US Bank To Stop Diaspora Remittances To Kenya
At the beginning of every month, Ms Safia Ibrahim anxiously waits for a call that will offer her a lifeline. Once it comes, she walks to a forex bureau near her home in Nairobi’s Eastleigh neighbourhood and comes out a few hundred dollars richer.
Thanks to her brother who works in the United States, Ms Ibrahim is able to pay rent, buy basic necessities and live a decent life.
This informal means of sending and receiving cash is known in Somali as hawala, a mostly unregulated money transfer system that traditionally involved neither physical nor electronic exchange of funds.
It is used by many who do not have bank accounts and is often the only way to send money to war-torn Somalia.
But the call may not come next month for Ms Ibrahim and many others like her if a decision by a US bank to stop acting as the intermediary between hawalas comes into effect.
Franklin Bank, which was the last US bank to do business with the Somali hawalas, said it would stop dealing with all of them by the end of December.
The bank, which is under the management of Sunrise Community Banks, said it feared some of the money transferred through this system could end up funding terrorist activities.
Since the September 11, 2001 attacks, hawalas in the United States, have been required to conduct monetary transactions through formal banks to avoid this possibility.
But recent events indicate that even this measure is not always effective.
In October, two Somali women, Hawo Mohamed Hassan, 64, and Amina Farah Ali, 35, were convicted in a US court of collecting and funnelling money to Al-Shabaab fighters in Somalia, highlighting the risks inherent in the system and raising the issue among Somalis over how best to reverse the decision by the US bank while abiding by the law.
“I haven’t heard of this decision,” Ms Ibrahim said in an interview. “I don’t even know what to say. I hope they will be able to do something about it. A lot of people depend on it.
The issue in Kenya is that hawalas here don’t operate under any regulatory framework, and there are no official estimates of amounts transferred.
Some observers claim that remittances to Kenya from the Somali diaspora sent through hawalas have fuelled the tempo of Somali investment in real estate, land, businesses and trade, especially in Eastleigh.
Sources close to the Central Bank of Kenya said discussions to formalise hawalas and regulate the transactions as soon as next year are ongoing.
This could mean a complete overhaul of the transfer system that could see the introduction of registration licenses and taxation procedures, they say.
“The real issue here is that the hawalas are cheaper, more efficient, involve less bureaucracy and are quicker,” said Mr Muzhaf Hassan, who has extensively researched the hawala system.
He said if the government registered the hawalas, it would make the system more mainstream while creating a source of employment and revenue.
“Hawalas are registered in UK, US, and even Uganda and Rwanda,” Mr Hassan said. “With the right will and means, the hawalas will be like any other business.”
Franklin Bank’s decision to cease cooperation with the hawalas comes when southern Somalia has been facing severe food shortages.
This has led many in the diaspora to channel money through the hawalas to assist those hard hit by the drought that has spread throughout south-central Somalia, and much of East Africa.
In September, even the United States Agency for International Development used hawalas to deliver aid to hunger-stricken Somalis living in Al-Shabaab controlled areas.
The organisation distributed food vouchers to the drought victims who use them to buy food from traders who in turn exchange the vouchers for cash later on by using certain identified hawala contacts.
“In Somalia, we have had to really innovate how we do this work,” Mr Raj Shah, director of Usaid was quoted to as saying at the time.
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