Fears rise as efforts to resume cash transfers to Somalia remain stalled

A month has passed since Merchants Bank of California closed its accounts with money transfer companies in Somalia. Warnings of the significant negative effects caused by the decision went unheeded and continued pressure on the U.S. government to intervene has yielded few significant changes.

Concerned members of Congress pressed Secretary of State John Kerry to convene a meeting, which took place in late February. Reports indicate little progress was made. Allison Sherry of the Minneapolis Star Tribune reported that the meeting included eight federal agencies, but the National Security Council was absent. The members of Congress who called for the meeting were not happy with how it went.

“I was extremely frustrated,” said Sen. Al Franken, D-Minn., to the Star Tribune. “Every federal agency representative told us that they are concerned, and yet no one came to the table with specific solutions to get remittances flowing again right away.”

Money that Somali diaspora send home accounts for between 25 percent and 45 percent of the country’s gross domestic product. In the past few years banks around the world have closed remittance accounts to Somalia over money laundering and terrorism funding concerns. Now, it is uncertain whether the $1.3 billion sent to Somalia each year will make it this year. As a comparison, $1.3 billion is more than Somalia receives in foreign aid.

Advocates say that these closures sever a critical lifeline for Somalis. Disrupting the flow of money could spell disaster for the already embattled country.

Credit: Oxfam

Credit: Oxfam

“Governments must urgently make good on their promises to keep this crucial flow of cash open. If not, 3 million Somalis risk going hungry this year, families will not be able to afford health care, and a generation of children could be kept out of school,” said Oxfam Somalia Country Director Enzo Vecchio to the media.

Oxfam, Adeso and the Global Center on Cooperative Security produced a report on the effects of the tightening flow of money to Somalia. Some 40 percent of Somali’s rely on remittances, according to Hanging by a Thread. The report argues that the U.S. government and its regulators need to provide the support so that banks can safely work with money transfer organizations.

“This is not just extra money; this is money that I need to survive on a daily basis,” Hawa Abdullahi Warsame, a Somali woman living in northern Somalia, told Oxfam. “Not only am I dependent on it, but over 10 relatives – my entire extended family – are as well. I have sick relatives who need medication, and children that I am trying to provide an education for. This money is vital for that.”

People like Warsame and her family are experiencing similar challenges. Cutting off such a vital tool could harm Somalia at a time when it has made such significant gains that the United States appointed its first ambassador to the country in two decades.

“Decreased remittances would also present greater security risks,” warned members of Congress in their letter to Kerry. “A disruption in remittances could reverse the limited gains that the Somali government and the international community has made to rid Somalia and the greater Horn of Africa of terrorism.”

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Tom Murphy

Tom Murphy is a New Hampshire-based reporter for Humanosphere. Before joining Humanosphere, Tom founded and edited the aid blog A View From the Cave. His work has appeared in Foreign Policy, the Huffington Post, the Guardian, GlobalPost and Christian Science Monitor. He tweets at @viewfromthecave. Contact him at tmurphy[at]humanosphere.org.