President Mohamud: Regulatory framework key to remittance challenges

Somali President Hassan Sheikh Mohamud Monday said there is need to strengthen and formalize the financial sector in Somalia by establishing financial systems with oversight and supervision as the only viable and sustainable solution to remittance challenges.

The president added that while there was need for effective regulatory framework, the closure of bank accounts of money transfer operators serving Somalia and the region was counterproductive.

Speaking during the Intergovernmental Authority on Development (IGAD) High Level Ministerial Roundtable in Addis Abba Ethiopia where he chaired the meeting, Mohamud said the issue of remittances is not just unique to Somalia and that it is was a key source of external resource flows for all developing countries, which far exceed official development assistance.

Regulatory framework

On his part, Finance Minister Mohamed Adan Ibrahim highlighted the need to ‘balance the requirement for fair and proportionate regulation with the need for financial inclusivity, with reach as far as small villages’. “The government of Somalia is committed to the important role in regulating the financial sector, and specifically in combatting the financing of terrorist activities,” said Ibrahim.

IGAD Executive Secretary Ambassador Mahboub Maalim stressed the plea undertaken by IGAD as a regional institution for a fair and balanced approach to remittance systems by all. Maalim said IGAD embarked very early on high level meetings at the United Nations headquarters in New York and at the European Union headquarters in Brussels to sensitize world powers on the threats posed by the closer of bank accounts of money transfer operating in Somalia and the IGAD region.

Remittance flows

The ministerial roundtable was convened to review the linkages between remittances, financing of development, and household food security in IGAD Member Countries with a view to formulating appropriate policies that enhance remittance contribution to local, national and regional economies and while protecting the remittance flows.

The meeting also sought to assess the impact of challenges that Money Transfer Operators (MTOs), or remittance companies, especially after legislation in the US, UK and Australia curtailed money transfers with Somalia being a major casualty to the move.

Lifeline

The charity Oxfam estimates remittances to Somalia is approximately $1.3 billion a year and had warned the closure of remittance companies accounts could pose substantial disruption to Somalia’s recovery and economic growth.

Kenya shut down remittance companies April cutting off money transfers to Somalia but has since waived the order for some companies.

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