Financing al Shabaab: The Vital Port of Kismayo

By: LTC Geoffrey Kambere, UPDF

Al Shabaab, which is generally described as a "Salafi-jihadist movement," is a major player and instigator in the ongoing fight to win control of Somalia.1 For about four years after its inception in 2006, al Shabaab focused its violence in Somalia only. In 2008, its leader, Ahmed Abdi Aw-Mohamed "Godane," pledged loyalty to al Qaeda and the goal of global jihad.2 The group turned into a transnational threat, however, when it carried out twin bombings in Kampala, Uganda, on July 11, 2010. The African Union and the struggling Transitional Federal Government of Somalia, with the backing of the United States, were unable to make much progress against al Shabaab until Spring 2011. Since then, they have launched a series of offensive operations that succeeded in winning back some of the terrorists' strongholds, including the vital Bakara market in Mogadishu, and the strategic town of Afogye. As of this writing, however, the terrorists are still strongly resisting, and the international coalition has been unable to attain a decisive victory.

The international community has concentrated on understanding al Shabaab's operational component while giving little attention to how it finances itself. This article endeavors to fill in at least some of that gap. The first section examines al Shabaab's primary sources of funds, how the group moves those funds to where they are needed, and how it spends its money. The second part examines the successes and weaknesses of the countermeasures different actors are using to defund al Shabaab, and recommends ways to use the available information about its financing to impair the group. In particular, cutting al Shabaab off from the Somali port of Kismayo, which is now its principal source of funding, could be fatal to the group. In May 2011, troops from the African Union Mission in Somalia (AMISOM) and the Transitional Federal Government began a fierce battle to force al Shabaab out of the Bakara market in Mogadishu, where the group had been taxing merchants to finance its assaults on the government's forces. On August 6, 2011, al Shabaab's fighters were finally forced to withdraw from Bakara, and the group has suffered from the loss of revenue streams from the market.

Although it has been forced from Mogadishu, al Shabaab still controls large areas of the country, including the southern and central parts of Somalia. The port city of Kismayo has been identified as the most important current source of revenue for the group. According to a BBC report, "Kismayo, a port city, is a key asset for the militants, allowing supplies to reach areas under their control and providing taxes for their operations."3 It is fair to speculate that without the funds raised through Kismayo, al Shabaab's military activities would be severely impeded.

How al Shabaab Raises Money

As with all organizations, financial channels are the hidden arteries that keep al Shabaab alive. Al Shabaab has leaned on different sources of revenue to finance terrorist acts for the past several years, including state sponsors, charities, individuals in the Somali diaspora, other terrorist groups, and businesses. Funds typically are transferred through hawala, an informal remittance system traditional to many Islamic communities; through regular banking channels; and by courier. The money goes mainly to support the group's members, and for the training, recruiting, weapons, and equipment required to sustain the Somali insurgency and wage jihad against non-believers.

State Sponsorship

A number of observers have asserted that Eritrea sponsors al Shabaab in an attempt to counter the regional power, Ethiopia, Eritrea's long-time enemy. Eritrea has consistently denied the allegations. Eritrea reportedly supplies weapons, military training, and even troops to fight alongside al Shabaab's militants.4 In addition, a United Nations report claims that Eritrea has sent $80,000 per month to some members of al Shabaab through the Eritrean Embassy in Nairobi for almost a decade.5

Yemen, Syria, Iran, and Qatar are also regularly accused by the Somali Transitional Government of providing funds and weapons to al Shabaab.6 For instance, in January 2010, the Transitional Government's Minister of Defense, Sheikh Yusuf Muammad Siad—alias Indho Adde—reported that Yemeni rebels had sent two boatloads of light weapons, ammunition, Kalashnikovs, and hand grenades to the al Shabaab-controlled port of Kismayo.7 Subsequently, a March 2010 U.N. monitoring group claimed that Muhammad Sa'iid Atom, an al Shabab-affiliated militant commander in Puntland, had been receiving arms shipments from Yemen and Eritrea.8 In addition, Saudi Arabia and other Gulf states have remained significant external sources of funds for the al Shabaab organization. Saudi Arabia has long been known for financing "Salafi jihadists."9

Charities, Donations, Other Terrorist Organizations

Terrorist organizations similar to al Qaeda (international jihadists) and other militant Islamic organizations contribute funds to al Shabaab to spread extremism in the Horn of Africa and other parts of the world.10 The World Assembly for Muslim Youth and the International Islamic Relief Organization (IIRO), as well as Somali businesses in the Gulf states, Europe, the United States, Australia, New Zealand, Malaysia, and Singapore are active financiers of radical Islamic movements in the Horn of Africa.11

Some charitable organizations that formerly channeled funds to al Itihaad, the Islamist group that preceded al Shabaab, are likewise suspected of maintaining links with al Shabaab.

These organizations include the African Muslims Agency in Kuwait; the Red Crescent Society of the United Arab Emirates; the al Islah Charity, which is linked to Harakat al-Islah, a Somali diaspora group founded in Saudi Arabia; the Muslim World League (Rabitat al-Islam al-‘âlamiyya) and its subsidiary, the International Islamic Relief Organization, both based in Saudi Arabia; Dawa al-Islamiyya; and the al Wafa Charitable Society, which is listed as a "specially designated terrorist entity" by the U.S. government for its suspected support to terrorist organizations.12

A diaspora is defined as "a people with a common origin who reside, more or less on a permanent basis, outside the borders of their ethnic or religious homeland—whether that homeland is real or symbolic, independent or under foreign control."13 An estimated one million Somalis now live outside the country, in sizable Somali communities in the Middle East, Europe, and North America. Some of these diaspora Somalis financially support al Shabaab. In late 2010, for example, three Somali men and one woman were arrested in San Diego, and charged with knowingly providing financial assistance to al Shabaab.14 In another case, a St. Louis cabdriver named Mohamud Abdi Yusuf pleaded guilty in 2010 to conspiracy and providing material support to a designated terrorist organization after admitting he had raised nearly $6,000 for al Shabaab to continue its struggle against the Transitional Government.15 Other supporters include wealthy businessmen, such as Saudi Sheikh Mohamed Abu Faid, who is reportedly the group's lead financier, and Omar Hammami, who is in charge of financing militants from the United States—often U.S.-born teenagers from immigrant families—who join al Shabaab.16

The Somalis in the diaspora are estimated to remit $500 million to $800 million annually back to friends and family in their homeland, according to at least one researcher.17 Some of this money, even when it comes into the country legally, will end up in the hands of extremists.

In addition, al Shabaab apparently has benefited from Somalis residing in Nairobi and in the Dadaab refugee camp in northern Kenya. Al Shabaab is said to have links with the Pumwani Riyadya Mosque Committee (PRMC) religious organization in Nairobi, which has a network of sympathizers who raise money for the group.18 A good deal of money for al Shabaab also is collected from the PRMC apparently under the pretense of reconstructing a mosque. Ahmed Imam Ali, a Kenyan and the PRMC's secretary, is reported to be siphoning off funds raised for social projects in Nairobi to facilitate the training and recruitment of insurgents in Kenya.19

In addition to receiving money from religious donations abroad, members of al Shabaab take advantage of the extensive black markets in places like Eastleigh, a Somali immigrant neighborhood in Nairobi, raising reasonably large sums of money to support the group's activities.

Some reports indicate that Somalis raise money for al Shabaab in the form of zakat, an Islamic religious tithe.20 Moreover, according to some sources, big companies such as Dahabshiil Bank, which is based in Mogadishu, send payments to al Shabaab in exchange for safe access to areas under al Shabaab's control.21 It is said that businesspeople are forced to pay "taxes" equivalent to the cost of an AK-47 in order to keep from losing their entire business inventory. In addition, al Shabaab exacts high tariffs from the informal Islamic banking system of hawala to boost its income, with little apparent regard for the effect this financial drain has on Somalia's economic activity.

Businesses in Kismayo

In 2008, al Shabaab took over Kismayo, the third-largest city in Somalia, after fighting a fierce three-day battle, later called the "Battle of Kismayo," against pro-government militias. The group quickly imposed harsh administrative rules based in shari'a law on the port's business community. To raise revenue, al Shabaab increased the fees for importing and exporting goods through the port, one of the largest in the country, by 30 percent.22 The most important economic activities in Kismayo are fishing, the import of goods like rice from Pakistan, and the export of primary goods such as livestock (camels, sheep, and goats), charcoal, and khat to the Gulf states.23 One analyst for African affairs estimates that the taxes al Shabaab collects from the business community in Kismayo include "over $1 million quarterly in port-use charges alone."24

Al Shabaab earns considerable money from the charcoal industry, one of Somalia's main exports, and the chief commodity to pass through Kismayo's port facilities. According to one report, in the southern sector near the border between Kenya and Somalia, "The cutting down of trees in large areas is evidence of the booming trade in charcoal that was a source of income for the militia group."25 Vast deforestation in the areas under al Shabaab's control is another sign of the lucrative charcoal trade between al Shabaab and the Gulf states. It is estimated that al Shabaab exports charcoal worth $500,000 per month to the Gulf states.26

Besides the considerable income al Shabaab receives through heavy taxes on imports and exports, militants also systematically collect taxes from farmers on Kismayo's outskirts. In March 2010, the government's Minister of Agriculture, Muhammad Ibrahim Habsade, claimed that al Shabaab was extorting $150 per hectare from farmers in the fertile Lower Shabelle Valley, and blamed the group's predations for a decrease in agricultural production.27

Since 2008, the port of Kismayo has become the main source of revenue for the terrorist group. According to one report, the United Nations believes that "al Shabaab collects an estimated U.S. $35–50 million annually in custom tolls and taxes on businesses in Kismayo and two secondary ports higher up the coast."28 This is one reason that Kismayo is referred to as the nerve center for the militants. Instead of using the large sums of money collected in Kismayo to maintain the port and city and meet the needs of the local population, al Shabaab sends most of the funds to other areas under its control to advance its insurgency.29

In October 2011, the Kenya Defence Forces struck a blow at one source of funding for al Shabaab when it took control of Ras Kamboni and Bur Gaboby, two coastal fishing towns that formerly had been controlled by the militants.30 Ras Kamboni, which is closer to Kenya and serves as a base for fishermen supplying seafood to hotels in Lamu and island local resorts, had been a particularly large source of income for al Shabaab.31

Piracy and Extortion

Al Shabaab has long been thought to be connected with Somali pirate groups operating in the Gulf of Aden and Indian Ocean, but it had been difficult to establish a direct connection between the Islamists and pirates. In December 2010, however, al Shabaab took control of a pirate base called Harardheere from Hizbul Islam, another Islamist group in Somalia, and reportedly reached a compromise with the local pirate gangs that would give the militants a 20 percent share of all ransoms received from the hijacking of ships.32 While there is no documentation to confirm such a deal, its share of the ransom money certainly has been lucrative for al Shabaab. Revenues from piracy also have boosted development in parts of Somalia, making it politically even more difficult to put a stop to pirate activity.33

Looting the nongovernmental organizations (NGOs) that are operating in areas controlled by al Shabaab is another way the group survives. It has been widely reported that al Shabaab loots aid meant for the hunger-stricken populace: in March 2010, the U.N. Monitoring Group alleged that as much as "50 percent of food aid delivered to Somalia was being diverted to criminals and insurgents, including Al-Shabab."34 Even worse, the practice of kidnapping and ransoming aid workers has also boosted al Shabaab's finances, while some NGOs and U.N. agencies pay "registration fees" of $500 or more in order to be allowed to operate in areas controlled by al Shabaab.35

With such a variety of funding sources, even if external support from state sponsors and the diaspora is successfully cut off, al Shabaab's money flow can be efficiently replaced with internal money sources, including taxes, business profits, port fees, extortion, and security protection fees from prominent business people and aid workers. In addition, the group's cooperation with Somali pirates remains a source of income.

How al Shabaab Moves and Spends its Money

Al Shabaab moves funds through the standard system of banks and couriers, but also through the traditional Muslim system of hawala, an informal means of transferring value and remittances through networks of brokers.36 Hawala, common throughout Somalia, is based on trust and honor, and can be effective, reliable, and efficient; the fact that few, if any, records are kept, is an added bonus for groups like al Shabaab.37 It is possible to organize transfers through secret senders and receivers who do not record and will not disclose details of the transactions. On the negative side, hawala typically involves a great deal of communication by phone, e-mail, and fax, so once a broker comes under suspicion for working with terrorists, his or her transactions may be traceable. In Somalia, hawala is the most common way of transferring money, and is regularly used by ordinary Somalis, but authorities believe it is also used by many al Shabaab sympathizers to support the group's objectives.38

Somalis in the diaspora also use wire services such as Western Union and MoneyGram to send money to their relatives in Somalia. These services are well-established in neighboring Kenya, where al Shabaab has a strong presence. Analysts assume that some portion of the money transferred by Somalis through regular wire and bank services is diverted to al Shabaab, although no figures are available.

Al Shabaab spends most of its money on four things: providing social services to its members (including paying salaries to foreign fighters); fighting to overthrow Somalia's Transitional Government and to expel Ethiopian troops from Somali territory; waging a violent campaign against nonbelievers (jihad), which includes recruiting and training fighters and buying weapons and equipment; and preaching extremism. Al Shabaab operatives often carry cash on their missions. For example, the perpetrators of the Kampala, Uganda bombings on July 11, 2010, carried their own money, as did the terror cell members who supported those bombings by crossing into Uganda with extra funds. The cash method leaves no trail, making it difficult to track the terrorists or their funding.

Recommendations and Conclusion

Too little attention has been paid to creating strategies to counter the financial streams that feed al Shabaab. The current AMISOM (African Union Mission in Somalia) operations against the group are aimed at attacking and eliminating militants; these operations have managed to chase the extremists out of Mogadishu, but not from other parts of Somalia. In addition, operations launched recently in southern Somalia by the Kenyan Defence Forces have neither stopped al Shabaab militants from carrying out their operations nor disrupted the financial channels that keep them active.

Since the attacks on the World Trade Center in September 2001, the international community has put in place countermeasures against terrorism funding and money laundering. For instance, the Financial Action Task Force (FATF) was formed in 1989 with 36 member states, including the European Union, the United States, and Canada.39 The FATF, however, is a policy-making body that has concentrated on limiting transfers and strengthening the documentation required of governments. Consequently, the ability to use hawala to send money to al Shabaab from outside Somalia depends only on the enforcement practices of the country from which the funds are sent.40 Respect for sovereignty has made international efforts to limit such transactions ineffective, and the international system to combat money laundering is not binding.

Disrupting al Shabaab's funding channels can be especially difficult to accomplish in Somali communities, because some of the group's funding is through normal, day-to-day financial activities. The enormous sums of money collected by the terrorist group at Port Kismayo, however, can be minimized or eliminated, particularly if the current offensive succeeds and control of the port can be turned over to the Transitional Government or AMISOM. Most authorities in Kismayo portray al Shabaab as an insurgent rather than terrorist organization, running a well-organized administrative system. The booming business environment of the port will keep al Shabaab strong as long as the group controls Kismayo. It is therefore imperative that international efforts to destroy al Shabaab should concentrate not only on countering its fighting tactics, but also on implementing long-term strategies to derail its administrative structure and operations around the port of Kismayo.

Those who are trying to dry up al Shabaab's money streams should pay particular attention to the means the terrorists use to avoid local and international financial control measures, especially when the transactions come through "innocent" front groups. East African Community members should work through the Community's counterterrorism agency to step up money-laundering and business-control measures across all domains, and to dedicate resources to counterterrorism not only at the central government and state levels, but also at the grass-roots level.

The Kenyan government, in particular, needs to better monitor places where large numbers of Somalis and Islamists live, especially Eastleigh, a neighborhood in Nairobi that is also known as "little Mogadishu." It is a thriving business and shopping district, and also a hub for the kinds of financial transactions—transfers and remittances by hawala and wire services—that benefit both Somali pirates who need to launder money and al Shabaab. Police occasionally crack down on undocumented immigrants residing in the area, but these moves are sporadic, and often indiscriminate. The central government apparently exercises minimal control over Eastleigh's rapid growth, which is fed by a steady influx of Somali refugees from over the border, although that may be changing as the area prospers.41 Kenya and its neighbors must put greater effort into properly registering parallel banking systems, such as mobile money services, since these services have proved to be an easy way to transfer money out of the country, and they surpass traditional banks in terms of their geographical reach. Governments also need to implement universal SIM card registration, so that every SIM card would be registered to an individual; such a system would help authorities to track money moved through mobile services. To defeat al Shabaab, international efforts must focus on how to recapture Kismayo Port. If al Shabaab continues to utilize this port as its hub, all efforts to destroy the group may be prolonged, as the terrorists can easily reequip themselves, make money through imports and exports, and coordinate with Somali pirates through Kismayo.  

In East Africa, community-based and ideologically rooted support has helped provide the finances al Shabaab needs to survive and sustain its operations. For years al Shabaab was focused narrowly on expelling Ethiopian troops and winning control of Somalia's government. Today it has regional objectives in line with al Qaeda's "global jihad," and its sources of funding have significantly broadened so that it no longer solely depends on external support from places like Eritrea. Regardless of what strategy AMISOM adopts to defeat the terrorists, Kenya must be involved because Kenya is not only a home for Islamist extremists, but also a financial conduit for al Shabaab. The fact that al Shabaab has continued to receive support from various overseas sources means that the measures put in place to close down funding channels for terrorist groups have not been effective in this case.

About the Author(s): LTC Geoffrey Kambere serves as the deputy chief of the Integrated Human Resource Management Information System, Ugandan People's Defence Forces. He recently graduated from the Defense Analysis department of theU.S. Naval Postgraduate School.


1. 1 Salafi-jihadists are followers of the modern Sunni Islamic Movement, or Salafism, which adheres to a rigid and strict interpretation of Islam associated with violence against non-believers. Al Shabaab promotes an authoritarian form of "Salafi" Islam that stresses an inflexible interpretation of the Qur'an, with the aim of overthrowing the current government and implementing shari'a law. See Christopher Harnisch, "The Terror Threat from Somalia: The Internationalization of Al-Shabaab," Critical Threats Project, February 12, 2010, 14-17:

2. David Shinn, "Al-Shabaab Tries to Take Control of Somalia," Foreign Policy Research Institute, November 5, 2012:

3. "Q&A: Who Are Somalia's al-Shabab?" BBC News, last updated February 23, 2012: http://www.

4. Gabe Joselow, "All Eyes on Eritrea as Arms Shipment Reaches Al-Shabab," Voice of America, November 1, 2011: Arms-Shipment-Reaches-Al-Shabab-133079288.html

5. Joselow, "All Eyes on Eritrea;" and, Pieter D. Wezeman, "Arms Flows and the Conflict in Somalia," SIPRI Background Paper, Stockholm International Peace Research Institute (SIPRI), October 2010:

6. Joselow, "All Eyes on Eritrea."

7. Gulf of Aden Security Review, Critical Threats, American Enterprise Institute, January 4, 2010:

8. Claude Heller, "Letter dated 26 February 2010 from the members of the Monitoring Group on Somalia, addressed to the Chairman of the Security Council Committee established pursuant to Resolution 751 (1992) and 1907 (2009) concerning Somalia and Eritrea, addressed to the President of the Security Council," UN Security Council, New York, March 10, 2010, 45:

9. James M. Dorsey, "Saudi Arabia Embraces Salafism: Countering the Arab Uprising?" Fair Observer, February 27, 2012:

10. Abdulkadir Abdiraham, "Islam AU Summit: A/S Carson's meeting with Somali President Sheikh Sharif Tripoli," The Telegraph, February 3, 2011: CARSONS-MEETING-WITH-SOMALI-PRESIDENTSHEIKH-SHARIF-TRIPOLI-00000561-001.2-OF-002.html

11. Abdisaid M. Ali, "The Al-Shabaab Al-Mujahidiin: A Profile of the First Somali Terrorist Organisation," Institut für Strategie- Politik- Sicherheits- und Wirtschaftsberatung (ISPSW), June 2, 2008:

12. Andre Lesage, "The Rise of Islamic Charities in Somalia: An Assessment of Impact and Agendas," paper presented to the 45th Annual International Studies Association Convention, Montreal, Canada, March 17–20, 2004, 9.

13. Valter Vilko, "Al-Shabaab: From External Support to Internal Extraction," Minor Field Study, Dept. of Peace and Conflict Research, Uppsala University, March 2011, 5-6: pdf. The author describes how a shrinking flow of funds from emigrant communities is forcing the group to rely more and more on internal Somali sources of funding. Vol. 2, No. 3 | CTX 47

14. Tony Perry, "Woman Arrested in San Diego on Charge of Providing Money to Somali Terrorists," Los Angeles Times, November 15, 2010: http://latimesblogs.latimes. com/lanow/2010/11/woman-arrested-in-san-diego-oncharge- of-providing-money-to-somali-terrorists.html

15. Robert Patrick, "St. Louis Cabbie Gets 11+ Years for Sending Money to Terrorist Group,", last updated June 19, 2012: st-louis-cabbie-gets-years-for-sending-money-to-terrorist/ article_2a272094-ba3e-11e1-b919-0019bb30f31a.html/

16. Shinn, "Al Shabaab Tries to Take Control."

17. Kenneth Menkhaus, "African Diasporas, Diasporas in Africa and Terrorist Threats," in The Radicalization of Diasporas and Terrorism, Doron Zimmerman and William Rosenau, eds. (Zurich: ETH Center for Security Studies, 2009), 87–88.

18. Geoffrey Mosoku, "Kenya: Riyadha Officials Deny Links to Al-Shabab," AllAfrica, August 1, 2011:

19. "Immigrant Admits Funneling Money to Terrorist Group in Somalia,", November 4, 2011:

20. Ali, "The Al-Shabaab Al-Mujahidiin."

21. "Why Blockading Kismayo Will Not Weaken Shabab Financially," Inside the Insurgency, October 31, 2011:

22. MHD, "Life in Kismayo under Shabaab Rule: Shabaab Mobilizing for Defense of Kismayo," Somalia Report, February 12, 2012:

23. Khat, a plant native to the Horn of Africa and the Arabian Peninsula, is very popular throughout the Gulf states and North Africa as a traditional stimulant, and is often enjoyed in social groups the way Westerners drink coffee. Al Shabaab heavily taxes its sale.

24. Lauren Ploch, "Countering Terrorism in East Africa: The U.S. Response," Congressional Research Service Report, November 3, 2010, 21:

25. John Ngirachu, "Al Shabaab Militia's Tight Grip on ‘Desert' Charcoal Trade." allAfrica, November 13, 2011:

26. H.S. Puri,"Letter dated 18 July 2011 from the Chairman of the Security Council Committee pursuant to Resolutions 751 (1992) and1907 (2009) concerning Somalia and Eritrea addressed to the President of the Security Council, UN Security Council, July 18, 2011:

27. Mohamed Abdi, "Somalia's minister for agriculture accuses Alshabab for the farmers' low harvest," Network Al Shahid, March 24, 2010:

28. Tim Lister, "Fertile Territory for Al Shabaab in Chaos of Somalia," CNN, last updated February 23, 2012: africa/al-shabaab-guide/index.html?hpt=hp_c2

29. Abdulkadir Abdiraham, "Teenage Al-Shabaab Soldiers in Training," Demotix News, October 29, 2010: http://www. 30 Ngirachu, "Al Shabaab Militia's Tight Grip."

31. Ibid.

32. "The Saga of MV Iceberg: One Ship, Three Different Stories," Somalia Report, July 26, 2012:

33. Sarah Childress, "Somali Militants Try Piracy to Fund Attacks," The Wall Street Journal/Africa website, September 10, 2010: 052748703720004575477491009472882.html

34. Ibid.

35. Vilko, "Al-Shabaab: From External Support to Internal Extraction," 21.

36. Animesh Roul, "Lashkar-e-Taiba's Financial Network Targets India from the Gulf States," Terrorism Monitor, vol. 7, no. 19 (July 2, 2009): 8, retrieved from The Jamestown Foundation website:[tt_news]=35221&tx_ttnews[backPid]=412&no_cache=1

37. Laura Yuen, "‘Hawalas' Provide Lifeline to Impoverished Somalis," MPR News, April 29, 2009:

38. "Special report: In Africa, a militant group's growing appeal," Reuters, May 30, 2012:

39. Vilko, "Al-Shabaab: From External Support to Internal Extraction," 10.

40. Ibid.

41. Bedah Mengo, "Eastleigh Estate Nairobi has become Somali business hub," Hiiraan Online, March 13, 2011: has_become_somali_business_hub.aspx; and Parselelo Kantai, "Inside Garissa Lodge, Nairobi's Somali Trading Hub," The Africa Report, January 31, 2011:

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