NYTimes: Somalis’ Money Is Lifeline for Homeland

[Mintid Farayar]

November 12, 2009

Somalis’ Money Is Lifeline for Homeland

 

By MATTHEW SALTMARSH

PARIS — As Somalis struggle to survive the chaos that has overtaken their country, a network of companies that distribute money from the nation’s large diaspora has quietly expanded, providing a crucial safety net.

 

As in other poor countries, the main purpose of these companies is to ensure that money from those working abroad reaches family members left behind.

 

But in war-torn Somalia, where the government has little control of the country and is itself struggling to survive, the companies are now also helping international organizations shift money into and within Somalia, according to the World Bank, academics and aid workers.

 

And in Somaliland, a breakaway region where the government is more stable than in other parts of the country, the Somali diaspora has contributed money for education, health and other social programs.

 

“The remittance system has become the lifeline for the Somali people and the lifeblood of the economy during the last two decades of civil strife,” said Samuel Munzele Maimbo, a World Bank specialist based in Mozambique, who added that many Somalis survived only because of the money from abroad. For others, the money has been crucial to establishing or propping up businesses.

 

A study sponsored by the British Department for International Development from May 2008 found that 80 percent of the start-up capital for small and medium-size enterprises in Somalia benefit from money sent by the diaspora.

 

Dilip Ratha, a World Bank economist, said that Somalia, like Haiti, was among the countries that are the most dependent on money from abroad.

 

The remittance system — and its importance in Somalia — has grown as decades of political upheaval have driven many Somalis abroad and, in recent years, as Islamists have wrested control over much of the country from a weak transitional government. The government, which has international support, is trapped in a small section of the capital under the protection of African Union peacekeepers.

 

A recent study by the United Nations Development Program estimated the size of the Somali diaspora at more than one million and the amount of annual remittances to Somalia at up to $1 billion, equivalent to about 18 percent of the nation’s gross domestic product.

 

The system began to take off during the dictatorial rule of President Mohammed Siad Barre, who ran the country from 1969 to 1991. As the banking system weakened, according to Mohamed Waldo, a consultant who has worked with Somali remittance companies, traders stepped in with a solution: act as middlemen in the resale of consumer goods shipped home by the increasing number of Somalis working abroad, especially in the Persian Gulf region. The traders kept a small cut of the proceeds and turned the rest over to the laborers’ relatives in Somalia. The shipments got around currency restrictions.

 

Eventually, when the government collapsed, Somali workers abroad began to send money instead.

 

Mr. Waldo said that these days, there were more than 20 active Somali remittance companies, five of them large. One of the leading companies is Dahabshiil, founded in the early 1970s by Mohamed Said Duale from his general store in Burao in northwest Somalia.

 

In 1988, fighting between government forces and rebels with the Somali National Movement swept Burao. Mr. Duale subsequently left the country and continued his work from abroad.

 

In 1991, when the Barre government was overthrown, Mr. Duale returned to Somalia. He opened offices in major towns and later in remote villages that the Western money-transfer giants would struggle to serve.

 

“Through word of mouth we built this business,” said his son, Abdirashid Duale, now chief executive of the company.

 

Today, Dahabshiil says it has more than 1,000 branches and agents in 40 countries.

 

The United Nations Development Program uses Dahabshiil to transfer money for local programs, said Álvaro Rodríguez, the agency’s director for Somalia. Such companies provide “the only safe and efficient option to transfer funds to projects benefiting the most vulnerable people of Somalia,” he said. “Their service is fast and efficient.”

 

Abdirashid Duale, who gives his age as “35, but with 25 years of experience,” declined to provide profit or revenue figures, saying that would only help his competitors. The company charges commissions that vary from 1 percent to 5 percent depending on the size of the transaction; he said most Somalis he worked with abroad sent home $200 to $300 a month.

 

Nikos Passas, a professor at Northeastern University in Boston who researches terrorism and white-collar crime, said Dahabshiil was helped by the closing of a larger rival, Al Barakaat, at the behest of the United States authorities in the wake of the attacks on Sept. 11, 2001.

 

In the end, F.B.I. agents found no evidence linking Al Barakaat to terrorist financing. But for Dahabshiil, gaining market share from Al Barakaat was “like shooting fish in a barrel,” Professor Passas said.

 

Dahabshiil’s image has been helped by its charitable works. It says it invests 5 percent of annual profit in such ventures; Abdirashid Duale said this represented around $1 million a year.

 

In Mogadishu — a city of pockmarked Italian architecture and rubble — Dahabshiil operates from Bakara Market, despite continued clashes in the area between the weak government and Islamist insurgents.

 

Its office, in an unassuming two-story building, is protected by security guards.

 

Looking ahead, Abdirashid Duale plans more expansion.

 

“One day the fighting will stop,” he said, “and we will still be here.”

 

Mohammed Ibrahim contributed reporting from Mogadishu.

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