Could there be a better way to create more hardship,more instability and more potential refugees,while increasing the appeal of extremism, than tocut off the money transfer lifeline to Somalia byshutting down remittance agencies

Cindy Horst

Nick Van Hear

Horst, C.M.A.

van Hear, N.

International Migration, Integration and Social Cohesion online publications

UvA-DARE is a service provided by the library of the University of Amsterdam (https://dare.uva.nl)UvA-DARE (Digital Academic Repository)Counting the cost: refugees, remittances and the 'war against terrorism'Horst, C.M.A.; van Hear, N.Publication date2002Published inForced Migration ReviewLink to publicationCitation for published version (APA):Horst, C. M. A., & van Hear, N. (2002). Counting the cost: refugees, remittances and the 'waragainst terrorism'. Forced Migration Review, 14, 32-34.General rightsIt is not permitted to download or to forward/distribute the text or part of it without the consent of the author(s)and/or copyright holder(s), other than for strictly personal, individual use, unless the work is under an opencontent license (like Creative Commons).Disclaimer/Complaints regulationsIf you believe that digital publication of certain material infringes any of your rights or (privacy) interests, pleaselet the Library know, stating your reasons. In case of a legitimate complaint, the Library will make the materialinaccessible and/or remove it from the website. Please Ask the Library: https://uba.uva.nl/en/contact, or a letterto: Library of the University of Amsterdam, Secretariat, Singel 425, 1012 WP Amsterdam, The Netherlands. Youwill be contacted as soon as possible.Download date:09 Mar 2023n 7 November 2001, Somalisaround the world wereshocked to find that the haw-ilaad offices they use to sendremittances to their relatives were onthe list of organisations suspected oflinks with Osama Bin Laden and al-Qa’ida. Without any warning, AlBarakaat offices around the worldwere forcibly shut down, their assetsconfiscated and telecommunicationslines cut as part of the ‘global waragainst terrorism’. US officials justi-fied these measures by claiming thattens of millions of dollars a year weremoved from Al Barakaat to al-Qa’idabut produced little evidence to sup-port this allegation. This article looksinto an aspect of the closure that hasbeen largely neglected: the conse-quences for ordinary Somalis.The hawilaad systemDerived from an Arabic word, hawil inSomali means transfer — usually ofmoney or responsibilities. The haw-ilaad is an informal system of valuetransfer that operates in almost everypart of the world. It is run by Somalisand mainly used by Somalis, for busi-ness transactions and to sendremittances to relatives. It worksremarkably simply. If a Somali man inMinneapolis or East London wants tosend money to his mother in Nairobior Mogadishu, he presents the amountof money to be transferred to thefinancial broker in his town, providingfull details of himself and the recipi-ent. The financial broker then sends afax, telephone message or email tothe Nairobi or Mogadishu office,where the mother will be contacted assoon as possible. She goes personallyto the hawilaad office and has to pro-vide the full details of the person shethinks has sent the money, as well asproof of her own identity. If the infor-mation corresponds to what thesender has given, she will receive hermoney, within only a few days of itbeing sent. Accounts between the dif-ferent hawilaad offices are laterlevelled out through sending cash orthrough trade in consumer items,gold or other commodities.Most of the Somali money transferbusiness is handled by three maincompanies: Al Barakaat(‘Blessings’), Dahabshil (‘MeltedJewellery’) and Amal (‘Trust’).Though these started to operatein the late 1980s, the transfer systemhas a long history in Somalia.Remittances have long played animportant part in the country’s econo-my, since a large number of Somalinationals have emigrated elsewhere insearch of better opportunities, work,business or education. Somali migration andremittancesIn the last 30 years there have beentwo main forms of movement out ofSomalia, resulting in the formation ofa large and influential diaspora. Fromthe early 1970s, many Somalis wentas migrant labourers to work in theGulf States during the oil boom ofthat time. Some 150,000-200,000 didso annually in the 1970s, while by theend of the 1980s between 200,000and 375,000 were working in oil-richGulf states. The outbreak of civil warin 1988 and the inter-clan fightingafter the fall of Siad Barre in 1991 dis-placed hundreds of thousands ofSomalis within the country and drovemany others to leave for Ethiopia,Kenya, Yemen and other neighbouringcountries, as well as further afield tothe UK, Italy, the Netherlands,Scandinavia, Canada, the US and otherWestern states. While accurate num-bers cannot be established, by 2000there were thought to be some300,000 displaced people withinSomalia, about 400,000 refugees inAfrica and Yemen, and more than70,000 refugees in Western countries,out of a total diaspora in Westerncountries of perhaps 200,000.1As the forms of Somali migrationhave diversified, so too have thesources of remittances. While figuresare only rough estimates, from thelate 1970s up to $300 million wasremitted annually, about two-fifths ofGNP. In the 1980s this rose to $370million, with migrant workers in theGulf accounting for about 75%. Fromthe later 1980s and in the 1990s, thewider diaspora, partly formed byrefugee outflows, accounted for agreater proportion of remittances.Currently about $500 million may beremitted to Somalia annually and per-haps the same amount to Somaliland.232 FMR 14Counting the cost: refugees,remittances and the ‘war against terrorism’by Cindy Horst and Nick Van HearCould there be a better way to create more hard-ship, more instability and more potential refugees,while increasing the appeal of extremism, than tocut off the money transfer lifeline to Somalia byshutting down remittance agencies?Oabout $500 million may be remittedto Somalia annuallyCindy HorstFrom the 1970s, Somali traders beganto collect hard currency from migrantworkers in the Gulf and to use it topurchase commodities for sale inSomalia. The equivalent in Somali cur-rency or goods was then handed overto the migrants’ family and kinsmen.The first version of this was known asthe ‘franco-valuta’ system: this wasbanned in 1982, partly because it cir-cumvented the control of the Barreregime. It was supplanted by the haw-ilaad system, encouraged by thecollapse of Somalia’s formal economyand the burgeoning of the informalsector. Both systems were based ontwo essential characteristics in Somaliculture: strong kinship ties and highrate of mobility. Although familymembers often move in differentdirections and may thus find them-selves far apart, they still carry astrong responsibility to assist eachother.Hawilaad and Somalirefugees in Kenya’s Dadaabcamps The hawilaad system has been ofgreat importance in the lives of manySomalis, including refugees. For thosein the three camps around Dadaab innorth-eastern Kenya, survival is adaily struggle in an arid environment.The international community handsout rations of maize and at timeswheat flour or beans every 15 daysbut these last only about ten days.Firewood is distributed a couple oftimes a year as well but amounts arefar from sufficient. Besides, peoplehave other needs that are not catered for through handouts. It is very diffi-cult to find additional sources ofincome in the area. Those who camewith their own resources may havebeen able to set up a small business.Others have managed to bring live-stock or have bought it in Dadaab.Ecological constraints and insecurityhamper agriculture. Salaried employ-ment is largely confined to jobsavailable with relief and developmentagencies working in the region.Mostly, people are involved in suchpetty trade activities as weaving, bak-ing, brewing tea, selling smallquantities of camel milk, sugar or tealeaves or collecting firewood. Profitsare minimal and risks may be high:when women go into the bush to col-lect firewood, for instance, they runthe risk of being raped by shifta or‘bandits’.3 Receiving a monthly allowance of$100 a month from a relative inToronto or Nairobi therefore makesan immense difference to refugees inDadaab. Even if that person is not in aposition to send remittances on amonthly basis, at least he or she canbe called upon in times of contin-gency, like illness or death. YunisAhmed was a refugee in his mid-for-ties, living in Dagahaley camp. He hadworked for the agencies as teacherand translator on anumber of short-term assignments.He lived in the camp with his agedmother, close to the house where hisbrother stayed with his wife. Thebrother was having mental problemsthat were aggravated to the pointwhere he became a danger to his wife,threatening to kill her. Yunis tried todo whatever was in his power, evengiving up his teaching position; hewent to the local hospital for assis-tance but was told that they could donothing for his brother. When mattersgot out of hand, he contacted a cousinin Nairobi who passed the message totheir relatives in different placesaround the world, collecting $100from one family, 3,000 Kenyanshillings from another, and so on.Eventually, he was able to send a totalamount of $600, which Yunis used totake his brother to Nairobi for treat-ment.Beneficiaries and benefitsThe majority of the refugees are notas fortunate as Yunis, having no rela-tives to assist them when they need it.However, even though the proportionof refugees who do receive remit-tances may only be 10-15%, othersbenefit indirectly from the existenceof the hawilaad in the camps. Thosewho receive a regular or occasionalamount mostly share this with others;money enters the camp economy,which benefits shopkeepers and busi-nessmen; and those who can afford itoccasionally employ others as domes-tic workers or for construction work.Thus, even the poorer segments ofthe population may eventually benefitfrom the hawilaad system. Habibo Omar, a woman from theBantu minority in her late thirties,learned through a radio conversationwith her brother in Kismayo, withwhom her disabled daughter was stay-ing, that the security situation wasworsening there. She borrowed 1,000Kenyan shillings in the market, givingher ration card number as security,then travelled to Mombasa to findwork as a maid. A Somali womanemployed her and after one monthHabibo was able to send back the1,000 shillings she borrowed. Anotherthree months later, she had savedenough money to send to Kismayo tourge her brother to come to therefugee camp with her disableddaughter.Among the many advantages of thehawilaad are that the system is muchfaster and cheaper than conventionalways of transferring money. Besides,in many instances these conventionalmeans cannot be used — for example,when sending money from Dadaab toanywhere in Somalia. The system is rel-atively safe in a rather insecure area,since travellers do not need to carrytheir money but can simply transfer itto their place of destination. Beyond helping Somalis to survive,the remittances transferred give peo-ple a choice. The money can beinvested in business, or used to assistothers or for children’s education.The recipient can decide to use it tomove: away from insecure areas,towards economic opportunities,towards a better life or family mem-bers, elsewhere in the world. Theseresources give refugees in difficultconditions the capacity to assistthemselves. This capacity has beengreatly undermined by the closure ofAl Barakaat. 33FMR 14 Counting the cost: refugees, remittances and the ‘war’ against terrorismthe remittances transferred give people a choiceRemittances, terrorism andrefugee livelihoods A few years ago, the Ministry ofJustice in the Netherlands carried outa study on informal value transfersystems (IVTS) and criminal organisa-tions.4 The conclusions are highlyrelevant for the closure of the haw-ilaad: "IVTS are by no means infestedor controlled by criminals, but ratherthey are one of numerous alternativesavailable to criminal organisations.Many others resort to IVTS simply totransfer money to their relativesbecause they follow cultural traditionsor services are faster, cheaper, lessbureaucratic and more convenientthan any other alternative. Beforeimplementing drastic measuresagainst IVTS, more solid evidence ofnegative consequences is required.The legislative arsenal in the West canadequately deal with those who havecommitted crimes, and Western gov-ernments have already attempted torender IVTS more transparent byrequiring them to get a license andreport unusual transactions of certainmagnitude. After all, criminals are themain problem, not the way they movetheir money." Terrorist networks may well haveused the hawilaad system, as haveSomali warlords buying weapons andsponsoring war, but, as UN agenciesand others in Somalia have attested,the system is mainly used by ordinarySomalis, including refugees, with nosuch connections. Life in the Horn of Africa is often lifeon the margins, and assistance fromoutside is needed for survival. TheSomali economy as a whole, andSomali refugees in particular, arehighly dependent on remittances.Urban households, including those inrefugee camps, are the main beneficia-ries of remittances, which mayaccount for between 20 and 60% ofhousehold income. While there is anurban bias, some remittances areredistributed among people in ruralareas.About $60 million was injected intothe Somali economy in 2000 throughinternational aid (EIU 2001). In con-trast, between $200 million and $500million may have been transferred toSomalia through the hawilaad system,and these funds reach many morepeople than does international aid.There are other hawilaad companiesstill operating, and new telecommuni-cations and internet companies areemerging, but none of them has thereach of Al Barakaat; besides, many ofthem depend on infrastructure ownedby Al Barakaat. Alternatives might befound but would probably involvehigher costs and risks. The refugeesin the Dadaab camps in Kenya areamong those who will end up payingthe highest price of the measurestaken against the hawilaad in thename of the ‘war against terrorism’.Cindy Horst is a PhD candidate atthe Research Institute for GlobalIssues and Development Studies,University of Amsterdam. UNHCRWorking Paper 38 (availableonline at www.jha.ac/articles/u038.pdf) has further details ofher research in Dadaab. Email: C.Horst@inter.NL.net Nick Van Hear is a SeniorResearcher at the Centre forDevelopment Research,Copenhagen, Denmark. Email: nvh@cdr.dk1.  UNHCR The State of the World’s Refugees. 2000,Oxford: OUP; US Committee for Refugees TheWorld Refugee Survey 2000, Washington DC: USCR;J Gundel The migration-development nexus:Somalia, 2002. Copenhagen: Centre forDevelopment Research working paper.2.  L Ahmed ‘Remittances and their impact in post-war Somaliland’, Disasters, 2000, 24, 2, pp380-389;Economist Intelligence Unit. Country Report:Somalia, 2001, EIU: London. Gundel is also asource on remittances.3.  For further information about life in Dadaab,see J Musau Protecting refugees in Dadaab:processes, problems and prospects, FMR11, pp34-36.4.  N Passas Informal Value Transfer Systems andCriminal Organisations. A study into so-calledunderground banking networks. Onderzoeks -notities 1999/4. Ministerie van Justitie, Den Haag.34 Counting the cost: refugees, remittances and the ‘war’ against terrorism FMR 14Exile Images/R Chalasani

English

Counting the cost: refugees, remittances and the 'war against terrorism'

UvA-DARE

UvA-DARE is a service provided by the library of the University of Amsterdam (https://dare.uva.nl)UvA-DARE (Digital Academic Repository)Counting the cost: refugees, remittances and the 'war against terrorism'Horst, C.M.A.; van Hear, N.Publication date2002Published inForced Migration ReviewLink to publicationCitation for published version (APA):Horst, C. M. A., & van Hear, N. (2002). Counting the cost: refugees, remittances and the 'waragainst terrorism'. Forced Migration Review, 14, 32-34.General rightsIt is not permitted to download or to forward/distribute the text or part of it without the consent of the author(s)and/or copyright holder(s), other than for strictly personal, individual use, unless the work is under an opencontent license (like Creative Commons).Disclaimer/Complaints regulationsIf you believe that digital publication of certain material infringes any of your rights or (privacy) interests, pleaselet the Library know, stating your reasons. In case of a legitimate complaint, the Library will make the materialinaccessible and/or remove it from the website. Please Ask the Library: https://uba.uva.nl/en/contact, or a letterto: Library of the University of Amsterdam, Secretariat, Singel 425, 1012 WP Amsterdam, The Netherlands. Youwill be contacted as soon as possible.Download date:15 Apr 2023n 7 November 2001, Somalisaround the world wereshocked to find that the haw-ilaad offices they use to sendremittances to their relatives were onthe list of organisations suspected oflinks with Osama Bin Laden and al-Qa’ida. Without any warning, AlBarakaat offices around the worldwere forcibly shut down, their assetsconfiscated and telecommunicationslines cut as part of the ‘global waragainst terrorism’. US officials justi-fied these measures by claiming thattens of millions of dollars a year weremoved from Al Barakaat to al-Qa’idabut produced little evidence to sup-port this allegation. This article looksinto an aspect of the closure that hasbeen largely neglected: the conse-quences for ordinary Somalis.The hawilaad systemDerived from an Arabic word, hawil inSomali means transfer — usually ofmoney or responsibilities. The haw-ilaad is an informal system of valuetransfer that operates in almost everypart of the world. It is run by Somalisand mainly used by Somalis, for busi-ness transactions and to sendremittances to relatives. It worksremarkably simply. If a Somali man inMinneapolis or East London wants tosend money to his mother in Nairobior Mogadishu, he presents the amountof money to be transferred to thefinancial broker in his town, providingfull details of himself and the recipi-ent. The financial broker then sends afax, telephone message or email tothe Nairobi or Mogadishu office,where the mother will be contacted assoon as possible. She goes personallyto the hawilaad office and has to pro-vide the full details of the person shethinks has sent the money, as well asproof of her own identity. If the infor-mation corresponds to what thesender has given, she will receive hermoney, within only a few days of itbeing sent. Accounts between the dif-ferent hawilaad offices are laterlevelled out through sending cash orthrough trade in consumer items,gold or other commodities.Most of the Somali money transferbusiness is handled by three maincompanies: Al Barakaat(‘Blessings’), Dahabshil (‘MeltedJewellery’) and Amal (‘Trust’).Though these started to operatein the late 1980s, the transfer systemhas a long history in Somalia.Remittances have long played animportant part in the country’s econo-my, since a large number of Somalinationals have emigrated elsewhere insearch of better opportunities, work,business or education. Somali migration andremittancesIn the last 30 years there have beentwo main forms of movement out ofSomalia, resulting in the formation ofa large and influential diaspora. Fromthe early 1970s, many Somalis wentas migrant labourers to work in theGulf States during the oil boom ofthat time. Some 150,000-200,000 didso annually in the 1970s, while by theend of the 1980s between 200,000and 375,000 were working in oil-richGulf states. The outbreak of civil warin 1988 and the inter-clan fightingafter the fall of Siad Barre in 1991 dis-placed hundreds of thousands ofSomalis within the country and drovemany others to leave for Ethiopia,Kenya, Yemen and other neighbouringcountries, as well as further afield tothe UK, Italy, the Netherlands,Scandinavia, Canada, the US and otherWestern states. While accurate num-bers cannot be established, by 2000there were thought to be some300,000 displaced people withinSomalia, about 400,000 refugees inAfrica and Yemen, and more than70,000 refugees in Western countries,out of a total diaspora in Westerncountries of perhaps 200,000.1As the forms of Somali migrationhave diversified, so too have thesources of remittances. While figuresare only rough estimates, from thelate 1970s up to $300 million wasremitted annually, about two-fifths ofGNP. In the 1980s this rose to $370million, with migrant workers in theGulf accounting for about 75%. Fromthe later 1980s and in the 1990s, thewider diaspora, partly formed byrefugee outflows, accounted for agreater proportion of remittances.Currently about $500 million may beremitted to Somalia annually and per-haps the same amount to Somaliland.232 FMR 14Counting the cost: refugees,remittances and the ‘war against terrorism’by Cindy Horst and Nick Van HearCould there be a better way to create more hard-ship, more instability and more potential refugees,while increasing the appeal of extremism, than tocut off the money transfer lifeline to Somalia byshutting down remittance agencies?Oabout $500 million may be remittedto Somalia annuallyCindy HorstFrom the 1970s, Somali traders beganto collect hard currency from migrantworkers in the Gulf and to use it topurchase commodities for sale inSomalia. The equivalent in Somali cur-rency or goods was then handed overto the migrants’ family and kinsmen.The first version of this was known asthe ‘franco-valuta’ system: this wasbanned in 1982, partly because it cir-cumvented the control of the Barreregime. It was supplanted by the haw-ilaad system, encouraged by thecollapse of Somalia’s formal economyand the burgeoning of the informalsector. Both systems were based ontwo essential characteristics in Somaliculture: strong kinship ties and highrate of mobility. Although familymembers often move in differentdirections and may thus find them-selves far apart, they still carry astrong responsibility to assist eachother.Hawilaad and Somalirefugees in Kenya’s Dadaabcamps The hawilaad system has been ofgreat importance in the lives of manySomalis, including refugees. For thosein the three camps around Dadaab innorth-eastern Kenya, survival is adaily struggle in an arid environment.The international community handsout rations of maize and at timeswheat flour or beans every 15 daysbut these last only about ten days.Firewood is distributed a couple oftimes a year as well but amounts arefar from sufficient. Besides, peoplehave other needs that are not catered for through handouts. It is very diffi-cult to find additional sources ofincome in the area. Those who camewith their own resources may havebeen able to set up a small business.Others have managed to bring live-stock or have bought it in Dadaab.Ecological constraints and insecurityhamper agriculture. Salaried employ-ment is largely confined to jobsavailable with relief and developmentagencies working in the region.Mostly, people are involved in suchpetty trade activities as weaving, bak-ing, brewing tea, selling smallquantities of camel milk, sugar or tealeaves or collecting firewood. Profitsare minimal and risks may be high:when women go into the bush to col-lect firewood, for instance, they runthe risk of being raped by shifta or‘bandits’.3 Receiving a monthly allowance of$100 a month from a relative inToronto or Nairobi therefore makesan immense difference to refugees inDadaab. Even if that person is not in aposition to send remittances on amonthly basis, at least he or she canbe called upon in times of contin-gency, like illness or death. YunisAhmed was a refugee in his mid-for-ties, living in Dagahaley camp. He hadworked for the agencies as teacherand translator on anumber of short-term assignments.He lived in the camp with his agedmother, close to the house where hisbrother stayed with his wife. Thebrother was having mental problemsthat were aggravated to the pointwhere he became a danger to his wife,threatening to kill her. Yunis tried todo whatever was in his power, evengiving up his teaching position; hewent to the local hospital for assis-tance but was told that they could donothing for his brother. When mattersgot out of hand, he contacted a cousinin Nairobi who passed the message totheir relatives in different placesaround the world, collecting $100from one family, 3,000 Kenyanshillings from another, and so on.Eventually, he was able to send a totalamount of $600, which Yunis used totake his brother to Nairobi for treat-ment.Beneficiaries and benefitsThe majority of the refugees are notas fortunate as Yunis, having no rela-tives to assist them when they need it.However, even though the proportionof refugees who do receive remit-tances may only be 10-15%, othersbenefit indirectly from the existenceof the hawilaad in the camps. Thosewho receive a regular or occasionalamount mostly share this with others;money enters the camp economy,which benefits shopkeepers and busi-nessmen; and those who can afford itoccasionally employ others as domes-tic workers or for construction work.Thus, even the poorer segments ofthe population may eventually benefitfrom the hawilaad system. Habibo Omar, a woman from theBantu minority in her late thirties,learned through a radio conversationwith her brother in Kismayo, withwhom her disabled daughter was stay-ing, that the security situation wasworsening there. She borrowed 1,000Kenyan shillings in the market, givingher ration card number as security,then travelled to Mombasa to findwork as a maid. A Somali womanemployed her and after one monthHabibo was able to send back the1,000 shillings she borrowed. Anotherthree months later, she had savedenough money to send to Kismayo tourge her brother to come to therefugee camp with her disableddaughter.Among the many advantages of thehawilaad are that the system is muchfaster and cheaper than conventionalways of transferring money. Besides,in many instances these conventionalmeans cannot be used — for example,when sending money from Dadaab toanywhere in Somalia. The system is rel-atively safe in a rather insecure area,since travellers do not need to carrytheir money but can simply transfer itto their place of destination. Beyond helping Somalis to survive,the remittances transferred give peo-ple a choice. The money can beinvested in business, or used to assistothers or for children’s education.The recipient can decide to use it tomove: away from insecure areas,towards economic opportunities,towards a better life or family mem-bers, elsewhere in the world. Theseresources give refugees in difficultconditions the capacity to assistthemselves. This capacity has beengreatly undermined by the closure ofAl Barakaat. 33FMR 14 Counting the cost: refugees, remittances and the ‘war’ against terrorismthe remittances transferred give people a choiceRemittances, terrorism andrefugee livelihoods A few years ago, the Ministry ofJustice in the Netherlands carried outa study on informal value transfersystems (IVTS) and criminal organisa-tions.4 The conclusions are highlyrelevant for the closure of the haw-ilaad: "IVTS are by no means infestedor controlled by criminals, but ratherthey are one of numerous alternativesavailable to criminal organisations.Many others resort to IVTS simply totransfer money to their relativesbecause they follow cultural traditionsor services are faster, cheaper, lessbureaucratic and more convenientthan any other alternative. Beforeimplementing drastic measuresagainst IVTS, more solid evidence ofnegative consequences is required.The legislative arsenal in the West canadequately deal with those who havecommitted crimes, and Western gov-ernments have already attempted torender IVTS more transparent byrequiring them to get a license andreport unusual transactions of certainmagnitude. After all, criminals are themain problem, not the way they movetheir money." Terrorist networks may well haveused the hawilaad system, as haveSomali warlords buying weapons andsponsoring war, but, as UN agenciesand others in Somalia have attested,the system is mainly used by ordinarySomalis, including refugees, with nosuch connections. Life in the Horn of Africa is often lifeon the margins, and assistance fromoutside is needed for survival. TheSomali economy as a whole, andSomali refugees in particular, arehighly dependent on remittances.Urban households, including those inrefugee camps, are the main beneficia-ries of remittances, which mayaccount for between 20 and 60% ofhousehold income. While there is anurban bias, some remittances areredistributed among people in ruralareas.About $60 million was injected intothe Somali economy in 2000 throughinternational aid (EIU 2001). In con-trast, between $200 million and $500million may have been transferred toSomalia through the hawilaad system,and these funds reach many morepeople than does international aid.There are other hawilaad companiesstill operating, and new telecommuni-cations and internet companies areemerging, but none of them has thereach of Al Barakaat; besides, many ofthem depend on infrastructure ownedby Al Barakaat. Alternatives might befound but would probably involvehigher costs and risks. The refugeesin the Dadaab camps in Kenya areamong those who will end up payingthe highest price of the measurestaken against the hawilaad in thename of the ‘war against terrorism’.Cindy Horst is a PhD candidate atthe Research Institute for GlobalIssues and Development Studies,University of Amsterdam. UNHCRWorking Paper 38 (availableonline at www.jha.ac/articles/u038.pdf) has further details ofher research in Dadaab. Email: C.Horst@inter.NL.net Nick Van Hear is a SeniorResearcher at the Centre forDevelopment Research,Copenhagen, Denmark. Email: nvh@cdr.dk1.  UNHCR The State of the World’s Refugees. 2000,Oxford: OUP; US Committee for Refugees TheWorld Refugee Survey 2000, Washington DC: USCR;J Gundel The migration-development nexus:Somalia, 2002. Copenhagen: Centre forDevelopment Research working paper.2.  L Ahmed ‘Remittances and their impact in post-war Somaliland’, Disasters, 2000, 24, 2, pp380-389;Economist Intelligence Unit. Country Report:Somalia, 2001, EIU: London. Gundel is also asource on remittances.3.  For further information about life in Dadaab,see J Musau Protecting refugees in Dadaab:processes, problems and prospects, FMR11, pp34-36.4.  N Passas Informal Value Transfer Systems andCriminal Organisations. A study into so-calledunderground banking networks. Onderzoeks -notities 1999/4. Ministerie van Justitie, Den Haag.34 Counting the cost: refugees, remittances and the ‘war’ against terrorism FMR 14Exile Images/R Chalasani

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Counting the cost: refugees, remittances and the ‘war against terrorism’

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The article analyzes the system and the role of remittances in the context of political instability that characterizes today's Somalia.Maqaalku wuxuu falanqaynayaa hab-dhaqaaleedka xawaaladaha ee Soomaaliya loo adeegsado, iyadoo aan jirii degganaasho siyaasadeed.L'articolo analizza il sistema e il ruolo delle rimesse economiche nel contesto di instabilità politica che caratterizza oggi la Somalia

Horst, Cindy

Van Hear, Nick

Archivio Aperto di Ateneo

n 7 November 2001, Somalis
around the world were
shocked to find that the haw-
ilaad offices they use to send
remittances to their relatives were on
the list of organisations suspected of
links with Osama Bin Laden and al-
Qa’ida. Without any warning, Al
Barakaat offices around the world
were forcibly shut down, their assets
confiscated and telecommunications
lines cut as part of the ‘global war
against terrorism’. US officials justi-
fied these measures by claiming that
tens of millions of dollars a year were
moved from Al Barakaat to al-Qa’ida
but produced little evidence to sup-
port this allegation. This article looks
into an aspect of the closure that has
been largely neglected: the conse-
quences for ordinary Somalis.
The hawilaad system
Derived from an Arabic word, hawil in
Somali means transfer — usually of
money or responsibilities. The haw-
ilaad is an informal system of value
transfer that operates in almost every
part of the world. It is run by Somalis
and mainly used by Somalis, for busi-
ness transactions and to send
remittances to relatives. It works
remarkably simply. If a Somali man in
Minneapolis or East London wants to
send money to his mother in Nairobi
or Mogadishu, he presents the amount
of money to be transferred to the
financial broker in his town, providing
full details of himself and the recipi-
ent. The financial broker then sends a
fax, telephone message or email to
the Nairobi or Mogadishu office,
where the mother will be contacted as
soon as possible. She goes personally
to the hawilaad office and has to pro-
vide the full details of the person she
thinks has sent the money, as well as
proof of her own identity. If the infor-
mation corresponds to what the
sender has given, she will receive her
money, within only a few days of it
being sent. Accounts between the dif-
ferent hawilaad offices are later
levelled out through sending cash or
through trade in consumer items,
gold or other commodities.
Most of the Somali money transfer
business is handled by three main
companies: Al Barakaat
(‘Blessings’), Dahabshil (‘Melted
Jewellery’) and Amal (‘Trust’).
Though these started to operate
in the late 1980s, the transfer system
has a long history in Somalia.
Remittances have long played an
important part in the country’s econo-
my, since a large number of Somali
nationals have emigrated elsewhere in
search of better opportunities, work,
business or education. 
Somali migration and
remittances
In the last 30 years there have been
two main forms of movement out of
Somalia, resulting in the formation of
a large and influential diaspora. From
the early 1970s, many Somalis went
as migrant labourers to work in the
Gulf States during the oil boom of
that time. Some 150,000-200,000 did
so annually in the 1970s, while by the
end of the 1980s between 200,000
and 375,000 were working in oil-rich
Gulf states. The outbreak of civil war
in 1988 and the inter-clan fighting
after the fall of Siad Barre in 1991 dis-
placed hundreds of thousands of
Somalis within the country and drove
many others to leave for Ethiopia,
Kenya, Yemen and other neighbouring
countries, as well as further afield to
the UK, Italy, the Netherlands,
Scandinavia, Canada, the US and other
Western states. While accurate num-
bers cannot be established, by 2000
there were thought to be some
300,000 displaced people within
Somalia, about 400,000 refugees in
Africa and Yemen, and more than
70,000 refugees in Western countries,
out of a total diaspora in Western
countries of perhaps 200,000.1
As the forms of Somali migration
have diversified, so too have the
sources of remittances. While figures
are only rough estimates, from the
late 1970s up to $300 million was
remitted annually, about two-fifths of
GNP. In the 1980s this rose to $370
million, with migrant workers in the
Gulf accounting for about 75%. From
the later 1980s and in the 1990s, the
wider diaspora, partly formed by
refugee outflows, accounted for a
greater proportion of remittances.
Currently about $500 million may be
remitted to Somalia annually and per-
haps the same amount to Somaliland.2
32 FMR 14
Counting the cost: refugees,
remittances and the ‘war against terrorism’
by Cindy Horst and Nick Van Hear
Could there be a better way to create more hard-
ship, more instability and more potential refugees,
while increasing the appeal of extremism, than to
cut off the money transfer lifeline to Somalia by
shutting down remittance agencies?
O
about $500 million may be remitted
to Somalia annually
C
in
d
y 
H
o
rs
t
From the 1970s, Somali traders began
to collect hard currency from migrant
workers in the Gulf and to use it to
purchase commodities for sale in
Somalia. The equivalent in Somali cur-
rency or goods was then handed over
to the migrants’ family and kinsmen.
The first version of this was known as
the ‘franco-valuta’ system: this was
banned in 1982, partly because it cir-
cumvented the control of the Barre
regime. It was supplanted by the haw-
ilaad system, encouraged by the
collapse of Somalia’s formal economy
and the burgeoning of the informal
sector. Both systems were based on
two essential characteristics in Somali
culture: strong kinship ties and high
rate of mobility. Although family
members often move in different
directions and may thus find them-
selves far apart, they still carry a
strong responsibility to assist each
other.
Hawilaad and Somali
refugees in Kenya’s Dadaab
camps 
The hawilaad system has been of
great importance in the lives of many
Somalis, including refugees. For those
in the three camps around Dadaab in
north-eastern Kenya, survival is a
daily struggle in an arid environment.
The international community hands
out rations of maize and at times
wheat flour or beans every 15 days
but these last only about ten days.
Firewood is distributed a couple of
times a year as well but amounts are
far from sufficient. Besides, people
have other needs that are not catered 
for through handouts. It is very diffi-
cult to find additional sources of
income in the area. Those who came
with their own resources may have
been able to set up a small business.
Others have managed to bring live-
stock or have bought it in Dadaab.
Ecological constraints and insecurity
hamper agriculture. Salaried employ-
ment is largely confined to jobs
available with relief and development
agencies working in the region.
Mostly, people are involved in such
petty trade activities as weaving, bak-
ing, brewing tea, selling small
quantities of camel milk, sugar or tea
leaves or collecting firewood. Profits
are minimal and risks may be high:
when women go into the bush to col-
lect firewood, for instance, they run
the risk of being raped by shifta or
‘bandits’.3 
Receiving a monthly allowance of
$100 a month from a relative in
Toronto or Nairobi therefore makes
an immense difference to refugees in
Dadaab. Even if that person is not in a
position to send remittances on a
monthly basis, at least he or she can
be called upon in times of contin-
gency, like illness or death. Yunis
Ahmed was a refugee in his mid-for-
ties, living in Dagahaley camp. He had
worked for the agencies as teacher
and translator on a
number of short-
term assignments.
He lived in the camp with his aged
mother, close to the house where his
brother stayed with his wife. The
brother was having mental problems
that were aggravated to the point
where he became a danger to his wife,
threatening to kill her. Yunis tried to
do whatever was in his power, even
giving up his teaching position; he
went to the local hospital for assis-
tance but was told that they could do
nothing for his brother. When matters
got out of hand, he contacted a cousin
in Nairobi who passed the message to
their relatives in different places
around the world, collecting $100
from one family, 3,000 Kenyan
shillings from another, and so on.
Eventually, he was able to send a total
amount of $600, which Yunis used to
take his brother to Nairobi for treat-
ment.
Beneficiaries and benefits
The majority of the refugees are not
as fortunate as Yunis, having no rela-
tives to assist them when they need it.
However, even though the proportion
of refugees who do receive remit-
tances may only be 10-15%, others
benefit indirectly from the existence
of the hawilaad in the camps. Those
who receive a regular or occasional
amount mostly share this with others;
money enters the camp economy,
which benefits shopkeepers and busi-
nessmen; and those who can afford it
occasionally employ others as domes-
tic workers or for construction work.
Thus, even the poorer segments of
the population may eventually benefit
from the hawilaad system. 
Habibo Omar, a woman from the
Bantu minority in her late thirties,
learned through a radio conversation
with her brother in Kismayo, with
whom her disabled daughter was stay-
ing, that the security situation was
worsening there. She borrowed 1,000
Kenyan shillings in the market, giving
her ration card number as security,
then travelled to Mombasa to find
work as a maid. A Somali woman
employed her and after one month
Habibo was able to send back the
1,000 shillings she borrowed. Another
three months later, she had saved
enough money to send to Kismayo to
urge her brother to come to the
refugee camp with her disabled
daughter.
Among the many advantages of the
hawilaad are that the system is much
faster and cheaper than conventional
ways of transferring money. Besides,
in many instances these conventional
means cannot be used — for example,
when sending money from Dadaab to
anywhere in Somalia. The system is rel-
atively safe in a rather insecure area,
since travellers do not need to carry
their money but can simply transfer it
to their place of destination. 
Beyond helping Somalis to survive,
the remittances transferred give peo-
ple a choice. The money can be
invested in business, or used to assist
others or for children’s education.
The recipient can decide to use it to
move: away from insecure areas,
towards economic opportunities,
towards a better life or family mem-
bers, elsewhere in the world. These
resources give refugees in difficult
conditions the capacity to assist
themselves. This capacity has been
greatly undermined by the closure of
Al Barakaat. 
33FMR 14 Counting the cost: refugees, remittances and the ‘war’ against terrorism
the remittances transferred give people a choice
Remittances, terrorism and
refugee livelihoods 
A few years ago, the Ministry of
Justice in the Netherlands carried out
a study on informal value transfer
systems (IVTS) and criminal organisa-
tions.4 The conclusions are highly
relevant for the closure of the haw-
ilaad: "IVTS are by no means infested
or controlled by criminals, but rather
they are one of numerous alternatives
available to criminal organisations.
Many others resort to IVTS simply to
transfer money to their relatives
because they follow cultural traditions
or services are faster, cheaper, less
bureaucratic and more convenient
than any other alternative. Before
implementing drastic measures
against IVTS, more solid evidence of
negative consequences is required.
The legislative arsenal in the West can
adequately deal with those who have
committed crimes, and Western gov-
ernments have already attempted to
render IVTS more transparent by
requiring them to get a license and
report unusual transactions of certain
magnitude. After all, criminals are the
main problem, not the way they move
their money." 
Terrorist networks may well have
used the hawilaad system, as have
Somali warlords buying weapons and
sponsoring war, but, as UN agencies
and others in Somalia have attested,
the system is mainly used by ordinary
Somalis, including refugees, with no
such connections. 
Life in the Horn of Africa is often life
on the margins, and assistance from
outside is needed for survival. The
Somali economy as a whole, and
Somali refugees in particular, are
highly dependent on remittances.
Urban households, including those in
refugee camps, are the main beneficia-
ries of remittances, which may
account for between 20 and 60% of
household income. While there is an
urban bias, some remittances are
redistributed among people in rural
areas.
About $60 million was injected into
the Somali economy in 2000 through
international aid (EIU 2001). In con-
trast, between $200 million and $500
million may have been transferred to
Somalia through the hawilaad system,
and these funds reach many more
people than does international aid.
There are other hawilaad companies
still operating, and new telecommuni-
cations and internet companies are
emerging, but none of them has the
reach of Al Barakaat; besides, many of
them depend on infrastructure owned
by Al Barakaat. Alternatives might be
found but would probably involve
higher costs and risks. The refugees
in the Dadaab camps in Kenya are
among those who will end up paying
the highest price of the measures
taken against the hawilaad in the
name of the ‘war against terrorism’.
Cindy Horst is a PhD candidate at
the Research Institute for Global
Issues and Development Studies,
University of Amsterdam. UNHCR
Working Paper 38 (available
online at www.jha.ac/articles/
u038.pdf) has further details of
her research in Dadaab. 
Email: C.Horst@inter.NL.net 
Nick Van Hear is a Senior
Researcher at the Centre for
Development Research,
Copenhagen, Denmark. 
Email: nvh@cdr.dk
1.  UNHCR The State of the World’s Refugees. 2000,
Oxford: OUP; US Committee for Refugees The
World Refugee Survey 2000, Washington DC: USCR;
J Gundel The migration-development nexus:
Somalia, 2002. Copenhagen: Centre for
Development Research working paper.
2.  L Ahmed ‘Remittances and their impact in post-
war Somaliland’, Disasters, 2000, 24, 2, pp380-389;
Economist Intelligence Unit. Country Report:
Somalia, 2001, EIU: London. Gundel is also a
source on remittances.
3.  For further information about life in Dadaab,
see J Musau Protecting refugees in Dadaab:
processes, problems and prospects, FMR11, pp34-
36.
4.  N Passas Informal Value Transfer Systems and
Criminal Organisations. A study into so-called
underground banking networks. Onderzoeks -
notities 1999/4. Ministerie van Justitie, Den Haag.
34 Counting the cost: refugees, remittances and the ‘war’ against terrorism FMR 14
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