IFC: Ukrainian Refugees Access Finance via New Digital Data Corridors

Virtual channels among international financial institutions help refugees verify credit histories and re-establish their careers in host countries

As a psychologist, speech therapist, and owner of a therapy practice in Ukraine, Maryna Usenko helped children find their voice. But after she was forced to leave her hometown of Kyiv on February 24 because of the Russian invasion, she feels like she has lost hers.

When Usenko relocated to Warsaw, Poland, she started meeting Ukrainian parents whose children needed psychological support to adjust to their new environment. They’ve been through a lot, just like she has. Knowing she can help, she set her sights on opening a Warsaw branch of her therapy center. As a refugee, however, financing remains a hurdle.

“Helping children was not a job but my mission,” she said.  “I’m interested in the financing to launch my new business here, but where do I start?  Is it even possible?”

Working with banks was a challenge because Usenko, like most Ukrainians fleeing the war, lost proof of her financial standing, such as the records of her past bank accounts and her robust credit history in Ukraine.  There has been no mechanism by which banks in Poland can connect with Ukrainian banks to recover this information. Without these records, Ukrainians like Usenko have limited access to employment, accommodation, and banking services in Poland—including loans that could help them relaunch, sustain, or grow their careers.

“When we were confronted with stories like Usenko’s, we asked ourselves, ‘How can we solve this problem?’’’ said Vittorio Di Bello, IFC’s Regional Head of Industry for Financial Institutions in Europe. “We came up with the solution of what we call Digital Data Corridors. These corridors can meet the needs and protect the rights of consumers while satisfying the stringent requirements of financial institutions, assuring them that their risk is minimal,” said Di Bello. “IFC established the initiative in response to the financial needs of Ukrainian refugees, because the scale of the crisis in Ukraine urgently demands solutions tailored to refugees’ situation.”

IFC’s Digital Data Corridors initiative brings together a coalition of credit information providers, financial institutions, and industry experts to allow financial institutions to work electronically across borders and receive international credit histories, identity verification, and bank transaction data in real time. With this information, Ukrainian refugees in host countries will be able to get easier access to credit cards, loans, and other services.

The new Digital Data Corridors initiative is backed by the National Bank of Ukraine, Ukrainian Credit Bureaus, Association of Consumer Credit Information Suppliers (ACCIS), and Poland’s BIK Group. The data exchange mechanism has already become operational in Poland, Georgia, Latvia, and the Czech Republic. In fall 2022, IFC will help organize a series of events in these countries to further equip banks with the tools they need to tailor financial services to refugees’ needs.

The scale of the crisis

The Russian invasion of Ukraine triggered one of the largest humanitarian crises since World War II. Millions of Ukrainians fled to neighboring countries, and many more have been displaced within the country. As Poland continues to be the main country to offer refuge to those displaced by the war, more than 3.5 million Ukrainians like Usenko have entered the country since the war started.

But financial institutions in some of the countries where Ukrainian refugees have resettled do not have the infrastructure and resources in place to accommodate the influx of potential new customers seeking banking services. These new potential customers arrived bearing foreign IDs and do not speak the local language, further straining the process.

Poland and other countries, including Moldova, Romania, and Slovakia, have put in place many systems to ensure Ukrainians refugees’ legal rights, including access to employment, education, health care, and social welfare benefits. Over 1.1 million Ukrainian refugees have registered with the Polish authorities so they can access these services. Ninety-four percent of those registered are women and children, according to the UN refugee agency UNHCR.  The EU Temporary Protection Directive also grants residency rights to refugees from Ukraine and offers access to basic financial products and services, such as bank accounts, payment cards, and cash transfers.  Some banks also offer digital interfaces and explanatory materials in Ukrainian.

Working through those channels has allowed many Ukrainians to access the services they need. But there was still a gap in the lending options available for people who ran successful small businesses in Ukraine and were told that their insufficient credit history impacted their ability to obtain financing to keep their enterprises going.

According to ACCIS, digital data corridors that allow banks to share a potential customer’s history help overcome this hurdle.  “Digital data corridors satisfy banks’ need to follow established compliance requirements and gain new customers without much of a risk,” said ACCIS President Mariusz Cholewa. Based on current needs, he anticipates that the demand for bank services will increase significantly when the digital data corridors become operational in European financial institutions.

At a time like this, full integration of Ukrainian refugees into the regional financial system, where credit reporting plays a vital role, is critical, said IFC’s Di Bello. “Establishment of the Digital Data Corridors is definitely a step in the right direction, supporting Ukrainians as they overcome unprecedented economic challenges.”

Published in August 2022.

By Kateryna Chechel.

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