Remittance from diasporic nationals to their various homeland runs into billion of dollars every year. These monies do not only serve as the primary source of sustenance to the recipients, but also indirectly sustain local economies of the recipient nations. Foreign remittance has come to represent a crucial lifeline for many, particularly those in dysfunctional regions of the world, such as Somalia.
Somalis are widely dispersed all the the world, those in the United States are heavily concentrated in the the Midwestern state of Minnesota, where many have found a new lease of life.
I was impressed on visiting the Somali mall, Suuqa Karmelin, in Minneapolis: a sprawling 125,000 square footage of bustling commerce and enterprise. What caught my attention right away was the money transfer outlets scattered within the mall. Unable to curb my curiosity, I walked inside one of the shops to inquire from the attendant how the transactions are executed. I was somewhat confused when the man behind the counter appeared evasive, but he later opened up.
What these Somali entrepreneurs have fashioned out makes a lot of sense, given the fact that Somalia lacks the infrastructure to sustain the complex, technology-driven models of the corporations that have dominated the money remittance business. All these Somalis rely on are emails, cell phones and some bank accounts. The money gets to its destination between 48 to 72 hours, guaranteed.
The system works for the sender and the recipients, it also works for the agent, who gets about 5 to 10 % in commission. This system is driven by an informal money transfer system called Hawala, a system that has been in existence for generations in the Middle East and some Islamic nations worldwide.
But this system is about to slam into a brick wall put in place by the United States government. Why? September 11 and susbsequent fight to curb money laundry and terrorism.
In order to cut off funding to terrorist organizations, the regulatory agency in charge of foreign money transfer business now mandates and it enforcing stricter regulation of the industry. Unable to secure the required assistance from U.S banks and other financial institutions, the local money transfer system the Somalis have enjoyed for decades is gradually choking and may totally go into extinction, if alternative and workable modes of money remittance are not put in place.
A spokesperson of a bank in Minneapolis states, via a local newspaper – The Star Tribune – that the requirement to police the money-wiring businesses they have accounts with, were too onerous. “It’s simply that we don’t have the systems, the manpower to follow the regulations the government has put on us…”
The policy this banker talks about is not aimed only at the Somalis, but all money service businesses. But given the unique nature of Somali, where none of the formal and better established money wiring corporations can operate, at the moment. I wonder what will become the fate of the millions of remittance receivers back in Somalia. This is a case where a seemingly appropriate and necessary government intervention, especially post 9-11, has some inadvertent and most inappropriate impact, that may yield some unwanted sequelae.
Related Article: Guns, terror and money transfer – Somalia
Tags: Somalia Remittance Terrorism Money Laundry 9-11
