The challenge of informality: counter-terrorism, bank de-risking and financial access for humanitarian organisations in Somalia

Working and discussion papers
June 2018

Somalia’s financial sector is not a centralised system with clear checks and balances. Instead, it operates through various formal, less formal and informal actors, including three central banks, money transfer operators with international bank accounts, mobile money operators tied to the private sector and informal money transfer businesses operating locally. The financial sector faces both internal and external challenges, all of which have important implications for local humanitarian actors.

External challenges stem largely from the enforcement of counter-terrorism measures and banking regulations, which has seen transactions delayed or frozen and bank accounts closed. For local humanitarian organisations, these de-risking measures make it difficult to receive transactions through the formal banking system in a timely manner. They also block money transfer operators as a viable channel for financial access and the transfer of remittances from the Somali diaspora. 

This study urges the various actors involved to manage risk, rather than trying to avoid it, and to support Somalia’s financial sector to facilitate much-needed humanitarian assistance and remittances, while also reducing financing for violent extremism. This will require investing in the country’s financial infrastructure, as well as rethinking the utility of the counter-terrorism regime.