Comments on: Hawala Tech and Banks in Somalia

By: Mkono

Mkono — Wed, 20 Oct 2010 02:54:38 +0000

@Hash great article and much needs to said about the determined folks rendering great the service for the people of Somalia and surrounding countries. The Hawala system is a network and a bank in Somalia. The 3 largest Hawala are Dahabshiil, Amal and Qaran Express. In fact in Djibouti Dahadshiil runs a commercial bank. Amal and Dahabshiil have large operations in Kenya when you get back go see the investments they are making in Eastleigh, Nairobi. No Kenya government has made such investment in that neighborhood and wish they at least fix the road.

In Hargeisa, Somaliland Dahabshiil is the defacto bank and they even have plastic debit cards!! When a small player wanted to get a MPESA like system started in Somaliland the Wireless Teleco crushed them and guess who backed them up by starting a new wireless mobile company – Hawala operators!! In Northeastern Somalia the largest Hawala operator is Amal and they finance everything practically. The Hawala is and will always operate on trust however since 9/11 they have been burdened by paperwork and US and European banks harass them. They are an inventive bunch so to overcome this now they are pooling resources in the US and would become a bank and have an operation Minneapolis, MN where majority of Somali live in the US.
From technology perspective you are right they have evolved greatly from complete trust (still works in Somalia and surrounding countries) to complete data driven system with automated SMS confirmation when money is received by intended customer.
Banks and Telecom used to be different verticals but this is no longer the case in Somalia and increasing in the whole East Africa.

By: Global Voices in English » Somalia: Hawala Tech and Banks in Somalia

Global Voices in English » Somalia: Hawala Tech and Banks in Somalia — Wed, 06 Oct 2010 14:37:58 +0000

[...] Erik looks at Hawala and bank systems in Somalia: “Somaliâ€s have been using the Hawala form of money transfer for centuries, to the tune of approximately $1.6 billion annually. Somalia, per capita, has one of the largest diaspora populations in the world.” [...]

By: jke

jke — Mon, 04 Oct 2010 21:08:17 +0000

Yes, next to the macro impact a system like Hawala / Al-Barakat has on an economy, I’m also fascinated that it is based on trust.

The only other system I can think of that works this way are the Dabbawalla food transports in Mumbai.

I am very curious to know where Somalia will be in let’s say 15 years from now, compared to other countries in the region – and how it will be influenced / depend on these remittances.

By: peter

peter — Mon, 04 Oct 2010 13:43:24 +0000

first the statistics… i think that 1.6 billion quoted in that article is western union, which is misleading because, hawala is much bigger and operates in competition to western union….

most rich somalis have moved their property to nairobi and mombasa and other towns, in kenya precipitation huge asset price inflation…. not all the cash is clean….

the hawala system is based on trust, in some places no money mioves physically , and all it takes is a phone call from one agent to another…

By: Drace

Drace — Mon, 04 Oct 2010 08:30:29 +0000

I quite enjoy reading this blog and didn’t bother to comment since it’s so well-written and informative of what’s happening around the East African region which i so dearly miss, sentiments aside, i would like to correct one more thing, the Hawalas work more like a transfer bank like Western Union not like a bank, they can’t handle large sums of money, credits and loans are offered by rich business men to their next kin and whom they can trust, most of the businesses are informal. The only Id they ask is your clan and some elder guy who can confirm if you are from that clan, its abhorrent and i hate using that old system if you know what i mean.

By: Casey Kuhlman

Casey Kuhlman — Sun, 03 Oct 2010 18:31:19 +0000

Nice post.

What will be interesting to watch is that the hawala company with the largest market-share has opened a telecom company this year serving Somaliland. They have invested heavily in the venture. Very close to the time they announced they were opening that venture, the telecom company with the largest market-share here in Somaliland opened their mobile payment system, which operates basically the same system as M-Pesa.

Both seem to be vying for the what will likely be the Somali Financial Services Holy Grail – think Pay-Pal + Hawala + M-Pesa. Prior to last year each of these companies were nearly monopolistic within their sector. Now they have entered each other’s sector and the competition has further driven down prices and up services.

And, by the way, the largest of the Hawala companies has (as you suggest) opened a formal arm based in Djibouti with announced plans to extend into Somaliland.

By: HASH

HASH — Sun, 03 Oct 2010 18:22:03 +0000

@Joe thanks for the corrections. My understanding of Hawala was that it was a network, not an entity. That each operator could do as they chose. Is that right/wrong?

By: Joe

Joe — Sun, 03 Oct 2010 18:03:26 +0000

Some quick notes…first, the Hawala system is in itself a commercial bank. You can find creditors easily through contacts with hawala owners and you will be loaned money if somebody can guarantee it on the other side. Second, I chuckled when you said nobody gives money to Somalia; foreign governments are giving money to Somalia. And now there is a little more paperwork (i.e. show your ID) because of heat from the US Treasury’s financial/terrorism crimes agency. Prior to 9/11, you didn’t even need to tell them your real name (lots of Somali’s have nickname) and everybody was cool with it. Good post.