Five reasons why Kenya needs to reconsider its Somalia money transfer ban

In response to the terrorist attack on Garissa University that killed 147 students, Kenya banned eighty six entities engaged in money transfers to Somalia. This includes thirteen money transfer agencies that act as a critical remittance lifeline to Somalia. However, it remains unclear as to what extent such a blanket ban would work in curbing the flow of funds to the radical Islamic terrorist group, Al-Shabaab. This ban also has observers worried about its consequences on the lives of ordinary Somalis. Previously, the US and the UK have tried similar bans on Somalia. Here are five reasons why this latest ban by Kenya is likely to fail:

  1. This ban first and foremost, will affect remittance channels used by diaspora Somalis and squeeze a critical lifeline of households in Somalia dependent on these remittances. Remittances to Somalia are in the region of $1.2 – 1.6 billion annually – a significant and reliable source of support to Somali families engaged in rebuilding their lives through decades of conflict. If the Kenyan government chokes the official supply lines, the chances are that more money will be pushed through ‘informal’ channels that are not only harder to monitor, but also more liable to be misused. The hawala system is not only easier to operate, but also the cheapest alternative available to those looking to send funds to Somalia. Clearly, while there would be instances of misuse, it is unfair to allege that all hawala operations are illegal or that they are channelling funds to terror groups.
  2. Al-Shabaab is financed through multiple sourcesCharcoal is a big one; so is ‘local taxation’ of NGOs and businesses. To the extent that a part of the group’s income is financed by commodities or livestock through porous borders, there is little that a remittance ban can achieve. Common sense suggests that those who want to channel terror funds probably already doing so through alternate channels. The goal has to be to channel transfers through legitimate and verifiable mechanisms and for this, along with better regulation, financial service providers need to become far more competitive than they currently are.
  3. This doesn’t signal a cogent response on the part of the Kenyan government. A blanket ban suggests that the central bank lacks the intelligence capacity to monitor the flow of funds through the Kenyan banking system. A more measured response that called for increased information sharing and compliance requirements would indicate that the central bank has systems to filter through the bulk of ‘normal’ transfers and isolate the ones that are suspect. At the same time, this runs the risk of obfuscating the inherent weaknesses in the state security apparatus – the endemic corruption within the police and the defence forces – and doesn’t reflect the urgent need to stem the rot.
  4. On the security and development front, the Kenyan government has plenty more to do. There are a significant number of Kenyans of Somali origin, and Somalis that live and work in Kenya. Security forces continue to target them indiscriminately in cities like Nairobi. At the same time, the north-eastern region of Kenya (that borders Somalia and Ethiopia) are ethnically Somali and suffer from decades of neglect in terms of infrastructure, service provision and political participation. A knee-jerk ban on money transfers will only result in raising the discontent with the Kenyan government. This internal discontent provides a potent mix for radicalisation of Muslim youth.
  5. Irrespective of what one might think of the effectiveness of aid in the country, this ban is also going to make it difficult to fund local organisations to administer humanitarian relief and developmental projects. Local NGOs often have to pay levies to various militant groups to operate in sensitive areas. However, in many contexts of dire humanitarian need, there is little choice but to fall back on these modes of relief. With most international agencies operating in Somalia having their operational head-quarters in Kenya, there will be immense pressure on the government to roll back this ban – possibly before realising any of the objectives of the ban.

Kenya is in an unenviable situation with its Al-Shabaab problem. To have any chance of containing this menace and protecting its population, the state response needs to be strategic and not reactive. Tackling the root causes of terrorism will require fixing a lot of the problems in Kenya’s north-eastern region; a will to engage with the local politics of the region, as well as running a genuinely devolved government at the national level; and a decisive set of steps to address the corruption within. Until that happens, moves such as the ban on money transfer channels will continue to be seen as band-aid solutions.

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