Politics of Poverty

Ideas and analysis from Oxfam America's policy experts

Remittances lifeline to Somalia shrinks 80 percent

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Katra Arale is among those in the Somali Diaspora who send money to family members in Somalia who are struggling to survive there. For 15 years, since arriving in the US at age 22, Arale has worked in janitorial services, cleaning a government building in Minneapolis. A mother of three children all born in the US, Arale says she’s glad to share her salary with her extended family in Somalia. Katra Arale sends at least $300 home every month. Sometimes, it’s as much as $400 or $500. The money helps her father, who is disabled, his wife, and their children. Photo: Coco McCabe / Oxfam

A stop gap is now urgently needed to ensure Somali families can access family funds upon which they rely.

Lauren Hartnett is a humanitarian press officer at Oxfam America. 

Friday marked the deadline set by Merchants Bank as the last day they will operate remittance accounts with Somali money transfer operators (MTOs). According to MTO leaders, as of Saturday morning, 80% of Somali remittances will be halted.

Oxfam and others are calling for the US government, led by the Treasury Department, to intervene and save this vital remittance lifeline.

All of the Somali companies ended services at most of their branches on Saturday; some shut down altogether. Merchants Bank, located in California, was the only bank capable of accepting cash from branches across the US and wiring it abroad. Most MTOs do have at least one local or state bank that they can work with for the time being, but these banks are only able to handle 20% of the cash Somali-Americans send each year.

In addition, these banks can only wire money collected in specific regions. Service in Ohio and Virginia, for example, will close down altogether; most service in Washington will be halted, with remaining offices closing in a matter of weeks. Minnesota, home to Somalia’s largest diaspora population in the United States, will experience a drastic reduction in service.

Somali families rely on remittances to pay for things like school fees, health care costs, food and other necessities. With only a week’s warning, there was little chance for families to plan for this devastating disruption.

The time for the US government to act is yesterday,” said Scott Paul, Oxfam’s senior humanitarian policy advisor. “Tomorrow, many Somali-Americans will wake up wondering whether their parents and children will survive the month. Unless the Obama administration takes action, many won’t. Our leaders are going to have to reckon with that.

While the US government has been thoughtfully working towards a lasting solution, a stop-gap is now urgently necessary. A few policy options are available to the US government in the short-term, and while none of them are ideal, all of them are vastly preferable to the humanitarian and security consequences that will follow from a disruption in formal channels for remittances.