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The Somali government on Sunday called on the U.S. to intervene over the move by the American bank to close accounts of money remittance companies to the Horn of Africa nation.
Prime Minister Omar Abdirashid Sharmarke said the move will have an enormous impact on the well-being of many Somalis, adding that he was determined to work with the U.S. government to avert the crisis.
"I have personally spoken to the U.S. government on this pressing issue and repeated my calls to U.S. banks to reconsider their decision and continue to support Hawalas (money transfers)," Sharmarke told journalists in Mogadishu.
"No one in the money remittance sector disputes the vital importance of remittances to developing countries and I fully understand the limitations imposed on them by government regulations," he added.
The PM's remarks after the Merchants Bank of California on Jan. 27 informed Somali-American money transfer operators (MTOs) that it would discontinue their relationship from Feb. 6.
The bank was issued with a Consent Order by the Office of the Comptroller of the Currency (OCC), an independent bureau within the U.S.Treasury Department in June 2014.
"We cannot in good faith meet the obligations of the Consent Order given the complexity of your business," the bank explained in a letter dated Jan. 27.
The Horn of Africa nation has no formal banking system and money transfer operators provide the services people in foreign countries would expect from a bank.
About 40 percent of Somali families depend on remittances to meet their most basic needs, including food, health care and education, and 80 percent of the capital for start-up businesses comes from the Diaspora.
Sharmarke said his government was working hard to ensure Somalia develops a robust financial and banking system in order to reassure the money remittance sector, governments and key stakeholders.
"In the meantime, we cannot remain passively inactive and I will ask my government to quickly develop and implement new ways to support the millions of ordinary Somalis relying on the program, " the PM said.
"The situation has been a concern for many years and we need tofind a permanent solution to keep open this vital humanitarian lifeline. The security situation is one of the main challenges and I am committed to bringing stability and security to Somalia. Unfortunately as many know, this alone will not do," he said.
Concerns have been raised over the move by the bank to close the remittance accounts that the lifeline of millions of Somalis who depend on remittance could be cut off subjecting them to the economic brink.
Sharmarke called on Somalis and the international donors to remain positively committed, noting that money transfers are not only a lifeline but a family-to-family voluntary support system, which helps to reduce reliance on official foreign aid.
"Without this engine, many Somalis risk to lose their autonomy and ability to pay rent, buy food and clothes, access medical services or even afford to send their children to school," he said.
Analysts say that while the closure of formal remittance channels would hurt Somali communities, it would benefit criminal networks that prey on informal money transfer systems that are invisible to regulators and law enforcement officials.
The Treasury Department, State Department and USAID have drawn up plans to strengthen the remittance system and the Somali banking sector, but these are long-term interventions. Emergency measures are needed.
