Shamis Abokor was once Somalia’s hottest pop singer, belting out love songs in front of thousands of adoring fans.

Then she suffered a disastrous stoke and for the past 16 years she has been confined to her tiny concrete home, cared for by relatives. Today, aged 78, she is bedridden and semi-paralysed. She survives with dignity thanks to her daughter in the UK, who sends her hundreds of pounds every month via a Somali money transfer operator (MTO) called Dahabshiil.

A few streets away in his tidy, windowless office, Ahmed Aliubaxle is a symbol of why Somaliland, the self-declared independent republic in the north-west, is so different from Mogadishu and points south, still racked by civil war. His father emigrated to Birmingham, made some money in property and sent it home, where Ahmed used it to import used vehicles from Dubai and re-selling them. He is now the boss of a major freight forwarding company, moving everything from wheelchairs to construction equipment across the world.

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But Somaliland, like the rest of the country, has no banks, so he depends on Dahabshiil for his firm’s growth. “Without Dahabshiil I would have no way to get cars from Dubai or a generator from China,” he explains. “The only way would be to fly to China with a suitcase full of dollars.”

Across town, Alima Abdi’s little grocery shop is no more than a window in a stone wall, but it helps feed her and her five children. It was set up with the help of her sister who works in London, and still sends $200 a month.

Ms Abokor, Mr Ahmed and Ms Abdi are just three of the millions of Somalis who owe their survival to “the economy of compassion” – the relatives abroad who send regular sums month after month and year after year. The total remitted annually is believed to be about $1.3bn (£830m), or half of Somalia’s national income, and dwarfs international aid. At least 40 per cent of Somalis depend on these payments: the true figure may be much higher, because the remittances are often divided among numerous relatives. Somalis in the UK alone remit some $500m a year.

With a federal government shakily holding on to power in Mogadishu and violence significantly reduced, Somalia and the EU co-host a conference of international donors in Brussels today, intended to chart a new course to peace and prosperity.

But on 30 September, those hopeful prospects will be thrown into jeopardy when Barclays closes the accounts of 250 Somali MTOs, including Dahabshiil, which is much the biggest of the lot.

Barclays initially announced, in a letter to Dahabshiil and others dated 8 May, that the accounts would be closed on 30 July. It wrote: “Acceptance and eligibility criteria have been amended for customers in this sector, which unfortunately means we will no longer be able to provide banking services to businesses that fall outside of these.”

For everyone involved in helping to haul Somalia back from the brink after its years of civil war and famine, the disastrous implications were immediately clear. Simon Levine of the Overseas Development Institute said: “The famine of 2011 is largely over, so we’re back to the situation where one in seven young children are so skinny that they are classified as ‘acutely malnourished’… If Barclays pull out of Somalia and there is no way to send money, what happens when families whose kids are already malnourished lose a quarter of their income? And what happens to the economy, to jobs, to investment when a quarter of the money just disappears? There is a risk that the consequences could be even worse and much longer-lasting than the 2011 famine itself.”

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For the international aid community, the severing of the remittance pipeline threatens to spark a new Somali emergency. And the effect on the agencies is even more direct than that, because in the absence of banks, they depend on the MTOs to funnel aid money to their Somali projects. The vast majority of them, including Oxfam, Care International and World Vision, use Dahabshiil, as does the United Nations.

Founded in 1970 in Burao, near Hargeisa, Dahabshiil’s head office is in Whitechapel in east London, while in Somalia it has 268 agencies across the country. Inside Somaliland, where its dominance is overwhelming, it describes itself as a bank and fulfils all of a bank’s normal functions.

With 5,000 employees spread across 150 countries, this family-owned company has become big and profitable enough to keep abreast of the ever-changing regulations of the banking sector in Europe and the US. During a 15-year relationship, Barclays has regularly acknowledged that Dahabshiil is fully compliant with industry regulations.

As a UK banking industry insider confirmed, it is US not British regulators that are setting the pace in the crackdown, following the massive fines imposed last year on HSBC ($1.9bn) and Standard Chartered ($330m) for facilitating money-laundering. “The main pressure is from the US regulator,” he said. “They are the ones on the hunt.”

The irony is that, just one month before Barclays’ announcement, Dahabshiil received a ringing endorsement in the US. Seeking a solution to transparency problems with Somali MTOs, a US Bankcorp spokesman said: “We are pleased that we may have recently found a solution with one remitter – Dahabshiil… We are currently in discussions with this remitter to ensure all parties understand the terms and requirements necessary.”

The Barclays bombshell provoked a storm of protest and concern, and Barclays responded by extending the deadline to 30 September. But it has so far refused to contemplate a U-turn. Writing to Oxfam, Anthony Jenkins, the Barclays chief executive, said: “There are a number of serious concerns about the operation [of MTOs], with the sector at particular risk of being used for the transmission of the proceeds of crime, for money laundering, and for terrorist financing. This risk is exacerbated by a lack of transparency on who the remitters and end-receivers are in transactions.”

In Nairobi last week, Abdirashid Duale, Dahabshiil’s chief executive, said: “It’s all to do with fear. The banks are worried about Somalia because all they read is bad news about piracy, Al-Shabaab [the militant Al-Qa’ida offshoot] and so on – but they never go to Somalia to see for themselves. They fear that some day, something might happen, and ever since 9/11 Somalia has been harassed and stigmatised because of that fear. But the fact is that all the 9/11 terrorists used Western banking institutions… We are not asking any favours. If any company broke the law, they should face the law.”

Mr Duale has drafted a set of proposals to address the banks’ fears: improving the institutional capacity of the MTOs in technology and compliance systems, setting up third-party monitoring and certification inside Somalia, helping the Somali government to introduce biometric scanning to remove uncertainty about the identity of recipients, and setting up a fund which would effectively insure the Western banks against financial penalties. He also agrees on the need for greater collaboration between Somali MTOs. “We Somalis need to work together, or we will die together,” he said.

But so far there is no indication that Barclays will grant the MTOs a year of grace, as Oxfam and others have demanded. So what solutions are open to Somalis who want to maintain the lifeline to their families?

The obvious answer is to go back to the old-fashioned, unregulated, hole-in-the-corner hawala firms, which rely on the trust between members of the same Somali clans. “Somalis will find a way,” said Ed Pomfret, Oxfam’s campaigns and policy manager in Somalia. “We’re asking Somalis to pack suitcases with cash and carry it to Mogadishu. For a government dedicated to fighting money laundering, that doesn’t make any sense.”

Killing the patient to cure the disease...

$1.3bn

Total remitted to Somalia annually, about half of its national income

40

Percentage of Somalis relying on remittances

250

MTOs who will have their UK accounts closed