IMPACT OF REMITTANCE ON POVERTY REDUCTION IN SOMALILAND: THE CASE OF SELECTED DISTRICTS IN HARGEISA CITY

Abstract

This study was designed to investigate the impact of remittance on poverty reduction in Somaliland. Particularly, this study focuses to figure out the impact of remittance on both absolute and subjective poverty along with the aim of identifying the magnitude of remittance and how often remittance is spent. However, this study collected primary data from 168 households that were drawn randomly and 13 interviewee who selected purposively. In order to distinguish the poor and non-poor of the studied population, this study used Cost of basic needs (CBN) approach. Considerably, FGT revealed that 38.2% of the population live under the poverty line with the poverty gap and severity index 0.0951 and 0.0318 respectively. This study unveiled that remittance has a considerable effect on absolute and subjective poverty. In which 26.7% of remittance recipients live under the poverty line comparing to 48.4% of non-recipients who live under the poverty. In addition 30% of the households who do not receive remittance are poor where 13% of the households that receive remittance are poor. Relatively, this study figured out the impact of remittance on subjective poverty with comparing the perception of remittance receiving households with those who do not receive remittance of the studied households. About 76% of remittance receiving households showed improvement of their financial situation compared to 55% of remittance non-receiving households. Considerably, 81% of remittance receiving households believe that they are poor compared to 66% of remittance receiving households who believe same way. So that remittance receiving households believe they are financially better off comparing non-receiving remittance households. Moreover this study also tried to estimate the size of remittance in the study area and found that most of households receive more than $6,000 annually with an average remittance of $3,468 annually. In addition how often remittances are allocated were identified, 88% of remittances recipient households declared that they spend on basic needs (food and non-food necessities), nearly 83% of remittance recipient households spent on education fee, 72% allocated to cover the house rent, and the rest 58% and 36% are allocated medical care and clothes respectively. This study used binary logistic regression model to figure out those variables that have significant impact on poverty. In which 6 out of 10 explanatory variables were found to be significant either at 1%, 5% or 10% level of significance. Sex and household dependence ratio were found to be positively related to poverty with an odds ratio of 0.250 and 3.976 respectively. Contrarily, household size, remittance, household property and total income of the household were found to have negatively related with the poverty with an odds ratio of 0.875, 0.347, 0.119, and 0.994 respectively.