Africa Business
Wednesday, November 07, 2012
Abdirashid Duale, CEO of Dahabshiil - one of Africa's largest remittance businesses - today discussed the economic future of the Somali territories at an event at London's prestigious School of Oriental and African Studies, University of London.
Mr Duale joined senior lecturer and expert on the Somali regions Dr Laura Hammond in discussing the preliminary findings of new research into the diaspora's role in promoting economic development through remittance finance. The research specifically sought to determine differences in levels of remittance dependency between urban and rural communities.
As part of a series of talks organised by the SOAS Centre for Migration and Diaspora Studies, Mr Duale outlined the essential role remittances continue to play within the Somali territories. The Somali diaspora sends around $1.6 billion back home each year, a stable capital flow that far exceeds what the region receives in aid. This vital income has helped to sustain households and businesses, and has protected them during crises such as the acute food and water shortage which continues to affect some areas.
With approximately half of urban families receiving remittances from abroad, the commonly held belief is that these communities enjoy most of the benefits at the expense of poorer, rural groups. The research, conducted by the Food and Agricultural Organisation's Food Security and Nutrition Assessment Unit (FSNAU) for Somalia and co-led by Dr Hammond and Dr Zoltan Tiba of FSNAU, challenges this notion and shows that many rural economies are also closely tied to remittance inflows - either directly or via family connections with those living in the cities. The research did however confirm that approximately forty per cent of all Somali households receive remittance income.
Addressing the question of distribution between urban and rural areas, Mr Duale said:
"In my experience, remittances have been instrumental in alleviating poverty and nurturing local economies in some of the Somali territories' most remote locations. Particularly through its work with IFAD, Dahabshiil has invested heavily in expanding its network of money transfer agents in order to reach those communities.
"Remittances are primarily based on peer-to-peer personal relationships. The rapid spread of new telecommunications technology has been essential to stabilising and increasing remittance flows by allowing people to keep in closer contact with their families in the diaspora."
Dahabshiil Group entered Somalia's booming telecoms industry in 2008 with the acquisition of Somtel, a fast-growing firm specialising in mobile and high speed broadband.
This expansion is indicative of the synergies between the region's telecommunications and remittance industries. Diaspora money has poured into telecoms as young, dynamic firms have competed vigorously for market share. As technology has advanced, communications between transfer agents has been greatly facilitated.
Mr Duale said: "In the early 1990s, high frequency radio was the primary means of communication and money transfer. Two decades later the Somali territories offer some of the most advanced and competitively priced telecoms services in the world. Dahabshiil has rapidly assimilated this new technology as it has become available."
With seventy per cent of Somali families now owning at least one mobile phone, the increasing connection between migrants and their families has fanned demand for remittances. Transfers to Hargeisa, as Mr Duale explained, tripled during the mid-90s as telecoms services first became widely available. After twenty years of upheaval, both industries have become central to maintaining important familial and social connections, often across long distances.
Diaspora investment has also been a critical factor in the growth of the energy, import/export, manufacturing and construction industries. As the security situation in Mogadishu has improved, Mr Duale indicated that new houses are springing up as families look to return home.
"The construction sector in particular is benefitting hugely from remittance inflows. A rising property market will create wealth and jobs, and will be an important part of the capital area's economic recovery," he said.
As well as fuelling economic development, remittances have played an important part in reconciliation across the region. By funding conferences and mediation efforts, the diaspora has made a significant contribution to the peace process and has stayed close to the political life of the territories.
Discussing the potential value of her new research into remittance flows, Dr Hammond said: "This research will help significantly in improving our understanding of what is one of the main drivers of the Somali economy.
"Interaction between diaspora and local communities is imperative to the continued rehabilitation of the Somali region. A greater appreciation of remittance penetration will undoubtedly help to shape policy development."
Notes to Editors:
Dahabshiil Group is one of Somalia's largest private sector employers and spans money transfer, banking, telecoms and import/export. As well as providing a lifeline for individuals, families and businesses, Dahabshiil serves over 95% of international organisations operating in the region, and provides strong support to Somali communities at home and abroad through ongoing CSR projects. It serves migrant communities all over the world, and is fully compliant with international regulations.
Dr Laura Hammond is a Senior Lecturer in Development Studies at SOAS and an expert on food security, agrarian development, migration and diaspora investment in the Horn of Africa. Recent academic papers include Cash and Compassion: The Role of the Somali Diaspora in Relief, Development and Peace-building, commissioned by UNDP Somalia and published in January 2011.