Business Technology and Remittance (Hawala) System in Somalia

Abstract

Abstract The main objectives of this thesis is to investigate whether hawala companies would be able to undertake the role of remittance in a formal financial system in Somalia; and whether or not they work with adequate technology to fill the gap created as a result of the collapse of the formal financial system. In this regard, the researcher formed three hypotheses: 1. Hawala companies undertook the role of the formal financial system remittance in Somalia. 2. Using contemporary technologies enhanced the quality of hawala in Somalia. 3. The growth of hawala in Somalia was caused by political and economic crisis. The research results clearly showed that the Hawala companies in Somalia had undertaken the role of remittances conventionally facilitated by a formal financial system. Also, using contemporary technologies improved the quality of hawala companies in Somalia. The results also confirmed that hawala system growth in Somalia was occasioned by political and economic crisis. The areas of the study are Somalia and Dubai because the headquarters of hawala Companies are mostly located at Dubai. The research utilized both primary and secondary data sources. The secondary data sources are derived from documented research, statistics, books, articles and intemet on the concepts of business technology and hawala system. The Primary data, it is collected via interviews and questionnaires. The population of the study is Somali hawala companies. The sampling fiameworks are hawala receivers, merchants and managers of the hawala companies. The sample size consists of 100 hawala receivers, 30 merchants and 12 managers of hawala companies.

Remittance companies have an extensive network of agents that serve almost all the towns and villages in Somalia. They operate in all major cities and towns in other countries where there are significant Somali Diaspora communities; and the growth and success of the remittance companies is a result of the trust and confidence of their customers. The findings of this research also confirmed that the remittance operations are far more efficient and cost effective than the formal fmancial institutions; and that there are social and historical factors, which are tied to the extended family, geographic and clan factors, that reinforced the relationship of trust between individuals who are doing business. Regarding the outcomes of this research, it is recommended: I That the new Somali government allows hawala companies to continue expanding their operations and investments. I The hawala companies, on their part, should consult and collaborate with KPMG to influence government’s design of a regulatory regime that is appropriate for credible and thriving hawala companies. I In this regard, the hawala companies should continue to base their business on money transfer and exchange, as well as related activities. I The companies should consider mergers so as to be stronger internationally. I The hawala companies should upgrade the quality of their staff, especially at the management level, to as much as possible reduce fears of managers and other professional personnel losing their jobs. Besides adherence to generally accepted accounting principles (GAAP), and enhances their technology, use appropriate Web-Based software programs such as what is prescribed in Appendix 4. I The most important task in all systems is to use resources efficiently. I Further research is needed to deeply investigate the hawala companies and its operations in Somalia.