NAIROBI (AFP) – 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 (1 billion euros) 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.
Closing organised transfers could drive them underground.
"Why let something happen that could increase money laundering and possibly terrorism?", Oxfam's Ed Pomfret said, speaking at a meeting in the Kenyan capital, where he called for regulatory changes to keep the remittances flowing.
Long term solutions would be to set up formal banking systems, said Philippe Lazzarini, United Nations humanitarian chief for Somalia, warning that cutting transfers in the meantime would "greatly undermine" development efforts.
Somalis send money back home via transfer businesses which can accept deposits abroad and immediately credit recipients back home.
But regulations require transfer systems pass money through a bank account.
"We are not asking for a favour and will follow the rules...Tell us what we should do and we will do it," said Abdirashid Duale, head of Dahabshiil, a key Somali transfer company, headquartered in Dubai with some 24,000 outlets in over 140 countries.