SEF London - Currently, the remittances lifeline, which is essential for survival to some 41 percent of Somalia's population, is threatened by the potential cutoff of access by Somali money transfer operators to Western banks.
For Somalia, the UK and the US are the two top remittance-sending countries, but most banks refuse to deal with the money transfer operators. One of the largest still handling such transactions has been Barclays Bank, which decided last May to close off these ties because of the alleged risk of financing terrorism. This is according to Africa Focus.
In November 2013, an injunction blocked Barclays from closing its business with Dahabshiil, the largest money transfer operator in Africa. But that injunction expires in October this year. Prospects for a more permanent solution to facilitate remittances, under study by the British government, are uncertain.
The Somali Economic Forum and the UK based Africa Research Institute has been following the situation closely.
In May 2013, Barclays announced that it would close the accounts of all but 19 of its 165 clients in the remittance transfer business. As HSBC and other UK banks had already substantially withdrawn from the sector, the effect of Barclays' decision was magnified. With very few exceptions, remittance transfer companies have found it impossible to secure banking facilities elsewhere - a prerequisite for their continued operation and regulatory compliance.
The Africa Focus report further says that while there are consequences for receivers of remittances in many countries, the threat to the economic fabric of the Somali regions is particularly grave. With no functioning banking system, there is no alternative to the well-established money transfer operators (MTOs) for the remittance of vital funds from the Somali diaspora.
The UK government has established a Working Group on Safer Corridors to find a long-term means of securing the flow of remittances to the region, but an interim solution is also urgently required.
However, there are a couple of things that need to be considered before any changes in Money Transfers are made and effected.
First, money sent from the diaspora provides essential support to some 41 percent of the population of the Somali territories, according to the most recent study. Remittances are primarily used to cover basic, everyday expenses such as food, medical care and education. Protecting these transactions is vital to safeguarding the livelihoods of recipients in an acutely vulnerable region.
Secondly, in Somalia there is no alternative. Authorised MTOs are the only means by which substantial remittance flows can be sent from overseas in a legally compliant, transparent, secure and cost-effective manner. In effect, they are the banking system.
Thirdly, the impact caused by any reduction in remittances will be multifaceted. MTOs service international aid agencies, multi-lateral donors and local charities as well as individuals. In addition to facilitating the delivery of humanitarian assistance, MTOs are the backbone of the economy. They are the conduit for trade finance and investment.
Fourthly, more than US$1.2 billion is remitted to the Somali regions annually from around the world. This figure represents over half of Somalia's gross national income. It exceeds international aid flows to the region which averaged an annual US$834m between 2007 and 2011.
Finally, trust is key. Somali remittance channels are subject to a high degree of self-regulation. An operator is only able to continue working because of his or her ability to participate honestly and reliably in a trans-national network of exchange. Similarly, closing down larger MTOs and forcing individuals to remit via smaller - and unfamiliar channels - ignores the close ties between remitters and specific remittance companies. Such ties may be based on clan or regional allegiances, but are also service-related and underpinned by trust.
Somalia Investment Summit 2014 - The 2nd Somalia Investment Summit comes after our last year’s successful summit hosted in Nairobi, Kenya in 2013.
The 2014 Investment Summit themed ‘Opening Your World to New Possibilities’ is once again brought to you by Somali Economic Forum. Over 250 leaders from the public and private sector, international business experts and investors, will converge in Dubai to discuss opportunities, share best practice, forge strategic partnership and showcase Somalia that is ready for foreign direct investment. Together, the political and business leaders will discuss ways of ensuring that Somalia turns its economic growth into real prosperity.
SIS 2014, will offer a platform for the Somali government department and ministries to engage, with both national and international investors and showcase the abundant investment opportunities available throughout the country.
Given the increasing interest in the whole region, now is the time for domestic and international players to examine the vast potential in Somalia. Clearly the Somalia Investment Summit Dubai 2014, is the place to be for those businesses looking to venture into the Horn of Africa and particularly Somalia.
The Summit hosted a day after the Annual Africa Global Business Forum will certainly attract regional and international decision makers, international business community, academics and media.
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