Remittances to Somalia Continue to Decline

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October 12, 2015

Remittances to Somalia are down significantly, according to a new, real-time look at the issue, Assessment of External Remittances in Selected Urban Areas and Among Displaced Populations Across Somalia. The survey of 2,300 households in urban areas as well as displaced populations throughout the country was conducted in July by Food Security, Nutrition, and Analysis Unit – Somalia (FSNAU), an arm of the Food and Agriculture Organization (FAO). Rural areas were not covered due to security and logistical constraints. Participants were asked about remittances received over the previous six months.

Remittances are handled by Money Transfer Operations (MTOs) who rely on banks to transfer the funds internationally. Several of these banks have closed their accounts with MTOs that serve Somalia due to poor financial regulation, the presence of designated terrorist organizations in Somalia and a strict regulatory environment. This has significantly reduced the number of remittances sent by family members to their relatives in Somalia.

The recent survey updates a 2012-13 study by the same group, which highlighted the importance of remittances to Somalians in that they provide an essential lifeline to both urban and rural Somali households. The earlier study estimated remittance flows to Somalia at US$1.2 billion per year, most of it used by families to cover expenses such as food, clothing, education and medical care.

The July survey found that “considerable proportions of households that received remittances over the January to June 2015 period have reported a decline in the amounts of remittances received.” Outside of the capital Mogadishu, 35 percent of urban emittance recipients surveyed reported a decline in remittances, a finding that Oxfam America characterized as “disturbing.” Nearly a third of households stated that said that money transfers were no longer available in the countries where their relatives were living.

However, lack of accesses to remittance services in senders’ countries was not found to be the primary reason for this decline. In many instances, remitters reduced the amount they sent. “Whether the reduction in the amount sent by remitters is linked to potential increase in the transaction cost associated with finding an alternative but potentially more costly money transfer mechanism remains a possibility that should be explored,” the report states.

The reduction in remittances received by internally displaced persons was far more drastic. Just one percent to eight percent of these people received remittances in the first half of 2015.

The declines in remittances received between January and June 2015 period “underscore the importance of the need for monitoring remittance flows and their dynamics more closely,” the report states. This should include “fostering collaboration and partnership with the major [MTOs] currently serving

Somalia in order to access their data on remittance flows to the country,” it adds.

Read the full report here.