The Australian Somali community has warned Westpac that closing the accounts of Somali money transfer operators on Tuesday 31 March will cut off a vital life line for thousands of poor Somalis dependent on funds sent by family to purchase basics such as food, water, health and education.
Westpac, which was the last of the big four banks to offer services to remittance organisations transferring funds on behalf of Somali migrants to loved ones in the fragile nation, will close the accounts by the end of this month, with no extension past this date. Westpac has advised Somali and other money transfer operators that the closure is driven by increased perception of risk around remittance services, in the context of changing international and domestic regulations and the bank’s own compliance requirements. The bank has noted that its decision is not based on any specific actions by Somali money transfer operators.
Dr Hussein Haraco, chairman of the Somalia Remittance Action Group, a network of Somali money transfer operators and community members working to ensure safe and sustainable remittances can continue to flow to Somalia, said the impact of the account closures would be dramatic.
“Remittances are vital for Somalia’s fragile economy and for the Somali people’s ability to feed and sustain themselves,” Dr Haraco said.
The Somali Diaspora sends home more than $1.3 billion annually, a sum larger than foreign aid and investments combined. This includes an estimated $33 million from Australia, more than double the $15 million in Australian aid sent to Somalia last year.
Remittances are a crucial component of the Somali economy, making up more than half of the nation’s gross national income. An estimated 73 percent of Somali households use overseas cash transfers to pay for food. Remittances help build schools and hospitals and pay for school fees. Nearly 80 percent of Somalis receive some form of remittances, highlighting the dependence on the money transfers from abroad. Somalis have created efficient money wiring agencies, known as Hawalas, which provide the only safe, practical and regulated means to send money in the absence of a formal banking system in Somalia. It has been the country’s rare lifeline over the last two decades that is now in jeopardy.
Dr Haraco noted that the Australian Government had formed a Remittance Working Group (RWG) in December 2014 to work with the Australian banks and remittance organizations to find a sustainable long term remittance solution that meets the concerns of all stakeholders. While this group had made some progress in last few months, more time was needed to reach an outcome around a viable alternative for remittances to Somalia.
“We welcome the fact that Westpac, via the Australian Banking Association, has been supporting efforts to reach a long term solution to maintain remittance flows,” Dr Haraco said.
“However, closing the accounts of money transfer operators now, before that solution is found, may undermine those efforts by sending the remittance industry underground, where it cannot be policed.”
“In the absence of any practical alternative for Somali migrants to send funds home, we urge Westpac to defer their remittance account closure decisions by at least six months to allow time to the Remittance Working Group (RWG) to find a viable long-term solution”.
For more interviews contact Hussein Haraco, Chairman of Somali Australian Council of Victoria and the Somali Remittance Action Group on 0408030181 or email: email@example.com