Wednesday April 22, 2015

Kenya's crackdown on Hawala money transfers cuts Somali lifeline

It's a country without a formal banking system of its own, yet its citizens depend on remittances from abroad to survive. Now the one way to get money into Somalia, is coming under attack.

It's a country without a formal banking system of its own, yet its citizens depend on remittances from abroad to survive. Now the one way to get money into Somalia, is coming under attack. (REUTERS/Feisal Omar )

Listen 25:42

​"Today, villages and towns throughout Kenya are in mourning for the fallen and those our precious Republic of Kenya has lost."

The president of Kenya, Uhuru Kenyatta, speaking this month after the attack on Garissa University, that left nearly 150 people dead. The al-Shabab militant group, based in neighbouring Somalia, claimed responsibility. And the Kenyan president promised retaliation.

Within a week of the attacks, Kenya shut down 13 money transfer businesses. It was a major move because these money transfer businesses — known as Hawalas — are the only way to get money into Somalia today.

Now, Kenya accuses them of funneling money to al-Shabab. But the Hawalas also represent a real lifeline inside Somalia. It's a country that's hugely dependent on remittances... money sent back home by Somali ex-pats all over the world.

More money enters Somalia from remittances each year, than from humanitarian aid. It accounts for as much as 45 per cent of the economy. But you can't just wire money to someone in Somalia through a bank... because there's no formal banking system there. Hence, the importance of Hawalas.

Individual Somalis and Somali-Kenyans aren't the only ones affected by the Kenyan Government's decision to shut-down the Somali money transfer businesses operating there. Aid groups working in Somalia are being hit hard too.

Degan Ali is the Executive Director of Adeso Africa, an aid and development group that works in Somalia and is based in  Nairobi, Kenya.

The Kenyan government fears the militant group al-Shabab uses them to finance murderous attacks... such as the one at Garissa University, earlier this month. In fact, Hawala networks have come under heavy suspicion since as far back as 9/11.

Tom Keatinge is a former investment banker who's now the Director of the Centre for Financial Crime and Security Studies at The Royal United Services Institute in London, England.

We did try getting in touch with the Kenyan Embassy in Ottawa but it did not respond to emails or phone calls.


This segment was produced by The Current's Gord Westmacott.