Categories: Funding

President Obama Assents A Bill To Rejuvenate Money Transfer Services To Somalia

President Obama Assents A Bill To Rejuvenate Money Transfer Services To Somalia

A study carried out by Oxfam dubbed Keeping the Lifeline Open: Remittances And Markets In Somalia revealed that in 2012, remittances from Somalis living in the US remitted $215 million to their family and friends back in Somalia. This is almost the same amount the fragile state of Somalia got as donor funding from the United States that year.

The report, as cited by AFKInsider, said, “Many Somali families continue to rely on remittances to meet their most basic needs. With roughly a quarter-billion dollars of direct, community-level support at stake, all parties involved – Somali authorities, the US government, banks and Money Transfer Operators (MTOs), must ensure that members of the Somali diaspora in the United States can send their money to Somalia as long as they are willing and able to do so.”

Before the tabling of this report, the US government had imposed very tight rules aimed at discouraging money laundry and avoiding funding of terrorist networks like the Al Qaeda-linked Al-Shabaab operating in Somalia. That is perpetrating heinous terrorist attacks both in Somalia and its neighbours Kenya

and Uganda.

While the move by the US government to impose stringent laws on money transfers to Somalia is welcomed in terms of the fight against terrorism. Some say imposing extremely tight rules might amount to the United States playing the Russian roulette with thousands of lives of Somalis who heavily rely on the remittances from their relatives in the diaspora to buy food and medicine.

This is all set to change after the US Senate gave their approval for the Money RemittancesImprovement Act early this month. Followed by the signing of the Bill by President Barack Obama signed on August 8th, effectively reducing the stringent restrictions on non-bank companies like Money Transfer Firms in providing international remittance services.

The United States legislators have particularly identified Somalis living in Minnesota as the ones who stand to benefit greatly by this change in legislation. According to the 2012 census data, the number of Americans of Somali origin living in Minnesota is about 32,000. The Democratic Party representative, Keith Ellison from Minnesota, was the one who sponsored the Bill.

Ellison said that the new law will enable his constituents have a big relief when it comes to sending money back home. Prior to President Obama signing the bill, Ellison said, “Remittances are a lifeline for the loved ones of many Minnesotans. This bill will simplfy the process by which families and businesses send money home. I look forward to the President signing this bill into law.”

Now migrant workers of Somali origin will be able to send a much-needed remittance to their families, and friends back home, while the authorities maintain a certain level of safeguards.

However, many Banks and other money transfer service providers are still reluctant to relax their own rules. This is attributed to the heavy penalties they face if found by the authorities to have breached a law meant to stop funds getting into the hands of terrorist groups, drug and human traffickers. Just recently, Standard Chartered had to pay $300 million fine when it failed to report suspicious transactions linked to Iran. HSCBC paid a $1.2 billion fine back in 2012 for the same offence.

It would also be important to note that despite the stringent restrictions and the absence of a formal financial system operating in Somalia, the country has produced its very own and highly efficient money transfer system dubbed the Hawala.

Regional security experts say, says that despite the administrative chaos facing the country for years, this chaos has led to the birth of an efficient money transfer system. Atunga Atuti, the Director of the East African School of Human Rights and as one who did a study of the Regional Security in the horn of Africa, told AFKInsider, “That is why a money transfer system that is more efficient and elaborate than the more formal systems like Western Union has been developed.”

Atuti further noted that until Somalia can stand on its own feet, remittances to Somalis will continue to flow and any move that will make this flow easier is much welcomed. Given the country has no capacity to provide even the basics.

Atuti further said, “With the return of a semblance of organized central authority and lack of capacity to levy taxes as other governments do, remittances from Somali diaspora play an important role in addressing deficits in the provision of services for most households… That is why sending a relative; son, daughter, uncle, auntie abroad for many Somali families is an important lifeline.”

Milicent Atieno

Proud Kenyan Citizen, loving everything Tech related.

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