected by their neighbours, who are unfamiliar with the country’s financial systems.
- The language challenges. Households with limited language skills on the official or official languages of the host country face multiple barriers in understanding and accessing financial products and services. Financial information and related documents may only be available in the language of the host country and to a limited extent in a language understandable by them. Moreover, many financial institutions do not have multilingual staff to serve people with limited linguistic competence, particularly for languages different than e.g. English. Simultaneously, certain technical terms in the host country’s financial system may not have equivalent terms in some languages. But even if there are equivalent terms, incomplete translation can create more confusion.
- Potential fraud and other deceptive practices. At some point during their early years in the host country, many immigrants may have experienced fraud and misleading advice. Although many of these concerns exist, also, for indigenous households, the risks for the immigrants are significantly increasing and need to be addressed.
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