Why Somalia’s Remittance Safety Net Fails During Widespread Crises

A study by Arab Dahir Hassan and Mahat Maalim Ibrahim, published in Economies, highlights a critical gap in Somalia’s development strategy. Using 2022 household data, the authors found that 74.1% of the population lives in multidimensional poverty, a condition exacerbated by constant exposure to shocks. While receiving remittances is associated with a 4.3-percentage-point reduction in deprivation scores, this protective effect vanishes when disasters like droughts and floods strike entire regions simultaneously.

The data reveals that diaspora transfers function best as localized insurance. In rural areas, remittances significantly cushion the blow of idiosyncratic shocks—personal crises that affect a single family. However, this private safety net lacks the capacity to scale during covariate shocks, where the needs of an entire population overwhelm the informal networks of the diaspora. With nomadic households facing a staggering 98.8% poverty rate and minimal access to these financial flows, the reliance on private transfers remains an incomplete solution for the country's most vulnerable.

Ultimately, the research warns against viewing remittances as a substitute for institutional support. While lowering transfer costs and expanding mobile money access can bolster household resilience against personal misfortune, systemic crises demand robust public social protection and humanitarian intervention. Relying on private networks to absorb the damage of large-scale environmental or economic collapse ignores the reality that these networks reach their limit when the entire community is in distress.