SOMALIA: Closure of remittance company averted

U N I T E D N A T I O N S
Office for the Coordination of Humanitarian Affairs (OCHA)
Integrated Regional Information Network (IRIN)

SOMALIA: Closure of remittance company averted

NAIROBI, 8 April (IRIN) - The UN Development Programme (UNDP) for Somalia has helped avert the closure of the Dahabshiil Money Transfer Company (DMTC), the largest remaining such company in Somalia, a UNDP press statement said.

According to the statement, following consultations with all involved parties, the Wells Fargo Bank in the USA has suspended its decision to close down DMTC accounts. DMTC was the second-largest money transfer company in Somalia before the closure Al-Barakat in November last year.

The Al-Barakat group was one of the 62 organisations and individuals the US authorities accused of having links with terrorism, and whose assets were seized worldwide on 7 November. The group has consistently denied the charge, and accused the US government of responding to "rumours and lies".

If the accounts of DMTC were closed, "the combined impact on Somalia's economy could be grave", UNDP said. "Already there has been a crisis of confidence in remittance operations, a slowdown of private sector investment and labour opportunities, reduction in construction and transport activities, and a loss of a major source of income to some poor households."

A regional analyst told IRIN that following the closure of the Al-Barakat bank last year, any move to restrict the operations of DMTC would have had very serious implications for many ordinary Somalis who depend on remittances from abroad for their survival. "With no formal banking sector in Somalia, and few alternatives, the closure of Dahabshiil would have condemned many families to lives of utter poverty," the analyst noted.

A Somali economist added that the "closure of Dahabshiil after Al-Barakat would probably kill what is left of an already fragile Somali economy". The greatest impact would be felt in the self-declared republic of Somaliland, northwestern Somalia, where Dahabshiil is the "largest company and biggest private employer", the economist told IRIN.

The UNDP statement said the three major money transfer companies - Al-Barakat, Dahabshiil and Amal - used to handle about US $500 million a year, benefiting more than half the Somali population of some 6.5 million. The current remittance operations, though reliable, efficient and inexpensive, "fall short of certain acceptable international standards". After consultations with remittance companies, local authorities, concerned governments and parties, UNDP now planned to formulate short- and long-term solutions, the statement said.

In the short term, UNDP Somalia would provide technical support to the remittance companies "to ensure compliance with all international financial rules and regulations". In the long term, it would provide Somali authorities and private entrepreneurs with technical support. This would enable private investors to establish commercial banks, develop the necessary legal framework to regulate them and enforce those rules, and to train workers, the statement concluded.

[ENDS]

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