The impending closure of the last bank accounts used to transfer money from Australia to thousands of vulnerable families in Somalia is part of a global trend that could push millions of people deeper into poverty, a new report released by Oxfam says.
Somali remittances totalling AUS$1.6 billion annually are under threat as banks in Australia, the US and the UK break ties with the money transfer operators that enable Somali migrants to send money home to family and friends for food, water, health and education.
Westpac, the last major Australian bank to provide banking services for Somali money transfer operators, is due to close their accounts at the end of March. This follows a trend that has seen all major banks in the US and the UK classify the accounts as high risk and walk away from facilitating remittance flows to the East African nation, which after decades of conflict and displacement has no functioning banking sector. The challenges for Westpac have been compounded by a lack of appetite from international banks to approve remittances to Somalia originating from Australia, which need to be transferred in foreign currencies such as US dollars.
Oxfam Humanitarian Advocacy Lead Ben Murphy said the severing of the remittances lifeline would have severe implications for the country’s poorest people.
“Every year Somali Money Transfer operators reportedly send more than AUS$33 million on behalf of Somali migrants to families and friends in Somalia. This is more than double the AU$15 million in Australian aid sent to Somalia in 2014,” Mr Murphy said.
“More than 40 per cent of people living in Somalia rely on remittances, and one in three Somalis say that without these remittance flows they would not be able to pay for food, school or healthcare. Further strain on this vital lifeline will throw many more families into crisis and undermine efforts to foster a stable and peaceful Somalia.”
The Oxfam report, Hanging by a Thread: The ongoing threat to Somalia’s remittance lifeline, finds that steps taken by a number of Western governments, including Australia, to address the closures over the past year have been largely positive. However they have not been enough to prevent the critical lack of access to banking services that now exists for Somali money transfer operators .
Two weeks ago, US-based Merchants Bank closed all accounts with Somali money transfer operators (MTOs). Merchant’s was responsible for transferring an estimated 60-80 per cent of all remittances from the US, and no bank has stepped in to fill the void since the account closures. Last year the last major bank in the UK Barclays Bank to offer remittance accounts closed accounts of Somali MTOs.
The Australian Government formed a working group in December 2014 to work to build confidence between Somali remitters and the banking sector after Westpac announced its intention to close bank accounts of MTOs in August 2014.
“The major Australian banks, via the Australian Banker’s Association, have agreed to participate in a working group with the Australian Government and small-to-medium remittance service providers, aimed at finding a secure, sustainable solution that addresses the banks’ risk concerns while ensuring the continued viability of the remittance sector,” Mr Murphy said.
“This is a welcome first step, but efforts must accelerate to find a long-term solution, in the face of the looming March 31 deadline for the closure of MTO accounts. The Australian Government and their international counterparts, must urgently make good their promises to keep this crucial flow of cash open – if not, three million Somalis risk going hungry this year, families will not be able to afford health care, and a generation of children could be kept out of school.”
Mr Murphy also urged the Australian Government to use its membership in the G20 and the global Financial Action Task Force to push for further action to address issues impeding remittance flows, including addressing wholesale “de-risking”, rather than case-by-case approaches to risk management.
For a copy of the report visit: www.oxfam.org.au/hanging-by-thread
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