In a war-torn country with no formal banking structure, 40% of Somalis rely on money sent from relatives abroad – but what happens now that money is cut off?
Dahabshiil branches are the closest thing to a bank in Somalia. Photograph: Ali Gutale
Ali Gutale in Mogadishu
Friday, June 19, 2015
Amin Yusuf, a 49-year-old journalist in Mogadishu, is deeply concerned about his pregnant wife. They are among the 40% of Somali families who rely on remittances from overseas for basic needs such as food and medicine.
“My wife is in her final stages of pregnancy, this will be our fourth baby and I am very worried about her,” Yusuf explained. “Every time my wife is about to deliver a baby, my older brother who lives in the US would send me money for hospital expenses through remittance companies.
“But this time I am really scared because I am no longer expecting any financial support from my brother because he’s unable to transfer money from the US,” he said.
“What if she finds an urgent medical need that is catastrophic and costly when I don’t have the financial resources to pay it? My brother would have sent me the money already, but this time he couldn’t”. Yusuf explained that the US bank which holds the account his brother’s remittance firm uses to transfer money toSomalia has been closed.
In April, Australia’s Westpac bank became the latest foreign bank to stop transferring remittance money to war-torn Somalia. Barclays, the last major UK bank to provide remittance services to Somalia, closed the accounts of about 250 money transfer businesses in 2013 and another remittances specialist, Merchants Bank of California, announced plans in February 2015 to close the accounts of all the Somali-American money transfer companies on its books. The result is that Somalians in the US, UK and Australia are unable to send money home.
For the Somalian government, it is another reminder that their financial system is desperately in need of fixing. International regulatory pressure has pushed banks to withdraw from Somalia after concerns have been raised about money transfer operators laundering money or funding terrorism. The challenge for Somalian diaspora to get money home to their families is likely only to get harder.
Yusuf and other Somali men now fear that they will not be able to give their wives any more financial help. And that is one of the more minor problems facing thousands of poor families in a country where the estimated annual total of remittances – $1.3bn (£0.8bn) – is more than all foreign aid and investment in Somalia combined, according to a study published earlier this year by Adeso, Oxfam and the Inter-American Dialogue.
Mogadishu resident Hali Osman and her family are also dependent on money sent through remittances by her two sons who live abroad.
“Before the closure of remittance channels, my sons in the US and Qatar were sending me $200 every month to cover all my basic needs and with my 100-year-old mother who has many health issues, we are fully dependent on it,” Osman said.
“This month I received nothing from my son in the US and that had resulted in my eviction, with my landlord giving me only two weeks to leave. It’s not fair as I have no other source of income and the government of United States should know that $200 has nothing to do with terrorism and will seriously hurt my life.”
For more than 20 years, Somalia has been a battle zone as conflict between rival clan militias has led to widespread anarchy across the country. In that time Somalia, with its population of 10 million, has had no central government, a banking system that disappeared in the early 1990s and international money transfer companies which failed to fill the gap due to civil wars. Some small money transfer companies, such as Dahabshiil, were established by Somali businessmen in the 1970s when Somali migrants started departing for the Gulf states to find work, and these today still since serve as intermediaries between international banks and the Somalis needing money from abroad.
More than 2 million Somali diaspora use remittances to give financial assistance to loved ones in their home country.
Sahro Ahmed, the legal adviser of Mogadishu-based NGOSomali Women Development Center (SWDC), has expressed her frustration over the closure.
“Remittances are a crucial reason for stability and security in our country” Sahro said. “Thousands of children in Somalia pay their monthly school fees with money sent through remittances by their relatives outside the country. If they no longer get this money, they will lose their education and that might lead them into crime.”
Some countries see Somalia, which has not had a central government since 1991, as a high-risk location for terrorist financing and money laundering. But stopping the flow of millions of dollars in financial support, some say, also poses a threat to international security interests.
“We share their security concerns and we should eradicate the terrorists wherever they are,” said Ali Seko, former spokesman for the Banadir administration. “But the US government should protect its people on one hand and assist the vulnerable people in Somalia on the other hand.”
Since US banks, Barclays in the UK and Australia’s Westpac, announced their plans to close the accounts of money transfer companies, thousands of Somali families who depend on money sent through remittances, have voiced their anger and have been forced to consider other ways to fill the gap if remittances continue to be cut off.
Forty-two-year-old Maryan Hussein is the mother of seven children. When she heard about the closure of accounts operated by Westpac, she invested in starting up a small business in front of her house. She sells basic items such as sugar and oil.
“My brother lives in Australia, he works there as a truck driver. Every month he would send me $200,” Maryan said. “But then last month he failed to send me the money because of Westpac closing accounts. To raise money, I sold my jewellery, and then I opened this small kiosk with $600 so I could keep sending my son to school as I don’t want him to get recruited by al-Shabaab.”
The sudden cut-off in funds to Hussein has forced her to be resourceful: “Now I am earning, I can feed my children and be more independent because I am no longer waiting for my brother to send me money through remittances and I have to do what I can to survive.”
So what is the way forward?
“Cutting down remittances will be more disastrous than civil wars in the last two decades,” says Yahya Ali Ibrahim, the chairman of Somali International university in Mogadishu. “Remittance companies should come together and form an umbrella to develop new measures to improve the security and transparency of transactions.”
A spokesperson for Westpac said: “Westpac is just one of a large number of domestic and global banks which are finding it increasingly difficult to provide banking and payment services to remittance operators and companies due to the fast-changing international regulatory landscape and the compliance requirements on the global banking industry. We are continuing to work closely with the government, regulators, and our customers to see what longer-term solutions may be possible to support and help make such payments in the future.”
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