Barclays Account Closure, Setback to Livelihoods Improvement Gains

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By Yusuf M HasanBarclays bank

Somalilandsun – Still reeling from decades of war with attendant death, maiming, hunger and displacement, millions of Somalis are now bracing for a renewed onslaught on their, just, reviving livelihoods in lieu of losing nearly 500 million dollars in vital remittances following news that Barclays is to withdraw banking services from up to 250 Money Service Businesses (MSBs) in the UK, including Africa’s largest, Dahabshiil, along with a number of other Somali MSBs.

The anticipated onslaught and dire consequences comes courtesy of the sentence “it has no option”. According to Barclays Bank, “some money service businesses don’t have the proper checks in place to spot criminal activity and could therefore unwittingly be facilitating money laundering and terrorist financing”.

“If my daughter is no longer able to send her monthly stipend to us, then life as it is today for my family shall cease to exist” says Mrs. Ayaan Harbi, a single mother of 6 in Hargeisa whose eldest daughter in Europe contributes to over 90% of family needs.

According to Mrs. Harbi, whose monthly salary as clerk with the Hargeisa municipality is less than 70 dollars, she will be forced to withdraw her 4 children from school, move from her three roomed rented house, and suspend payment of electricity and water bills among other things if her daughter is no longer able to remit usual allowances from Europe.

In Somaliland, which solely depends on meager export of livestock to the Gulf countries -thence the prevalent economy that is over 95% import based, movers and shakers in the private sector are unanimous that a curtailment of remittances shall contribute to a rMs Harbi braces for difficult timeseversal of all recent gains especially security which incidental is the originally reason of the Barclays decision.

“If and when citizens are no longer availed the support of their diaspora based kin, then most of the now thriving big and small market enterprises shall collapse while the remaining few will be forced to operate at less than 75% of current capacity” said Abdirahman Nuur the managing director of Alnuur Furniture Company in Hargeisa.

Problems for private companies

Alnuur Company, which is the biggest supplier of home and office furniture in the country with an estimated 65% of the market, share relies entirely on imported supplies of products from China, Europe and Asia.

“While our business as most others in Somaliland and Somalia are reliant on imported supplies, our clientele directly or indirectly derive their livelihoods from remittances, thus an interdependence that will be harmed if the free flow of millions in dollars from the diaspora is encroached upon” lamented Alnuur.

While Somaliland is encumbered by its unrecognized status as a sovereign country, its neighbours Somalia is engulfed by insecurity which has led to failure in attracting international banking institutions thus both have for over two decades been devoid of internationally acceptable and imperative services like money transfer, bankers checks, letters of credit and credit cards.

These anomaly forces relatives in the diaspora and business like Alnuur furniture to utilize the services of Money Service Businesses (MSBs) popularly called Hawala (Xawala) for the remit of allowances to relatives and transactions with foreign suppliers respectively.

The Somali Money Services Association (SOMSA), a UK trade body for the money transfer industry, which has 17 members, has confirmed that 12 of its members have already lost their accounts with major banks in the UK, including Barclays and HSBC. Five others face imminent bank account closures.

SOMSA stated that its 12 members lost their accounts immediately after Barclays informed three-quarters of the money-service companies that use its accounts that it no longer wanted their custom and gave them a very short notice to find alternative banking facilities by 10 July 2013. Barclays is the last UK bank that has been providing services to the Somali MSBs.

Threat to economic and political stability

According to SOMSA, the key issue is the damage to flows of cash to the vulnerable Somali people, who depend on remittances for their livelihood; and the likely threat of this action to economic and political stability in fragile parts of the Somali region.Adirahman Alnuur is worried of job losses

“This action will have dire consequences in Somalia, where no alternatives to the money service businesses exist. The bank’s decision to close the accounts of licensed and regulated Somali MSBs could have the unintended consequence that money transfer might be pushed underground into the hands of unlicensed, unregulated and illegal providers”, argues SOMSA.

As a group of practitioners and NGOs added their pressure to the UK government through a petition submitted to Parliamentary under Secretary of State for Africa at the Foreign and Commonwealth Office Mr. Mark Simmonds arguing for intervention in effecting reversal of the Barclays decision.

“We are writing to request that the UK Government works with British banks to find a durable solution to the recent decision of Barclays to close its accounts with Somali Money Service Businesses (MSBs). Some have already been closed, and the account of Dahabshiil, by far the largest MSB providing services to Somalia, is to be closed as for July 10. With such a short timeframe, and without having provided a comprehensive explanation as to why Barclays wishes to sever its relationships with the MSBs, these companies are understandably finding it very difficult to find new partners to work with”.

“What is at stake is a lifeline that provides essential support to an estimated 40% of the population of Somalia. Somali MSBs provide fast, reliable and long trusted transmission of funds from the diaspora (estimated at approximately 1.5 million people) to their relatives at home. In addition, many other diaspora groups from the Horn of Africa –in Ethiopia, Kenya and South Sudan– send remittances to their family members using the same companies. Read the petition to the UK Government”.

The practitioners want the UK government to:

• Assist the Somali MSBs in finding alternative banking partners, and to assemble the necessary compliance information needed to demonstrate their accountability to new partners.

• Convene a series of multi-stakeholder discussions, beyond Whitehall, that will work on developing the enhanced due diligence that the banks seem to require for this sub-sector of MSBs.

• While Requesting that Barclays extends its termination deadline for at least 6 months for Somali MSBs so that the flow of remittances through licensed companies is not disrupted, and a more durable solution can be found in the meantime.

Dahabshiil: “Barclays sends the wrong signal that the country needs”

Adding its voice Dahabshiil, which has the biggest locally owned MSB with a presence in the entire region, says that the Barclays decision “sends the wrong signal about the recovery that the country needs.”

Abdirashid Duale, Chief Executive of Dahabshiil, said the MSB faces an extremely difficult situation. “Barclays has given us two weeks’ notice”, he said. “It will be hard for us as when we go to another bank; they will ask us why Barclays wanted to close our account. The UK and US governments say they want to help Somalia, but this action won’t help.”Celebrating a project facilitated by Diaspora Remittances

He called for the U.S. and British authorities to step in to help reverse the decision.

Though the decision has caused an outcry in the sector, coupled with pressure on the UK government Barclays remains adamant thence fears of the millions in the Horn of Africa and their indefatigable relatives in the diaspora.

As per the repercussions a senior police officer in Hargeisa says that security agencies will have a hard time trying to cope with an increase in crime as a result of the large number of school drop-outs, employee lay-offs that will follow.

“The fears of terrorism attributed to this decision might actually produce counterproductive results by sparking the recruitment of hitherto peaceful youths into extremist groups like Al Shabaab which are adept to promising heaven and delivering hell”, says the police officer.

Meanwhile a channel4 report indicates that the British government is bending to pressure as informed by a foreign office spokesperson who said: “officials are preparing an assessment of the impact on the economy and people of Somalia of Barclays’ decision to terminate banking services for a large number of money service businesses.”

The same report further reveals that Barclays says it has now decided it will extend the deadline for some companies including Dahabshil.

While this will give some hope to millions of people and unless the account closure issue is concluded in favour of the MSBs or they find an alternative bank, a crisis may still be on the horizon and livelihoods at stake.

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