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Author Topic: Specifically, how would Somali ex-pats send money to relatives using bitcoins?  (Read 2384 times)
CombustibleLemon
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January 02, 2012, 04:51:15 PM
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Somali ex-pats in America have recently been blocked from sending money to relatives in Somalia.  "An untold number of Somalis depend on small remittances — perhaps $50 to $200 a month — sent from family members in the U.S. Even that small amount of money goes a long way in Somalia, and can make the difference between a dignified life and homeless poverty."  Thus by blocking these transfers the Somalian grandmothers, mothers, wives, and children of workers here in america are now sentenced to a drastically worsened quality of life.

A large number of people have rather blithely suggested that Somali ex-pats should just use Bitcoin to transfer funds internationally.  If this could be done it would be a huge proof of principle for Bitcoin utility in modern finance.  But these individuals need a roadmap for doing these transfers.  I have spent a few hours trying to figure out a specific way to do this and I am kind of stumped.

The American Somali's can obviously buy and fund Mt. Gox accounts using Dwolla or international bank wire transfers.  But the question is how to get money from the Mt Gox Japanese bank, to a Somalian Bank in Mogadeshu for example.

  • As far as I can tell American dollars are used as freely as Somali Shillings in Somalia
  • Let us discard for the moment the idea of using Bitcoins as a raw currency in the country, it doesn't look like there is enough widespread telecommunications infrastructure.  I don't see these grandmothers using their droids to pay for vegetables at a corner grocer.
  • There is no Somalian to Bitcoin exchange currently operating
  • I cannot see a way to get money from a Japanese bank to a Somalian bank where grandma can pick up cash


These people are desperate to help their families after the recent blocks.  If we can generate an easy flowchart for Somalian ex-pats to follow for transferring money to their relatives, then we might be able to help a lot of desperate people AND improve the utility of Bitcoin tenfold.

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January 02, 2012, 04:57:19 PM
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You can't unless until there is a local Somalian exchange which allows local payment in dollars (or gold, or some other commodity readily accepted for trade).  That local exchange would need to smuggle in US dollars/gold/commodity (speedboat full of cash) unless there are enough locals looking to deposit dollars to buy coins.  That seems unlikely although maybe some savy pirate would see the blockchain as a way to protect wealth Smiley )

Bitcoin can be used for international transfers were sufficient native international currency flow occurs that any imbalance by Bitcoin is a drop in the bucket.  That doesn't exist in a  Somalia where international law is blocking the flow of fiat.
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January 02, 2012, 05:08:47 PM
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There are already banks and money transfer services set up in Somalia.  Money transfer services are already a significant part of their economy.  Individuals just need a way to transfer to the banks their relatives were already using for the past 5-10 years.  These banks dealt in both Somalian Shillings AND dollars as far as I can see.

Dahabshill looks like one option that was around but I don't see how to do it.

Pirates with speedboats full of cash is a romantic but pointless idea.  This is a country that already has at least some internet (if only satellite based) and international wire transfer infrastructure in place that was working fine for transfers up until two weeks ago.

When life gives you lemons, don’t make lemonade. Make life take the lemons back! Get mad! I don’t want your damn lemons, what the hell am I supposed to do with these? Demand to see life’s manager! Make life rue the day it thought it could give Cave Johnson lemons! Do you know who I am? I’m the man who’s gonna burn your house down! With the lemons! I’m gonna get my engineers to invent a combustible lemon that burns your house down!
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January 02, 2012, 05:19:55 PM
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Somalia seem to have a good internet infrastructure.
http://en.wikipedia.org/wiki/Communications_in_Somalia

Given the need, some bitcoin local exchanger will appear there soon.

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January 02, 2012, 06:06:30 PM
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Here are 3 ideas of mine:

- Bring in cash through Kenia.

- Set up a Bitcoin exchange in Somalia (maybe something like bitmarket.eu).

- Find a merchant who will accept payments in Bitcoin for the most common goods the Somalis buy with the money sent to them by ex-pats (bulk foods?).
This merchant would preferably be inside Somalia, but it might also work if he transported the goods to Somalia.

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January 02, 2012, 06:19:14 PM
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Pirates with speedboats full of cash is a romantic but pointless idea.  This is a country that already has at least some internet (if only satellite based) and international wire transfer infrastructure in place that was working fine for transfers up until two weeks ago.

Use of the international banking network requires support of the international community which is something Somolia is lacking.  Given current legal situation and the one sidedness of cashflow to Somalia you need some mechanism to bring currency into the country.

Speedboats was kinda tongue in cheek but it would involve some transfer of physical currency into the country against the wishes if not intent of international community.  Using the banking network is a non-starter.

i.e. (fees excluded and exchange rates kept constant to keep it simple)
1) Person in US deposits $100 USD to Mt. Gox (or some other international exchange).  Mt. Gox now has $100 USD.
2) Person buys Bitcoins on exchange (exchange still has the $100 USD).
3) Person sends Bitcoins to resident of Somolia.
4) Resident of Somolia uses local exchange (bitcoin-changer) to receive $100 USD cash.
At this point the local money changer is UP $100 USD equiv in Bitcoins but DOWN $100 USD in cash.

To keep it simple say the money changer also uses Mt. Gox. He sells the Bitcoins he just got and gains $100 USD.

The Somolia resident got money but it was only a local transfer from money changer to resident.  The same $100 USD is still outside the country.  Now the money changer has more resources to move money into the country BUT it requires physically moving currency into the country.

Given this is something the international community is trying to prevent it will require some "smuggling".  Maybe not James bondish w/ speedboats filled with millions in shrink wrapped pallets but you need to move the fiat. 

Bitcoin is useful for handling the value transfer (US resident -> Mt. Gox -> Somolia Resident -> Money Changer) but it doesn't eliminate the need to move the currency.

Given the one sided nature of currency flows that money changer needs to be able to sell those Bitcoins.  If he has an exchange account he could sell the Bitcoins for USD but the USD are now outside Somolia.

So the original issue remains.... how to bring USD into Somolia in bulk against the wishes of international banking community.  Using their international wire network is a non-starter.  Some for of physical money transfer will be necessary.
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January 02, 2012, 07:21:52 PM
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 1) Swap Kenyan M-Pesa credit for a country you can fund in the USA.

 2) Swap that M-Pesa credit with whatever local currency you can use.

You might be able to use M-Pesa with roaming, or you might need to get close to the border. You can boost GSM signal coverage.

 This is the best I can suggest for now and it's probably not as good as Wahala.

Hope this helps.

 p.s. I work at sea, don't invest tase me bro

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January 02, 2012, 07:58:50 PM
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But terrorism.

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January 02, 2012, 09:11:00 PM
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Related discussion in this thread: https://bitcointalk.org/index.php?topic=56081.0 Still no answer as to how the flow of money would be balanced, other than letting it take care of itself when local exchange rate of BTC starts dropping (arbitrage opportunity for whoever can figure out how to bring in fiat across the border).

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January 02, 2012, 09:29:16 PM
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In many countries, converting fiat currency to BTC and vice-versa is a problem. What's the best answer? Just use Bitcoin. If you can convince someone to accept Bitcoin as payment for a good or service then you don't have to worry about converting BTC to fiat. However, until that happens there will be the problems of converting BTC to fiat currency.
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January 02, 2012, 10:28:23 PM
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There.  I think I found it.  There are two banks in Somalia that accept international wire transfers.  The only problem is there are no American banks willing to transfer.   I imagine a Japanese bank will not have this problem.  As has been the case for the last couple decades the banks can handle their own US dollar based arbitrage, their international finances are not your problem.

What you need to have Mt. Gox do an international money transfer to another bank, be it American or Somalian is the SWIFT Code, name of person transferring too, account number, and home address.  Hell Mt. Gox even lists Somalia on their drop down menu.
  • Central Bank of Somalia (SWIFT Code = CBSOSOSM)
  • National Bank of Somalia Limited (SWIFT Code = NASISOS1)

So the mechanism for transferring bitcoins to grandma in Somalia is as follows:
  • Buy Bitcoins - Make one Mt. Gox account in your name and buy bitcoins using Dwolla and your normal American banks.
  • Have grandma or mom make an account at one of the two banks I listed above (they may already have one since that was the bank you were transferring to before)
  • Make a Mt. Gox account in grandma's name.  You may later on need her ID and some sort of phone bill with her home address on it if you want to transfer amounts larger than $1000 per day.
  • Transfer Bitcoins to Grandma's Mt. Gox account.
  • Sell Bitcoins and withdraw from the Japanese bank that Mt. Gox uses using an International wire, grandma's name, bank account number, and the SWIFT code of on of the above banks.

Rest easy knowing that mom, grandma, and the kids can eat a nice meal thanks to you working in the United States.

When life gives you lemons, don’t make lemonade. Make life take the lemons back! Get mad! I don’t want your damn lemons, what the hell am I supposed to do with these? Demand to see life’s manager! Make life rue the day it thought it could give Cave Johnson lemons! Do you know who I am? I’m the man who’s gonna burn your house down! With the lemons! I’m gonna get my engineers to invent a combustible lemon that burns your house down!
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January 02, 2012, 10:38:04 PM
 #12

If US FRN's are traded in Somalia as well as local currency, the simplist near-term solution is a wad of cash in a UPS International document envelope.  However, this still isn't a particularly cost effective solution for individuals.  The early advantage of using Bitcoin as the medium is that the exchangers on the Somali side will be incentivised to arrange for the shipment of the physical cash.  Considering that Somalia doesn't have any foreign trade to speak of, eventually any imbalance of cash transfers is going to have to result in the physical movement of either cash or goods.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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January 02, 2012, 11:38:58 PM
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If US FRN's are traded in Somalia as well as local currency, the simplist near-term solution is a wad of cash in a UPS International document envelope.  However, this still isn't a particularly cost effective solution for individuals.  The early advantage of using Bitcoin as the medium is that the exchangers on the Somali side will be incentivised to arrange for the shipment of the physical cash.  Considering that Somalia doesn't have any foreign trade to speak of, eventually any imbalance of cash transfers is going to have to result in the physical movement of either cash or goods.

Unless the dollar is inflating at a pretty heavy rate against goods inside of Somalia, there is already an outflow.

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January 04, 2012, 06:18:46 AM
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If US FRN's are traded in Somalia as well as local currency, the simplist near-term solution is a wad of cash in a UPS International document envelope.  However, this still isn't a particularly cost effective solution for individuals.  The early advantage of using Bitcoin as the medium is that the exchangers on the Somali side will be incentivised to arrange for the shipment of the physical cash.  Considering that Somalia doesn't have any foreign trade to speak of, eventually any imbalance of cash transfers is going to have to result in the physical movement of either cash or goods.

Unless the dollar is inflating at a pretty heavy rate against goods inside of Somalia, there is already an outflow.

Likely, and that is a problem.  An outflow of foriegn cash implies a trade inbalance, and one not favorable to the use of bitcoin as a value transfer mechanism unless it can help tp remedy that outflow.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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January 04, 2012, 12:15:20 PM
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If US FRN's are traded in Somalia as well as local currency, the simplist near-term solution is a wad of cash in a UPS International document envelope.  However, this still isn't a particularly cost effective solution for individuals.  The early advantage of using Bitcoin as the medium is that the exchangers on the Somali side will be incentivised to arrange for the shipment of the physical cash.  Considering that Somalia doesn't have any foreign trade to speak of, eventually any imbalance of cash transfers is going to have to result in the physical movement of either cash or goods.

Unless the dollar is inflating at a pretty heavy rate against goods inside of Somalia, there is already an outflow.

Likely, and that is a problem.  An outflow of foriegn cash implies a trade inbalance, and one not favorable to the use of bitcoin as a value transfer mechanism unless it can help tp remedy that outflow.

Actually, it is a good thing.  It means that there is at least one entity willing to trade value inside of Somalia for dollars outside of Somalia.  And since bitcoins can be thought of as "dollars outside of Somalia" thanks to the exchanges that literally convert them into dollars, bitcoins can flow through as soon as one of the outflowing entities starts accepting them.

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January 05, 2012, 10:48:14 AM
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In many countries, converting fiat currency to BTC and vice-versa is a problem. What's the best answer? Just use Bitcoin. If you can convince someone to accept Bitcoin as payment for a good or service then you don't have to worry about converting BTC to fiat. However, until that happens there will be the problems of converting BTC to fiat currency.

my thoughts on this exactly.

you just need some importer in Somalia who can pay for his imports (eg mobile phones etc) in btc instead, then he gets his USD back when he sells his imports

pretty simple really, maybe start sending them the emails they send us,

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January 06, 2012, 01:15:28 PM
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I think that no "Somalian bitcoin exchange" is needed for this to happen. Some Somali expats will find out about bitcoin, maybe try it out and speculate a little with it. Later they will send some bitcoins to their friends living in Somali, for example to a cheap Android phone. Those guys can then change the bitcoins to USD or Somali schillings via a visiting tourist, journalist or some local entrepreneur, which is able to use the western banking system.

After this "grass-roots" movement has been going on long enough, some entrepreneurial guy living in Somali will set up an exchange. And at that point the Somali would start exchanging bitcoins themselves more and more between each other, perhaps utilizing cheap android phones.

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January 08, 2012, 07:15:09 PM
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In many countries, converting fiat currency to BTC and vice-versa is a problem. What's the best answer? Just use Bitcoin. If you can convince someone to accept Bitcoin as payment for a good or service then you don't have to worry about converting BTC to fiat. However, until that happens there will be the problems of converting BTC to fiat currency.

I don't see it happen under the described circumstances. Bitcoin will not be trusted as a local currency unless (in the beginning at least), exchange to fiat is easy and reliable.

To be honest: it doesn't seem to happen at all, even under easy and reliable exchangability.

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January 08, 2012, 07:18:15 PM
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There.  I think I found it.  There are two banks in Somalia that accept international wire transfers.  The only problem is there are no American banks willing to transfer.   I imagine a Japanese bank will not have this problem.  As has been the case for the last couple decades the banks can handle their own US dollar based arbitrage, their international finances are not your problem.

What you need to have Mt. Gox do an international money transfer to another bank, be it American or Somalian is the SWIFT Code, name of person transferring too, account number, and home address.  Hell Mt. Gox even lists Somalia on their drop down menu.
  • Central Bank of Somalia (SWIFT Code = CBSOSOSM)
  • National Bank of Somalia Limited (SWIFT Code = NASISOS1)

So the mechanism for transferring bitcoins to grandma in Somalia is as follows:
  • Buy Bitcoins - Make one Mt. Gox account in your name and buy bitcoins using Dwolla and your normal American banks.
  • Have grandma or mom make an account at one of the two banks I listed above (they may already have one since that was the bank you were transferring to before)
  • Make a Mt. Gox account in grandma's name.  You may later on need her ID and some sort of phone bill with her home address on it if you want to transfer amounts larger than $1000 per day.
  • Transfer Bitcoins to Grandma's Mt. Gox account.
  • Sell Bitcoins and withdraw from the Japanese bank that Mt. Gox uses using an International wire, grandma's name, bank account number, and the SWIFT code of on of the above banks.

Rest easy knowing that mom, grandma, and the kids can eat a nice meal thanks to you working in the United States.

why go to the hassle and risk of using bitcoins in this scenario at all? expat could just send mtgox redeemable USD code to grandma's gox account. This is basically just using an intermediary bank that allows transfer to somali bank to get around "money export restrictions" adhered to by american banks, right?

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