Somalia faces crisis over cash transfer

In Summary

• International banks have been tightening rules in a bid to cut money laundering and funding of groups accused of terrorism, but experts said that there had been no actual cases recorded of regulatory failures by Somali companies.

By AFP - NAIROBI

War-torn Somalia will be dealt a devastating blow if international banks carry out threats to stop money transfer systems sending funds that dwarf levels of foreign aid, experts warned Wednesday.

With their country ravaged by decades of conflict and no formal banking system, diaspora Somalis depend on money transfer services to support their families, sending some $1.3 billion (Ksh113bn) each year, according to a recent report by aid agencies Oxfam and Adeso.

But Barclays, the last major British bank working with transfer companies, has said it will close all accounts with money transfer systems on September 30, cutting a $500 million (380 million euro) yearly flow.

“Remittances are more and more the backbone of Somalia’s economy,” said Degan Ali of Adeso, an African charity and development agency.

“It is also a lifeline for the whole trading and business system,” she said, noting remittances were double that spent in humanitarian aid last year.

International banks have been tightening rules in a bid to cut money laundering and funding of groups accused of terrorism, but experts said that there had been no actual cases recorded of regulatory failures by Somali companies.