FOR Mohamed Abdulle, sending money to his family in Somalia means a trip to a high street in Stratford, East London, home to a large expatriate community. Once there he hands over cash, a telephone number and a name, usually that of his grandmother who lives in Somalia’s capital, Mogadishu, to an agent. A few minutes later Mr Abdulle, who works as a shop assistant, gets a text message letting him know the cash has arrived on the other side. This fast and reliable system, developed during decades of war in Somalia, is used by hundreds of thousands in the global diaspora, as well as by some UN offices and aid agencies to pay staff.

Perhaps not for much longer. Barclays, a big retail bank, has served notice that it will close the accounts of some 250 money-transfer businesses. The bank said the decision followed a routine legal review. Some money remitters “don’t have the proper checks in place to spot criminal activity,” the bank says, or could “unwittingly” be financing terrorists.

Barclays was among the last British banks willing to deal with agents who cheaply transfer money to poor countries. Many European banks have become nervous about such cash transfers after the American government last year forced HSBC, another big British bank, into a $1.9 billion settlement over allegedly shoddy money-laundering controls.

The impact of Barclays’ decision will be felt across east Africa. Without accounts, the transfer agents cannot operate and their businesses in Somalia’s neighbours, Kenya and Ethiopia, may be hindered, too. The agents, who need a bank account to get a licence, insist they have no problems with law enforcement or regulators. Cash going to extremists in Somalia is sent in sacks by plane, not from a London suburb a few hundred dollars at a time.

The agents are asking what extra measures banks want them to take. Abdirashid Duale, who runs Dahabshiil, the largest Somali money-transfer agency and a customer of Barclays for the past 15 years, says he is willing to comply with any transparency checks the bank requires. He estimates that $500m is sent to Somalia from Britain each year and thinks much of this money will switch to underground agents if legal operators are put out of business.

Dominic Thorncroft, who heads the British money-transfer trade association, says as many as 50 of his 170 members face closure. Under pressure from British MPs, some of whom are elected in constituencies with large migrant populations, the bank has agreed to a 30-day stay which ends in mid-August.

Meanwhile, a group of 100 academics and other notables has written to the British government asking it to avert a humanitarian crisis in the Horn of Africa. An estimated 40% of Somalia’s population depends on money sent from abroad. A recent study showed that three-quarters of recipients need the money to buy essentials, such as food and medicine.

“This will mean children being pulled out of school, people going hungry or not getting medicines they need,” said Laura Hammond, a lecturer at the University of London. The Somali Money Services Association, another British trade body, warned that the consequences of the closure of the accounts would be “worse than the drought” that ravaged Somalia two years ago and killed tens of thousands.

So far attention has focused on Somalia, where years of conflict have destroyed the banks and left no real alternatives to cheap money transfers. But the 250 firms put on notice by Barclays also include some serving Ghana and Nigeria, as well as India and Bangladesh. More sophisticated and expensive competitors such as Western Union may now benefit. A reduction in competition in the African remittance market will drive up prices.

Africans already pay more than any other migrant group to send money home. The cost of remitting to sub-Saharan Africa, typically around 12%, is three percentage points higher than the global average, according to the World Bank. If African rates could be brought in line with those of South Asia, African migrant families would save more than $4 billion a year. Instead rates are likely to rise further.

Some observers are calling for the creation of new institutions that could replace private banks. One suggestion is a “remittance bank” hosted by the UN or a multilateral agency. Another is a code of conduct worked out by remitters, banks and regulators. “This needs to be driven by government,” says Leon Isaacs of the International Association of Money Transfer Networks. “Or the banks won’t get the comfort they want.”