Restrictions on somali remittance threaten livelihood for millions

By: ARAHA | Publish date: February 5, 2015

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In light of increasing restrictions on banks facilitating remittances from the United States to Somalia, the largest facilitator of such transfers – Merchants Bank of California – announced last week it would discontinue these services. The cessation of ‘hawala’ funds from relatives and friends in the US puts economic independence in jeopardy for millions of Somalis and further complicates ARAHA’s efforts to deliver essential resources and develop sustainable pathways to opportunity in one of the world’s most underserved countries.

Hawala funds represent an essential lifeline for approximately 40 percent of the Somali population. Conservative estimates place the value of these remittances at $1.3 billion per year in a country starved for foreign capital and investment. Money transfers play an outsize role in the economy and commercial life of Somalia due to the absence of an established banking sector. Indeed, they represent the sole channel for businesses and nonprofit organizations like ARAHA to carry out projects on the ground. Disruption of this crucial pillar of the Somali economy will destabilize millions of families, as well as the country’s fragile social and political concord.

This crisis need not come to pass. Federal regulation ought to robustly encourage collaboration between banks in the US and money transfer operators (MTO) in Somalia. Increasingly, however, it has achieved much the opposite. As banks face mounting bureaucratic hurdles from the Treasury Department regarding work with Somali MTOs, they can no longer afford to provide this essential banking service.

In the interest of guaranteeing economic security and continuity of humanitarian aid for millions in Somalia, ARAHA exhorts the Minnesota congressional delegation and officials in the State and Treasury Departments to intervene. Government should work swiftly to devise more agile regulation or alternative solutions to ensure the livelihood of Somali families and the enduring stability of Somali society.

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