When financial regulations threaten a Somali lifeline

Outdoor money exchange in Somalia. Strict international banking regulations help prevent money laundering and funding of terrorists. At the same time, these norms are also affecting a crucial source of funding for Somalia, where drought and conflict are causing yet another food crisis. Photo  by: G. A. Hussein / CC BY-NC-SA

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.

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About the author

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    Flavie Halais

    Flavie Halais is a contributor based in Montreal who covers cities and international social issues. In 2013-2014, Flavie was an Aga Khan Foundation Canada International Fellow, reporting for Nation Media Group in Nairobi, Kenya. She’s also reported from Rwanda, Brazil and Colombia.

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