UNDP helps keep remittance lifeline to Somalia open

UNDP Somalia is helping to keep open a crucial financial lifeline - remittance companies (hawala) - that transfer US$750 million to $1 billion a year from Somalis abroad to families and businesses in their home country.
This is by far the largest foreign currency infusion into the economy - more than international aid from all sources

  • and its shutdown would bring a major crisis. Somalia has been without a central government and a commercial banking system since 1991 because of civil strife.

Following the closure of Al-Barakkat, the largest Somali remittance company, after the 11 September attacks, due to allegations that it was used by terrorists, other such companies faced the threat of sudden closure.

Ambassador Alfonso Valdivieso of Colombia spelled out the issue, telling the UN Security Council last March that there is a need to devise more transparent remittance systems so that Somalis can transfer money while ensuring it is not diverted to support terrorism.

A UNDP Somalia study indicated that the hawala companies remain an integral part of Somalia's economy because they enjoy customers' trust, serve nearly the whole country, as well as Somalis elsewhere, and are less expensive and far more efficient than other financial companies. Traditional ties between extended families and clans reinforce these advantages.

A UNDP Somalia team went to the US, UK, Norway and the United Arab Emirates, meeting with governments and financial institutions to emphasize the importance of the remittance companies, while calling on the companies to comply with all international laws and host government rules and regulations.

Preserving the flow of money is crucial to averting a humanitarian crisis in Somalia, where poverty and unemployment are rampant," said Andrea Tamagnini, UNDP Somalia Country Director and a member of the team. "A framework is needed for more transparent and accountable financial operations that respect financial rules and regulations," he said.

As a result of the initiative remittance companies will be able to conduct their business safely and the international community will be able to monitor their activities.

The Norwegian Government has lifted a ban on the remittance companies and operations have resumed. UNDP Somalia and a prominent US bank agreed on steps to avert closing of more Somali bank accounts, and state regulatory authorities in the US said they will evaluate new applications and re-evaluate appeals from Somali remittance companies wanting to register in their states.

UK authorities have agreed to co-host a workshop with UNDP Somalia in London this spring for remittance companies operating in Europe. Bank authorities in the United Arab Emirates have sought assistance for remittance companies seeking transparency in international transactions.

For further information please contact Mugure Warobi (, UNDP Somalia, or Nadine Shamounki (, UNDP Communications Office.