Sending it home: Migration & Remittances in Somalia and Ethiopia
The Horn of Africa region, specifically Somalia, Eritrea and Ethiopia, continues to generate significant numbers of migrants to North America, Europe and Asia-Middle East. Many move by means, and along routes, that characterize the flow of mixed migration in the region and most are irregular migrants. Additionally, the region has the dubious distinction of both generating and hosting over 50 % of the refugees (forced migrants) in the African continent. In recent years particularly, a large number of women have emigrated, formally and informally, from the region to work as domestic servants in the Middle East. Sustaining and servicing this rising movement has been a vibrant money transfer system that ensures improved livelihoods and investments back home. The streets of Addis, Jijiga, Bossaso, Mogadishu and Hargeisa are lined with advertisements for banks and transfer agencies. This article takes a brief look at the impact and scope of remittances in Ethiopia and Somalia.
Statistics from the World Bank (2011) place the total stock of Ethiopian emigrants living abroad to be 0.6 million (roughly 0.7 % of the total population of over 82 million) a figure that has been on a steady rise. With the rise in diaspora population the flow of remittances to Ethiopia has shot up by a staggering 2150% from $18m in 2001 to $387m in 2010. According to the UN Human Development Report of 2009, the diasporas in North America, Europe and Middle East contribute 41%, 29% 24% respectively of the total sum in annual remittances to Ethiopia.
The population of the Somali diaspora is estimated to be between 1-1.5 million with the majority being in the United States and the United Kingdom. The U.S. Treasury Department estimates remittances from American Somalis total $100 million per year and has served to shield many from hunger and starvation. The 2008 UK Department for International Development (DfID) survey on UK Somali remittances estimated that 40% of all households in Somalia rely on remittances and the figure becomes even higher with regards to the urban population, which is estimated to be two thirds.
Although Ethiopia has had a galloping economic growth rate (between 9-11% annual growth in recent years), some argue that the levels of inequality have also increased. However, in a presentation at Columbia University 2010, Ethiopia’s Prime Minister Meles Zenawi stated that the Gini coefficient of inequality of Ethiopia is about 0.29 (unusually low for developing countries and globally), arguing that Ethiopia has not only registered rapid economic growth but the income from economic growth has been redistributed equitably.
World Bank figures show that remittance has contributed an average of 1% to the Ethiopian GDP over the last 8 years although the 2006 report suggested that if remittances sent through informal channels were included, total remittances could be as much as 50% higher than the official record. Studies show that remittances have played an important role in sustaining communities’ livelihoods in Somalia and Ethiopia. They have ensured a steady cash flow supply that has a profound ripple effect amongst immediate family members and the community close to the families. However, available data is insufficient to determine whether remittances alleviate poverty, accentuate existing inequalities or contribute significantly to economic development, job creation and investments.
A UNDP 2011 report titled Cash and Compassion: The Role of the Somali Diaspora in Relief, Development and Peacebuilding (UNDP),offers a comprehensive analysis of the methods, means and actors relevant to Somalia. It estimates the total global Somali remittance to be between USD $1.3 and 2 billion per year which is more than double of the 2011 UN appeal for Somalia estimated at USD $778.6m. Remittances to Somalia have been used to sustain livelihoods including investments in small businesses. The report starts with the claim, “One of the few success stories related to Somalia today is that of how effective the diaspora is in supporting relief and development activities in their country of origin.”
Remittances have also been used to facilitate a cycle of migration where diaspora members finance the travel of the next wave of migrants and thereby reinforcing the diaspora number and therefore the quantity of flows. Many diaspora Somalis lead and manage their lives through extensive networks of family relations, obligations and shared resources that are set up and managed in different nation-states. In the last decade, specifically after the 9/11 terrorist bombing of the Pentagon and World Trade Centre, there’s been growing suspicion that the finances are being used to bolster terrorism activities through the Islamist group Al-Shabaab. The UN Security Council report of 2010 accused the Al-Shabaab of extorting money from recipients of remittances. Such claims present a challenge to more effective diaspora support. The UNDP report suggests that any diaspora involvement with Al-Shabaab is hugely outweighed by the efforts being made for development purposes and recommends that better communication between ‘host’ governments and the diaspora be developed.
An interesting example of international suspicion and reaction to Somali banking is the case of Al Barakaat. Al-Barakaat first began operations in 1986, before the outbreak of the Somali civil war in 1991. It rose to prominence when hawala became the only way to transfer funds to Somalia, and remittances had become the lifeline of some of the nation's inhabitants. With no officially recognized private banking system, the remittance trade in Somalia came to be dominated by a single firm, Al-Barakaat, who by 2001 was operating in 40 countries and allegedly was the country's largest private employer. After the September 11, 2001 terrorist attacks in the US, the Al-Barakaat network and group of companies were suspected to have been linked to transfers that funded the attacks. In 2001, the United States shut down Al-Barakaat Bank's overseas money remittance channel, labeling the bank "the quartermasters of terror." Despite numerous investigations, nothing was found to link Al-Barakaat to terrorist activities and in February 2012 all its companies were removed from the terrorist list, the case against it was closed and it was finally delisted by the UN Security Council’s Al Qaida Sanctions Committee.
Remittances have been instrumental in sustaining livelihoods in Somalia and Ethiopia. The finances have helped families gain access to basic amenities and set up small businesses. While legal labour migration and irregular movement can provide an immediate solution to the challenge of unemployment in Ethiopia and remittances provide sanctuary to the families left at home, the challenge lies in ensuring that remittances don’t accentuate existing inequalities or contribute to rising inflation.
In Somalia it is clear that remittances go a long way in improving livelihoods and saving families during years of extreme hardship (conflict and drought). Some fear that the contributions are channeled to dissident groups like the Al-Shabaab which has links with the global Al-Qaida terror network. These concerns have led the U.S. treasury to try to stop the hawala system of money transfer and to lay out several options for U.S.-based Somalis to send money, including setting up accounts in other U.S. banks, sending money through other money transmitters, or shipping cash or money orders to hubs in Dubai, where payouts to Somalia can be arranged. These options are not practical to the Somali diaspora or the recipient community due to the fact that many senders are illegal migrants and furthermore the recipients do not have bank accounts or formal identification documents. Inevitably, alternative transfer methods will be established, where necessary, to meet the considerable and rising ‘supply and demand’ for transfers (in both Somalia and Ethiopia) and the lucrative rewards for whoever provides the service.
 World Bank (2011) Migration and Remittances Fact book 2011, 2nd edition Washington D.C., World Bank.
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