Today from Hiiraan Online:
Somalia remittance cut would sever financial lifeline, warns bank chief
Wednesday, August 07, 2013
Warning from African Development Bank president comes as Barclays prepares to scale back remittance business.
Any disruption to the flow of remittances to Somalia would represent a huge setback, the head of the African Development Bank warned as Barclays prepares to close its accounts with most money transfer companies.
Donald Kaberuka said he hoped nothing would be done to interrupt the sending of remittances that provide a financial lifeline for about 40% of the Somali population, some 3.8 million people.
A report by the UN Food and Agriculture Organisation's food security and nutrition analysis unit estimates annual remittances to Somalia to be at least $1.2bn. That is more than the international aid the country receives, which averaged $834m a year between 2007 and 2011.
Most of the remittances – channelled through hawala or small money transfer businesses – is used by families to cover basic expenses such as food, clothing, education and medical care. Most remittances come from Europe and the US. Kaberuka is the latest person to express concern over a decision by Barclays to cut back in this area. It is the last big UK bank providing services to money transfer companies.
Citing concern over falling foul of regulations against money laundering, Barclays said in June it planned to withdraw its services to 75% of about 250 money-service businesses. It initially gave a 10 July deadline. After an outcry by Somali remitters, academics and some MPs, the deadline was pushed back to next Monday and then to 30 September.
Kaberuka said, nothwithstanding concerns over money laundering, Barclays' action was disproportionate. He urged all parties concerned – government, banks and remitters – "to handle problems together, rather than cut off a lifeline". He described Barclays' approach to the problem as akin to trying to hit a fly with a hammer.
The bank says it is not halting banking services for all remitters, only those who do not meet its recently reviewed "eligibility criteria", which have not been publicly disclosed. It says four Somali remittance companies, including Dahabshiil – the biggest money-transfer company in Somalia – are far from meeting its eligibility criteria and have been told they must go elsewhere.
Barclays' decision follows the imposition of a record $1.9bn fine on HSBC last year by the US authorities for accepting the tainted money of rogue states and drug lords. HSBC said last autumn it would get out of the money-service sector entirely. Meanwhile, Royal Bank of Scotland has been reviewing customers more frequently to ensure they meet compliance standards. Barclays is playing down the impact of its decision, pointing out that 90% of remittances go through larger players such as Western Union.
Rushanara Ali, MP for Bethnal Green and Bow and shadow minister for international development, has called on the government, regulators and Barclays to take urgent action to save money-transfer agencies from going bust. On Wednesday morning, Ali, with other MPs and three heads of money-transfer agencies whose businesses are at risk, are to hand-deliver a petition to No 10 Downing Street signed by about 25,000 people to this effect. Mo Farah, the Olympic and world champion runner, has also thrown his support behind the campaign.
The government said it was committed to supporting a healthy and legitimate remittance sector while also ensuring a robust anti-money laundering regime. "We recognise the particular role that remittances play in supporting developing countries such as Somalia," a spokesperson said.
"Ministers continue to meet with industry to discuss the issues facing the sector. The Department for International Development (DfID) is also urgently reviewing the impact of changes on developing countries and examining what can be done to support those affected."
DfID, along with the Treasury and the Foreign Office, has held several roundtables and high-level meetings with the British Banking Association and remittance firms since the Barclays announcement. Justine Greening, international development secretary, has also spoken to Barclays' chief executive, Antony Jenkins. More meetings between government officials, banks, remittance companies and NGOs are planned over the coming weeks.
A drying up of remittance money to Somalia is the last thing the British government needs as it has invested much political effort in putting the country back on its feet. David Cameron hosted a Somalia conference in May in an effort to lend legitimacy to the country's president, Hassan Sheikh Mohamud.
Next month there will be another conference in Brussels hosted by the Somali government and the EU. The Brussels event will endorse a "new deal compact", committing Somalia and donors to key priorities and the reconstruction of the country for the next three years.
Barclays' decision threatens to throw a spanner in the works as Somalia embarks on reconstruction. After similar banking moves in the US, Oxfam America said in a report last week: "A remittance channel closure is among the most worrisome of the possible and foreseeable catastrophes that could befall Somalia in the future; even a partial shutdown could cause tremendous economic and social trauma, pushing money transfers toward informality and threatening the country's progress towards peace, security and sustainable development."
The report echoed Kabureka's assessment that the move by established banks to turn away remittance companies were "guided more by preconceived notions of risk than by actual risk".
Somalia: Somaliland Court Sentences 21 Men in a Gang Rape Case
UNICEF receives 1.3 mln USD for polio fight in Somalia
Students from Somalia given help thanks to grant
- ITV News
Somalia: Portugal Hands Over Force Command of the EU Naval Force Counter Piracy Operation to the Netherlands
Region Wants Continent's Role in Stabilizing Somalia
- New Vission
Somalia inks oil deal with British ex-Tory leader
Kenya says ready to hand over control of Somali port city
Flights suspended at Jomo Kenyatta International Airport after fire breaks out at arrival terminal
- Standard Digital
All Rights Reserved Copyright. © 1999-2023, www.hiiraan.com