Remittances were projected to crash at the start of the pandemic, but in Somaliland COVID-19 created an opportunity for digital disruption instead

In April 2020, when the effects of the COVID-19 pandemic were first beginning to be felt, the World Bank projected that remittances to low- and middle-income countries would fall by 20%. Such a precipitous drop would have been catastrophic. Remittances are a lifeline for millions of people around the globe and a key driver of several national economies. In Somaliland, a country of less than 4 million people in the Horn of Africa, they amounted to $1.4 billion in 2018, or around 50% of its GDP.

Analysts understandably drew a lot of attention to this projected decline, but in the intervening months they’ve missed the ways in which the industry has adapted to the new circumstances. Drawing on interviews with some of the Somaliland’s leading financial institutions, we argue that two key changes have taken place. On the one hand, the pandemic has interrupted the operation of the more established remittance organisations. But on the other, it has provided business opportunities to relatively new market entrants, such as cashless digital remittance providers and the two banks in Somaliland that use the SWIFT transfer system. We also show that though remittances dropped almost 7% in 2020 when compared to 2018, remittances picked up again during the year. This suggests that although the remittance lifeline is affected, it is still intact.