Remittances and Their Economic Impact in Post‐war Somaliland

Abstract

This paper examines the role of remittances, provided by a large global diaspora of migrant workers and refugees, in post-war Somaliland. Based on field-work conducted in Somaliland under the COPE project in 1998/9, 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 labour in the Gulf 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 and much more significant than hitherto appreciated. Contrary to the prevailing view that remittances are mainly used for consumption and unproductive investments such as housing and land, this study suggests that in Somaliland they have contributed to the rapid growth of a vibrant private sector. On the other hand, remittance flows have been associated with a number of negative side-effects such as the loss of the country's most educated and skilled labour, increased income inequality and booming sector effects, and their positive impact is limited by the present lack of credit schemes and facilities for saving.