Somaliland’s remittance businesses thrive around the world


Thirty years ago, Ismail Ahmed slipped from war-ravaged Somaliland to neighboring Djibouti, hidden in the back of a dump truck. His brother, who worked in Saudi Arabia, sent him money to pay for a flight to London to get a scholarship to study economics. “It was then that I really realized that remittances were a key source of money for migrants,” he says.

Today, Ahmed is the founder and chairman of London-based Zepz, formerly WorldRemit Group: a cross-border digital payment service that has more than 11 million users in 150 countries and was valued at $ 5 billion in a fundraising in August.

“We are one of the largest independent digital money transfer companies in the world,” he explains over tea in Hargeisa, his hometown and the capital of the self-proclaimed state of Somaliland.

“Our first remittance corridor was from the UK to Somaliland – that’s how we started. Then we went global and today we are among the best in Colombia and the Philippines, for example.

Ahmed started the company ten years ago. He funded it with compensation of around $ 100,000 which he received after exposing corruption as part of a remittance program while working for the UN in Nairobi. By this time, he was already researching more efficient ways to transfer money across borders after having to pay fees to major banks to send money to Somaliland while studying in the UK. .

“Hargeisa was actually built with money sent, so I grew up seeing remittances everywhere,” says Ahmed – noting that Somalis used a clandestine honor-based money transfer system called hawala, which was then developed to allow expatriates to send money back to Somaliland at almost zero cost.

Somalis working in other countries – they are heavily represented in Djibouti, Ethiopia and Kenya, for example – would hand over their cash to traders there who needed the money to buy stocks. These traders in turn sold their wares in the country for which the Somali money was intended, delivering the proceeds of their sales to a specific recipient. The united Somali clan communities have given enough confidence that these transfers will be made in good faith.

Remittances have also been sent to Somaliland via transfer shops and kiosks over the years.

However, with the development of mobile money – which is booming in parts of Africa – the remittance market has entered a new phase. This was illustrated in August, when Zepz raised $ 292 million in new funding from private equity investors, including Farallon Capital, as well as existing shareholders LeapFrog, TCV and Accel. Zepz was adopted as the company name earlier this year, after WorldRemit bought out the Sendwave money transfer app, which focuses on the African and Asian markets, for $ 500 million.

Fast-growing digital money transfer businesses have made it possible for migrants to send smaller emergency remittances that would not be possible at branches in cash, “due to minimum sending amounts and fees. higher minimums “, points out Ahmed.

And they have proven to be crucial during the Covid-19 pandemic. “The phenomenal success of mobile money and digitization, especially in Africa, means that when physical locations were closed during closures, people could often get their funds from their mobile money accounts or bank accounts. He adds. In Somaliland, which has an economy of $ 3.5 billion, remittances reached more than $ 1.3 billion in 2020, up from $ 1.1 billion in 2019, according to the central bank.

“We have a mutually supportive community culture, a support system,” said Saad Ali Shire, Minister of Finance of Somaliland. “People who have it give it to their relatives, who do not have it, for that you have to move money. Everywhere Somalis go they have to send money back, and to send money you need trustworthy money transfer companies.

Shire has industry experience, having served as Managing Director in the UK for Dahabshiil, Africa’s largest remittance provider. Dahabshiil has already won an injunction against Barclays, after the British bank attempted to close his account, sparking a campaign led by Somali-born British athlete Mo Farah.

For Somaliland, remittances constitute a large part of the economy of the unrecognized country, allowing a small state to grow into a thriving private enterprise.

“Our community trusts each other a lot, due to family, cultural, clan ties – and Dahabshiil respects that,” said Abdirashid Duale, general manager of Dahabshiil.

His father, Mohamed Duale, is the “founding father” of Somali remittances, having started Dahabshiil – which means “goldsmith” – in 1970, in the city of Burao.

In the early 1990s, however, the Duale family had to flee the Somali civil war, when “suddenly planes dropped bombs left and right”. Walking with nomadic communities, they crossed Ethiopia. They ended up in the UK, before returning to Somaliland to boost their business.

Today, the company operates in 126 countries and its interests range from banking and energy to telecommunications, as well as e-Dahab, a mobile money service.

“Remittances are essential for Somali communities around the world,” says Duale. “Business is in our DNA. People here are very innovative at doing business, making investments, and sending money.

Dahabshiil handles much of Somalia’s remittances, says Duale, in addition to remittances to and from other parts of Africa.

“People always think of money coming from Western countries which is vital, but they forget about regional transactions, with people buying goods in different parts of Africa and transferring money between countries on the continent and Middle East, ”adds Duale.


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