When a severe drought hit East Africa in 2011, triggering famine in Somalia, money transfer operators provided a lifeline to affected families. With help from MTOs, nongovernmental organizations were able to deliver nearly $80 million worth of emergency cash and vouchers to beneficiaries.
Somalia does not have a formal banking system. Although its central bank was reopened in 2009, inadequate resources have prevented it from formulating and implementing monetary policy. As such, the Somali diaspora sends remittances through money transfer companies such as Dahabshiil. Each year, about 40 percent of the Somali population receives between $1.3 billion and $2 billion in remittances, higher than the $998.6 million in net official development assistance donors gave to the country in 2012. The majority of this income is spent on food, clothes and education, and communities that receive larger amounts of remittances are usually more food secure than others.
While not all NGOs operating in the country use money transfer companies, a number of them do rely on these operators, not just to run cash transfers and voucher programs, but also to pay their staff.
MTOs keep bank accounts in the countries where most of the Somali diaspora reside — mainly the United Kingdom, the United States and Canada. But in an effort to curb money laundering and financing to terrorist organizations, these same countries are imposing increasingly stringent regulations on the banks, forcing them to close accounts associated with money transfer companies.