One of the most common misperceptions of the refugee populations is that they are highly transitory and not permanent. However, increasingly refugees find themselves in protracted situations in the host countries (spending more than five years) or in a legal limbo (long legal processes for establishing their refugee status or those who have a ban on deportation but no refugee status). In such situations, they often are economically engaged, formally or informally, to sustain themselves beyond the government benefits. For this reason, it is critical that access to affordable and safe financial services be included in the comprehensive solution for refugee integration. These financial tools reduce their vulnerability by helping them save, lowering reliance on informal channels, dealing with emergencies, and making investments to build their capacities.

This research paper aims to describe and analyse different aspects of the financial lives of refugees and asylum seekers (collectively newcomers) in Germany. It maps out the current situation of access to financial services for the newcomers, their unique financial needs, and the challenges from demand as well as supply-side perspective. The findings of the research are based on a thorough review of existing literature, qualitative in-depth interviews with newcomers, and interviews with key informants from the financial sector and other stakeholders involved in refugee integration (NGOs, social workers, researchers, international organisations). While the focus of the research is on financial strategies used by the newcomers, it recognises and looks at other spheres of integration— especially social and labour market—which heavily influences their financial choices. The other key focus of the research is to understand the behavioural factors and biases that influence their economic and financial choices.

There is no doubt that newcomers in Germany are better off than those in many other developing host countries (due to welfare benefits, ability to work, training support). However, they still face significant barriers to achieve their economic goals and contribute successfully to the economic development of the host country. One of these is the access to tools to improve their long-term financial resilience. This is currently limited to receiving cash assistance digitally through a bank account, while most of the other transactions (savings, remittances, payments) are cash-driven and informal. This is due to a lack of understanding of the benefits of digital transactions, and more importantly the need to maintain privacy of their financial lives, as they fear to lose their welfare benefits. In addition, the uncertainty about their future and declining confidence in being able to make it into the German labour market is resulting in ineffective economic and financial behaviour. The paper further explores these challenges attempting to bring in the refugees’ perspectives and provides some initial recommendations to overcome the same.