Remittances and Their Economic Impact in Post-War Somaliland

Ahmed, Ismail I


This paper provides a descriptive overview of the role of remittances, provided by a large diaspora of migrant workers and refugees, in post-war Somaliland. Based on field-work conducted in Somalia, the paper discusses trends in the size, source, means of transfer, distribution and use of remittances, their role in livelihoods and in the country’s economic recovery and future prospects. The total value of remittances, originating mainly from migrant labor in the Middle East and more recently an exodus of refugees to the West, and greatly facilitated by the growth of telecommunications in Somaliland and of remittance agencies, is estimated at some US$500 million annually — around four times the value of livestock exports. Contrary to the prevailing view that remittances are mainly used for consumption and unproductive investments such as housing and land, the author suggests that in Somalia, the author suggests that remittances have contributed to the rapid growth of a vibrant private sector. However, remittance flows have also been associated with a number of negative side-effects such as the loss of the skilled labor, increased income inequality and booming sector effects, and their positive impact is limited by the present lack of credit schemes and facilities for saving.

©2000 Wiley. Reproduced with permission of Blackwell Publishing Ltd.