Category Archives: Somali diaspora

Destroying What Works? Barclays and the Changing Somali Remittances Marketplace

By Emma Lochery

In May this year Barclays announced it would no longer supply bank accounts to 250 money service businesses as of July 10th – including four major Somali money transfer businesses. For most other countries that rely on remittances, there are alternatives for sending money, but Somalia is in a difficult position due to the weakness of its banking system, lack of banking regulation, and high level of need. After much protest from Somali diaspora and other civil society groups, the original deadline was extended a couple of times for particular companies, but as of mid-October only one Somali money transfer company had been allowed keep its account open pending the outcome of a court case arguing that Barclay’s decision violated competition law.

Oxford’s Horn of Africa Seminar met on October 15th to discuss the Somali remittance landscape and the challenges ahead.

Amidst the multitude of challenges facing Somalis today, money transfer agencies represent ‘what works’ in the Somali territories. As pointed out by a FSNAU report authored by Laura Hammond earlier this year, they provide an efficient way for an estimated minimum of $1.2 billion to be remitted back to Somalia every year, which is far more than what Somalia receives in international aid (on average just under $850 million for the last five years), foreign direct investment (just over $100 million in 2011), or exports earnings ($516 million in 2010). In the FSNAU study, which covered both rural and urban areas, 40% of all Somalis surveyed said they received remittances from abroad – and in urban areas that number rose to over 50%. Remittances helped meet basic needs; three-quarters of recipients said they used them to buy food and pay for services such as health and education. Three-quarters of recipients also said they shared what they received with others – demonstrating the way remittances help maintain a fragile but crucial social safety net. 93% of all recipients said they used money transfer companies to receive their money.

Money transfer companies in the Somali territories have also begun to offer more complex services, such as deposit accounts, debit cards, and credit to small businesses. They are a principal employer in the formal economy across Somaliland, Puntland, and Somalia. The bigger companies are also crucial players in wider Somali trade networks, facilitating financial transfers to the Gulf and cities in China and other trading hubs. Money transfer companies have helped to hold together economic networks, which are the mainstay of the Somali economy – from livestock to retail trade businesses. Based on informal mechanisms at first, but soon formalizing and adopting new technologies, they proved essential through the oppressive and extractive 1980s, helped families rebuild their lives amidst the wreckage of a state in the 1990s, and enabled people to survive conflicts in Somalia since then. They have been key in allowing Somali trade networks to expand and link into markets in Kenya, South Africa, and further afield. The names of the largest firms are household names – they are highly trusted brands in very insecure places.

However, the very factors behind the companies’ success are also some of the reasons for the current struggle with banks and regulators. To understand why, it is necessary to step back and look at the broader banking sector.  Since 9/11 in particular, there has been a huge growth in anti-money laundering regulations. Much of the pressure in the sector today comes from US regulators – and with operations spanning the globe, British banks such as Barclays cannot afford to ignore the changes. Last year in the US, HSBC was fined $1.9 billion by the US government for weak anti-money laundering controls in Mexico, while Standard Chartered was fined more than $300 million for violating US sanctions on Iran, Burma, Libya, and Sudan.

Money transfer businesses then find themselves in a difficult position. While the amount of money transferred as remittances is important to Somalis, for a bank like Barclays it is rather small in terms of their global business, and the small amount of profit is not worth the perceived risk of hosting the companies’ accounts.

While neither of the cases cited above involved transactions to Somalia, Somali money transfer businesses seem riskier to banks for two main reasons. First, they principally serve one country – and the less diverse a money services company’s customer base, the more risky they appear to a bank. So the reason that the major Somali money transfer businesses are so trusted in Somalia – that they are homegrown businesses with strong track records and connections at home and in the diaspora – means banks trust them less. Secondly, Somali money transfer companies generally rely on a third location as a clearinghouse – and these are most often in the Gulf States. Between a sender in London, and a recipient in Mogadishu, a transaction may also flow through Dubai, for instance. Dubai has long been a central economic node in Somali trading networks; Somalis migrated to labour in the Gulf in the 1970s, and in the 1980s, Somali businessmen took advantage of their relatively easy access to profitable and convenient Dubai markets. However the very ease of access and laxity of regulation that makes Dubai and its free zones attractive to Somali businesses makes large, global banks nervous that they might inadvertently end up flouting regulations in the other jurisdictions in which they operate – for very little profit.

To make matters worse, the UK government’s response has been rather slow and uncoordinated. The Economist hit the nail on the head with their article about the recent conference on a ‘new deal’ for Somalia in Brussels – much waffling about aid and not enough about how to fix the remittance question. Soon before the last and largest company was supposed to have its account closed, the government finally announced that over the next year it was planning to create a ‘safe corridor’ for transferring money between the UK and Somalia in partnership with the World Bank. However, it is unclear what will happen in the short-term before the corridor is set up. Questions remain as to if and when either the UK or US government will also create the regulation needed to assuage the banks’ concerns sufficiently. Somali money transfer companies have adapted to regulation before – but it is hard to adapt to regulation yet to be written.

Finally, last week’s speakers emphasized that people will find alternative means of sending money, sending cash in suitcases (risky for everyone involved and not exactly what the regulators want either…) or by using other companies on the market, many of which have a smaller geographical reach in Somalia. One company for instance has their clearinghouse in a more highly regulated location and connects with Somaliland’s mobile money system. Others are ‘small payment institutions’ (rather than authorized payment institutions), limited to remitting no more than 3 million euros a month. The largest company Dahabshiil, meanwhile, has managed to find a bank that will host its corporate client business, but not its small-scale remittance business that is so central to daily life in Somalia.

It thus remains to be seen how people will adjust to the closure of the accounts of the four major remittance firms – and what effects this will have on the overall market for money transfer businesses, some of whom are very powerful players on the Somali economic scene. As the Oxford event ended, we were still waiting to hear the outcome of the court case deciding whether Dahabshiil, the final company due to lose its account, had managed to escape the ‘final final’ deadline one more time.

This post is solely based on the opinion of the author, but we want to thank the seminar speakers who included:

Abdi Abdullahi, Chairman, SOMSA | Industry perspective

Edwina Thompson, Beechwood International | UK policy environment

Farhan Hassan, Somali Heritage Academic Network | Civil society view

Emma Fanning, Oxfam GB | Impacts on NGOs

Laura Hammond, SOAS | Livelihoods impacts

Chair: Anna Lindley, SOAS

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Filed under Business, Development, Diasporas, Somali diaspora, Somalia, Somaliland

Somalia’s ‘Constructive Elite’ and the Challenges Ahead

Laura Mann reports from the first event of the Rift Valley Institute’s Nairobi Forum for Research, Policy and Local Knowledge – ‘A Somali Spring?’ A link to the podcast can be found at the end of the post.

On October 11th, the Rift Valley held its first ‘Nairobi Forum’. They invited Ken Menkhaus, Amal Ismail, Jabril Abdulla and Matt Bryden to discuss the post-election climate in Somalia. The former Kenyan ambassador to Somalia, Mohamed Abdi Affey, who was chairing the proceedings, joked: “We wanted to show Kenya what it means to be a democratic nation”.

All parties agreed that Hassan Sheikh Mohamud is a man who combines two clean hands with enormous street cred. There is reason for ‘cautious optimism’ even amidst the challenges ahead. Ken Menkhaus argued that it was not the election of this single remarkable man that was important, but the extensive support network behind him. Describing this network as a ‘constructive elite,’ Menkhaus clarified that this was not a mass uprising ‘Somali Spring’ but a civic mobilization of determined professionals tired of warlordism and ineffective foreign interventions alike. These individuals have been on the ground for the past 20 years, building hospitals, schools, universities and private businesses. They have spent the past 20 years “navigating the streets” as Ken Menkhaus put it. They have learnt how to negotiate deals with difficult parties, how to build trust across clans and most importantly, they know how to get things done. Jabril Abdulla added that these negotiating skills are important. The gradual expansion of the state will not just involve institutions, but people, some benign and some less palatable. Getting warlords to engage in politics is one of the key challenges.

Abdulla added that while elites had gotten him elected, there was nonetheless widespread public support behind his victory. He described how the public ‘legitimized’ the election by broadcasting the news on radios and televisions during the week following the election. However he also cautioned that there were some regions that did not share in the jubilation.

Nevertheless, as each of them said in turn, there is reason for cautious optimism. Continue reading

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Filed under Development, Diasporas, Elections, Somali diaspora, Somalia, Uncategorized

More than Little Mogadishu

By Neil Carrier and Emma Lochery

Nairobi’s Eastleigh estate has gained fame due to its rapid development into a commercial hub of East Africa sustained by much investment from the Somali diaspora and trade networks stretching as far as China. The Somali influence on the estate has led to it being dubbed ‘Little Mogadishu’, and as a place somehow apart from the rest of Kenya.  In our experience, however, the story of Eastleigh is very much a Kenyan one, and the ‘Little Mogadishu’ label simplifies a very complex story…

Eastleigh 1st Avenue at closing time. Photo courtesy of Neil Carrier

 

Eastleigh is a major commercial hub of East Africa, brimming with around 40 shopping malls selling cheap goods from China, Dubai and elsewhere, that is located only a couple of kilometres away from Nairobi’s Central Business District.  Despite this proximity to the heart of Nairobi, the way many Kenyans speak about Eastleigh, it almost seems as if the short journey from town to the estate on the famous number 9 matatu is taking the passenger much further: from the heart of Kenya into the heart of Somalia.

Eastleigh has been described as if it were an imported city from Somalia, the place to which the big businesspeople relocated when conflict pushed them out of Mogadishu in the 1990s. Indeed, for many Kenyans, shopping trips to Eastleigh offer a taste of Somalia, as Somali language and identity seem to dominate, while Islamic influence is everywhere in dress styles, the prevalence of mosques, and even in the names of such businesses as ‘Madina Mall’.  Rumours of the area being awash with smuggled weapons and al-Shabaab operatives further consolidate the idea that this place of cheap jeans is dangerous and ‘other’, and decidedly not Kenyan.

Such impressions combined with the influx of many Somali refugees over the course of the last two decades, means that the ‘Little Mogadishu’ label rings true for many Kenyan and outside commentators.

Of course, Eastleigh today is the major urban centre for Somalis in Kenya. Many thousands of refugees from Somalia have arrived in this relatively small area (consisting of two main avenues and several streets that connect them) since the early 1990s, most surviving and others thriving thanks to the opportunities provided by this important retail and wholesale centre.   Furthermore, its development and growth are underpinned by Somali connections stretching to the West and Somalis resident there, and the East in the form of networks importing cheap clothes, textiles, electronics and so forth.

However, ‘Little Mogadishu’ is a name rarely heard from anyone who actually goes to Eastleigh on a regular basis or indeed from its residents. The label hides a wealth of other histories, processes and identities that need foregrounding in order to understand the dynamics of this estate and its transformation. Continue reading

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Filed under Business, Eastleigh, Kenya, Somali diaspora

Khat and Al-Shabaab: Views from Eastleigh

Khat traders swarming round a pick-up delivering fresh stock on the outskirts of Eastleigh. Source: Neil Carrier

by Dr. Neil Carrier

In Eastleigh – Nairobi’s bustling commercial zone dominated by Somalis where I have recently been conducting research – activity focuses on the sprawling shopping malls along its 1st Avenue in the daytime, and shifts towards the restaurants and hotels of 2ndAvenue after dusk. Business in the evening also becomes ever more brisk for the hundreds of Meru from Central Kenya selling chewable stems and leaves from kiosks draped in banana leaves.  These banana leaves are the khat sellers’ equivalent of the barber’s pole, alerting customers to the arrival of fresh stock of a stimulant of ever-increasing controversy.  A large proportion of Eastleigh’s population buy khat from these traders, adjourning to either private rooms, or, in the case of men, often to such public areas as Shaah Macaan.  This translates as ‘Sweet Tea’ from Somali, and is a small area located near such Eastleigh landmarks as the 11-storey Grand Royal Hotel.  One can indeed buy sweet tea at Shaah Macaan as well as indulge in shisha, khat and, most importantly, chat.

Shaah Macaan is not the most idyllic of spots.  The view out from the rather scruffy seating area overlooks a muddy road that requires great care to traverse without a fall, while the nearby fleet of buses bound for northeastern Kenya continually puncture any semblance of tranquillity with blasts of their horns.  The atmosphere is hardly healthy either, with dust, sewage and diesel fumes swirling around.  Yet chewers don’t seem to mind, and happily continue their consumption and conversation.  This is one of khat’s appeals: it helps induce comfort and ease in such unprepossessing locations.  Indeed, khat play a similar role in making the mafrish – a place where chewers can buy and consume khat in the UK and elsewhere – warm and welcoming despite their often unprepossessing decor and scant facilities.

However, khat is, as most readers are probably well aware, a highly contentious commodity.  Although chewed wherever there are communities of Somalis, many from these same communities see khat as a source of damage to health, damage to society, and as something immoral and haram.  There is disapproval in Eastleigh, but it is in the UK where sentiment against the commodity is currently most intense. The UK remains one of the few countries in Europe where khat remains legal despite its sizable population of Somali, Yemeni and Ethiopian consumers.  Indeed, 56 tonnes are estimated to enter the UK every week, almost all of it farmed by Meru in Kenya’s Nyambene Hills and exported by Somalis, many of them Eastleigh-based. Continue reading

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Filed under Al Shabab, Kenya, Khat, Somali diaspora

The poetry of Hamza Egal

Next Sunday, 10 June we will be hosting a blog launch party at the Oxford Hub, with food, art, music, and poetry, including performances by Hamza Egal, a Somali poet and philosopher based in the UK. The following is a poem by Hamza, but you can read more of his work and other Somali poets here.

Even a caged bird never forgets to sing

Picture how the heavens teach the most beautiful of lessons, celestial movements have compromise and union in their every essence. The sun doesn’t hold on to the skies when it’s time for the moon to dazzle your eyes. Man’s ignorance is his only prison, when every word is laced with poison and thoughts of treason.  Understanding oneself is long forgotten, replaced by addiction to the false illusions that they call freedom.

Insatiable hunger to feed the obsession with the dollar, thoughts contaminated, and basic human emotions intoxicated so we stagger to oblivion. Night and daydreaming, the scene keeps repeating, around me I see humanity frozen, in slumber deeper than animal hibernation. So every sunrise I am shovelling arctic snow, trying to ascertain the truth with me deep down and below. Equality and justice has no gender or skin tone, and those who truly desire it seek no throne.

I wonder if I could once again see this world through the eyes of a child, when everything was a wonderful reality and not memories retained in a mental file. Who knew all the while fear would become a tradition. Cowardice has us willing to accept lies, obey and listen, in school they precede me to worship a man made system. In university they asked me to take an oath and maintain the enslavement of the following generation. Capitalise on the warmth of your desires, let the lesser humans make up the coal for your fires.

We elect our tyrant masters by ticking a piece of paper, then turn around the next day bewildered by their behaviour. Only a fool would build a sand castle by the shore and ask the sea to respect its door.  If all men are equal then why do I carry the weight of your wars and interest? Ask yourselves the fundamental questions; only death has no medicine, together we can withstand and push back the evils that they bring. Hope is eternal even a caged bird never forgets to sing.

- Hamza O Egal

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Filed under Admin, Art, Somali diaspora, Somalia

Who is the Somali diaspora?

This post is contributed by Maimuna Mohamud, a current graduate student at Oxford. Reflecting on the London Conference on Somalia of 23 February, 2012, and a follow-up seminar on reactions to the conference held by Dr. Laura Hammond of SOAS on 3 May, 2012, Maimuna shares her thoughts on the challenging role and definitions of the Somali diaspora.

From the perspective of a Somali-diasporan-young-woman, the London conference on Somalia was already a failure long before February 23rd.  Not only that I felt a general sense of pessimism, there were also initial sentiments of anger and frustration.  For some unknown reason, my state of ‘conference fatigue’, which has conveniently served me in the past, was replaced by an unprecedented desire to act.  So I resolved to do something—finally.  Armed with a hot latte, I sent urgent Facebook messages to my ‘comrades’ asking them to join me in a demonstration in London. Our mantra would surely be: NO MORE CONFERENCES.  Unfortunately, there were no replies.  My generation, except for two Bulgarian friends, was in a state of conference fatigue.

Yet, there was a glimpse of hope. Prior to the conference, a series of consultative meetings with the Somali diaspora were held as part of an initiative “to elicit their thoughts on the way forward for the country”, wrote Dr. Laura Hammond in an article for the Guardian.  At the 3 May seminar, Dr. Hammond also shared the reflection that the “level of consultation with diaspora was unprecedented.” But was this a remarkable shift, a departure from business-as-usual and conference politics often associated with Somalia?

I held my breath and waited.  As I followed the developments I recalled the role my father played in many previous conferences. Years ago, he would often travel to attend numerous meetings and conferences in Nairobi and Djibouti.  During the 1990s, our habitual residence in Cairo served as a location from which my father would patiently wait for the next conference to consult. To apply a classic scholarly definition of diasporas, he maintained imagined as well as material links with ‘the homeland’.

Surely, then, he was a diasporan who travelled to attend consultation meetings.  So, wasn’t he part of diaspora consultative processes? Continue reading

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Filed under London Conference on Somalia, Somali diaspora, Somalia