This essay explores the central role of remittances in Somalia’s post-conflict economy. After the 1991 state collapse and the destruction of formal financial institutions, remittances—primarily channelled through the hawala system—became essential for house¬hold survival and commercial activity, tolday amounting to about 23% of the country’s GDP. Following the 2012 political transition, new financial regulations, the reactivation of the Central Bank, and the rise of private banks strengthened the sector and improved remittance flows. Remittances significantly support household welfare, reducing poverty gaps and increasing spending on food, health, and education, while helping families cope with droughts and economic shocks. They also contribute to rebuilding human capital and expanding entrepreneurship, with diaspora-funded initiatives—often led by women—stimulating small business development and job creation. Overall, remittances remain a crucial pillar of Somalia’s economic resilience and development.
Dahir Mohamed Ali (Wed,) studied this question.