How Will Remittances Affect the Somali COVID-19 Response?

This blog was written following a meeting of researchers and practitioners working on Somalia, on 1 April, hosted by the Rift Valley Institute (RVI) and facilitated by the Centre for Humanitarian Change (CHC). Thanks to Daniel Maxwell, Hannah Stogdon, Peter Hailey, Mark Bradbury and Alex de Waal for valuable inputs.

As the COVID-19 pandemic spreads into the Horn of Africa, and as diaspora communities become affected by lockdowns, layoffs and illness, the remittance lifeline that sustains more than 40% of Somalis is being attenuated. This blog outlines a number of issues related to remittances and Somalia in the light of the COVID-19 pandemic. There has been considerable research on remittances and the role that the Somali diaspora and its financial resources play in times of crisis. Taking stock of this information can provide useful insight into the likely impacts of the imminent drop in remittances.

The COVID-19 pandemic is an event of radical uncertainty: we don’t know the dynamics of the pandemic in different contexts (especially in Africa), nor its wider economic impact. We don’t know if this shock will compound other stresses afflicting Somalis (such as war and food insecurity), or whether the resilience shown by Somali communities in response to those shocks will also serve them well under the pressures of the pandemic.

The Somali diaspora, numbering well over 1 million, is distributed throughout the globe. Some of the largest communities are in the US (where at the time of writing the most cases have been recorded as a result of COVID-19), the UK, Sweden, Netherlands, Germany, and Italy (all of which have extremely severe outbreaks and high – although varying – death rates).

While the Somali diaspora are renowned for their ability to respond to crises in their country of heritage and have been doing so for decades, typically it is they who are insulated from the shocks that their relatives are facing within the Somali territories, whether conflict, drought, floods or economic emergencies (or a combination of these). In this instance, however, the shock of COVID-19 has begun in the diaspora. Ultimately it is likely that both ends of the remittance chain are likely to be affected by the same shock, playing out in similar and different ways. Already, according to an industry source, the volume of remittances has dropped by as much as 50% in certain corridors.

International assistance to the unfolding crisis will always have political dimensions and responses need to use ‘conflict lenses’ and the principle of ‘know your epidemic’. Somalia has a deeply politicised history of aid, most recently brought out once again in relation to the political economy of food assistance. This will play out in the current context in terms of which countries provide assistance and how it is distributed internally.

What do we know about those who send remittances?

Remittances from Somalis abroad are estimated at between US$1.3 – 2 bn annually, possibly much more, where GDP is estimated at US$6bn. Approximately 40% of households in the country are estimated to receive these funds directly. The vast majority of direct recipients are based in urban settings, but many send on a portion of this money to rural relatives.

Remittances contribute to the payment of national food imports in what is a food deficit country. At the household level, this money primarily covers food and household essentials – biil, in Somali. It also contributes to essential education and health care expenses. Receiving remittances makes it easier to access credit, repay debts, make business investments and smooth out fluctuations in overall household expenditures. Diaspora funding is a major source of finance for the private health care sector. They play a major role in peace-building activities as well. Some remittances have undoubtedly funded conflict activities in the past, but data on this is difficult to obtain; today funding for conflict mostly comes from sources other than remittances.

The diaspora’s support in times of crisis occurs in different ways. It may involve an extended family mobilising financially to support an individual household that has fallen on difficult times, or it may involve the wider diaspora in multiple countries organising together to respond to a drought or famine. Mobilisation can take many different forms, including calling on family and kinship networks, groups of young people using social media or holding charity events, individuals or small groups of people organising global fundraising initiatives through WhatsApp groups, or Somali community groups working together with their memberships to raise funds. Remittances usually intensify during crises and emergencies, whether through increased demands from recipients or additional contributions to fundraising activities. It thereby compounds existing diaspora contributions and civil society engagement.  In the cholera outbreak of 2017 remittance funds were used to buy medical supplies, pay for health staff salaries and protective equipment and supplies.

In the Somalia famine of 2011 as well as in the 2017 emergency, the ability of those living in the midst of appalling conditions to take advantage of their ‘social connectedness’ to reach out through social networks to Somalis in urban areas of the country and to the diaspora to ask for help was crucial to their survival. Of particular concern in this pandemic is that the virus knows no boundaries and may affect members in rural, urban and diaspora locations at the same time.

What do we know about who receives remittances?

We also know that remittances are not equally distributed in Somali society. They are concentrated within particular clans, lineages and extended families.¹ These geographic and identity-based particularities, for example, link Somaliland (and its diaspora) strongly with the UK, a function of colonial history. Some of these patterns may be even more localised with large extended families linked between specific towns in the diaspora and in Somalia. One of the four major Somali clan families, the Digil and Mirifle, are predominantly found in southern Somalia, are historically marginalised, and have a much smaller diaspora than the clan families of northern and central regions. These communities, who are also predominantly the farming and agro-pastoral populations, have been the worst affected by natural hazards such as droughts or locust swarms, as well as due to their weaker social and political status.  They make up the majority of the internally displaced living in Somalia’s largest cities and those who remain in their home areas are largely under Al Shabaab’s domain, complicating their position. These factors will need to be considered in analyses of vulnerability and in humanitarian response.

Research also suggests that as many as 80% of remittance recipients receive money from one sender, suggesting a high dependence and vulnerability on this relationship. Older women, who retain strong ties to family ‘back home’ are important senders. If anything happens to this person – they lose their job, become ill, or have to care for immediate family members who are ill – they may not be able to continue to remit at the same level. The extent to which the remittance link is resilient will depend on other family members being able to take up this role. The result is likely to be a reduction in the amount of remittances people in the diaspora are able to send, if not at first then over time if the unemployment and disease crises are protracted. Likewise, this reliance accentuates the significant pressure that Somali diaspora groups may encounter in this crisis.

These geographic and identity patterns matter in light of COVID-19 as both the health and economic impacts may play out quite differently in the countries (and localities) that host the majority of Somali diaspora groups; financial impact as well as economic and welfare support is significantly different in, for example, the USA, the UK and Scandinavia.

Remittance vehicles

The story of remittances in Somalia over the last 40 years is linked to the evolution of the Somali telecommunications and money transfer enterprises, who are a great success story in innovation. They have faced and continue to face threats to their own survival – particularly the restrictions in recent years on access to bank accounts – but have been instrumental to the survival of their clients. They are also powerful economic and political actors in their own right.

Depending on the sending country location there are different options and preferences for how to send money. Following the collapse of the state, the Somali-owned money transfer companies were the only option, with cash taken to a shop, which could then be collected within minutes or hours in numerous locations in Somalia. This is still a very common means of sending money, especially for the older generation, many of whom are less familiar with online technologies.

In recent years, online services have grown although not equally in all places. In Somalia, in terms of internal financial transfers, mobile money has become ubiquitous, and various online platforms can be used to move money within Somalia or between neighbouring countries – particularly Kenya – and Somali recipients. In the UK, online sending platforms to Somalia are not that commonly used given the tight restrictions on money service providers in many Western countries. However, money transfer companies like Dahabshiil and its mobile platform eDahab and Hormuud/Taaj have online services both in the US and the UK. These services are nonetheless limited due to restricted banking services and accessibility in the Somali territories. Continued restrictions on money transfer companies’ operations have an impact as well on international aid agencies’ activities, as they use these channels to pay staff and deliver essential funding for aid resources inside Somalia.

Emerging issues and vulnerabilities in the diaspora

Immediate concerns and reactions in the diaspora are centred on the personal health and financial impacts that people are facing. As in wider society, economic impact is differentiated across different countries and labour markets. People working in sectors such as transportation, retail, domestic and office cleaning, and restaurant/hospitality (all of which are major employers of Somalis) are being laid off. Cafes and teashops are closed in many locations; taxis business is virtually at a standstill. Where it has been promised, income support is not likely to cover their full lost salary. There will also be a cohort of unregistered/undocumented migrants doing casual work, who will be badly affected and for whom no compensation will be available.

Some areas of employment are still active or well protected. Notable amongst these are public sector workers, including health workers and those in the education sector. Public transport in cities like London is considered essential and well-protected and is a source of employment for many Somali men. Minnesota is an important hub for Somalis and while there are many taxi drivers and other occupations that are hard hit there is also a strong meat processing industry that remains active.

Beyond their employment, people are concerned about their elderly relatives, and are trying to use social distancing practices if possible and to live with restrictions on movements. The illness and deaths of prominent Somalis in the diaspora as a result of COVID-19 are being shared in media/social media and are being used as warnings for Somalis to follow social isolation practices.

Somalis in the diaspora contacted for this blog suggest that people are still preoccupied with their own situation and that it is still too early to know how remittances will be affected; the end of the month of March is the first month that an effect on remittances will become evident. Anecdotal reports indicate that people are not visiting money transfer companies’ shops (in the UK) and some activities have stopped, such as women’s savings clubs – hagbad in Somali. It is expected that belts will be tightened and families in Somalia warned that less money will be coming their way.

However, as COVID-19 cases in Somalia begin to be reported, some diaspora and community groups have started to raise funds for response. In a single weekend, in response to the Somaliland appeal for support, for example, several thousand pounds have been raised from within the diaspora. Ramadan is approaching, which is a traditional time of giving, which may help to alleviate some of the worst effects of the crisis if people can find ways to send funds home. However over time, as the economic impacts deepen, such giving may be difficult to sustain.

Emerging Issues and vulnerabilities in Somalia

Pre-existing food security and economic vulnerability is focused on southern Somalia, particularly amongst displaced populations, however displacement-vulnerability is as much a factor of access as it is of vulnerability; conditions of rural populations in Al Shabaab territory are not clearly understood. The underlying health conditions in IDP camps and poor urban settings are extremely worrying in relation to the health impact of COVID-19. The hope of many Somalis that the virus will spare them is already being shattered by reports of people with fevers and cough-related illnesses in many parts of the country. With no in-country testing procedures it is impossible to know whether these are COVID-19 cases.

Northern and central areas depend more on remittances as well as on food imports, as these are predominantly urban and pastoral areas. These areas also have a greater reliance on the livestock economy. Especially the export of livestock to the Gulf, where the Hajj in Saudi Arabia – due to start this year in late July, and already under doubt – provides a huge annual demand for Somali-reared animals, and an important source of household income and food imports. With the potential for strict economic lockdowns and restrictions on imports, such as of cereal imports, warning bells will already be ringing.

Looking forward … it seems likely that the negative impact on remittance flows to Somalia and globally will be considerable. Those who remain in work or whose income is protected by the various financial support provisions being made by governments in the Global North are likely to be obliged to support relatives in these same areas. Increased reliance on forms of welfare support in Europe and the UK, where health care is largely free, appear to offer better prospects than in the USA where social protection is patchier and health care costs can be exorbitant. In short, the social support mechanisms in Somali society, which are extremely strong, may be coming under great strain, just to support those in the diaspora. The longer the domestic and international lockdowns continue to inhibit economic activity, the greater the challenges to remittances will be.

The epidemiology of COVID-19 and its interaction with other diseases in Somalia, and in Africa, is not yet known, but will be revealed in the coming weeks. If remittances to Somalia do diminish significantly and the Hajj pilgrimage to Saudi Arabia is cancelled, if food imports remain restricted and prices start to rise, pressure will quickly mount. The gu rains that are starting across the Somali territories will play an important role in 2020 as good livestock health will mean more milk and meat and higher value animals.

Following on from this preliminary piece, and as the COVID-19 crisis evolves, we will be developing a more detailed analysis.

This brief review already suggests several recommendations:

1. There is a need for continuous monitoring of conditions in both diaspora countries and in Somalia to see how the epidemiological and economic impacts of the pandemic influence diaspora/country of origin interactions; operational aid agencies (both Somali and international) and donors should use this information to adapt their approaches.
2. The influence of politics and conflict on the spread of COVID-19 needs to be monitored in real time to be able to adapt.
3. Remittance-sending channels need to be protected to enable people to send money to all parts of Somalia.
4. All money transfer companies operating in Somalia should reduce their transaction fees to help maintain the flows.
5. Aid flows to Somalia may need to increase to compensate for losses in remittance support. It is worth noting that humanitarian agencies rely on Money Transfer Companies to deliver this much needed aid.
   

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1 Somali society is based on a segmented lineage structure, which serves well as a wider social and economic support system but also frames the contours along which identities are politicised and conflict is driven.

Note: The CRP blogs gives the views of the author, not the position of the Conflict Research Programme, the London School of Economics and Political Science, or the UK Government.