The world’s chokehold on Somalia’s key financial lifeline is getting even tighter.
As of February, many banks in the United States have largely stopped servicing the accounts used by money transfer operators to help Somalis in the country send money to their families and networks back in Somalia, often for basic needs such as food, medicine and school fees. The country, which has been ravaged by civil war, famine and lacks a central banking system, heavily relies on these remittances. Some organizations estimate that remittances represent 25 percent to 45 percent of the country’s gross domestic product. Somalia, which barely has a functioning government, is also plagued by the Islamist terrorist group Al-Shabab. Consequently, the threat of heavy fines for failure to comply with U.S. anti-terrorism regulations has many banks choosing to flee the market altogether.
Unfortunately, more banks in other countries are doing the same. Westpac, the last bank in Australia to handle remittances to Somalia announced at the end of March that it was shutting down servicing these accounts. The United Kingdom has also restricted these transfers. Global remittances to Somalia are estimated at $1.3 billion, dwarfing the combined amount of global humanitarian aid and foreign direct investment to Somalia.
But it is Kenya’s surprise decision this week to shut down Somali money transfer businesses that adds an even more devastating blow. In the aftermath of al-Shabab’s attack in Garissa that killed 147, the Kenyan government announced the closure of 13 of these such businesses, including Dahabshiil, a globally well known money transfer firm that has been operating in the country for more than 20 years. These closures came without any evidence of wrong doing by these firms, or any due process. Kenya is also host to more than 450,000 Somali refugees, many of whom also depend on these funds for support.
Kenya is, as foreign minister Amina Mohamed put it, a “frontline state in the war against terror.” The country shares a porous border with Somalia. Al-Shabab has increased its attacks on the nation in retaliation for its 2011 military incursion into Somalia. There is no doubt that Kenya faces a serious national security threat. But the move to shut down transfers is a knee-jerk reaction that amounts to the collective punishment of Somalis and Somali Kenyans for the actions of a few. As al-Shabab continues to recruit from those who are disenchanted and marginalized, Kenya shouldn’t be taking a page out of the United States’ playbook by excluding Somalis and Somali Kenyans from the global banking system.
Even further, this move directly harms NGOs and international organizations, who rely on money service operators to pay their staff and fund humanitarian operations in Somalia. Degan Ali, the chief executive of Adeso, a Nairobi-based development NGO said, “We are not sure how we are going to be able to continue operations and send money to the field to Somalia without being about to use the Somali money transfer companies, So we are looking at alternatives, as an NGO to try to keep our operations open. But certainly It’s going to cost more money to the donors in the end, and it’s going to delay activity, if we are able to find a solution. But we are not confident we can.” Adeso, along with Oxfam, CARE, Mercy Corps, World Vision and other organizations released a joint statement on Friday expressing concern over Kenya closing the accounts, warning that at worst the closures could “force aid agencies to close their operations.” If families in Somalia are not able to get the funds they need for food and necessities from their family members, and humanitarian organizations are not able to operate in the country, the results would be nothing short of catastrophic. Such a move could cause ill will towards Kenya from Somalis, which of course is exactly the fuel al-Shabab uses to recruit followers and convince them to carry out its violent agenda.
Meanwhile, Washington is dragging its feet on coming up with even one short-term solution to the remittance issue. A number of members of Congress who represent states and districts home to large Somali populations have been vocal about finding a solution for keeping remittance flows to the country stable, including representatives Keith Ellison (D-Minn.) and Adam Smith (D-Wash.). There have been talks on talks in Washington among Treasury, State, the FDIC, the National Security Agency and others, but little progress. The longer it takes for agencies to debate these issues and find a formal solution, the more time that the remittance system into Somalia can potentially morph into a black market of sorts, impossible to regulate, and leaving desperate Somalis to turn to criminals — or terrorists — to get them the cash they need to survive.
Other nations are taking their cues from the United States on regulating remittances to Somalia. Unfortunately for Somalis, if Kenya and the rest of the world continues to follow Washington’s lead in shutting down financial lifelines to the country, we could very well be setting the stage for a slow burning humanitarian and political disaster in Somalia.