In Sudan the era of the oil boom resulted in a flood in labor remittances that circumvented official financial institutions, thereby undercutting the state’s fiscal and regulatory capacity and fueling the expansion of the informal foreign currency trade. Initially, developments in Sudan paralleled those in Egypt as the boom witnessed the rise of an Islamist-commercial class that formed as a result of its successful monopolization of informal financial markets. However, in contrast to Egypt, by 1989 Sudanese Islamists were able to take over the levers of the state via a military-coup. This development was made possible by Sudan’s weaker state capacity and the extreme weakness of its formal banking system. As a result, the financial power of the Muslim Brotherhood continued to increase in relationship to the state as they continued to profit from participation in the lucrative speculation in black market transactions and advantageous access to import licenses.

In Somalia the boom in labor remittances inflows fueled a different type of informal economy. More specifically, while the oil boom period reduced the Somali state’s ability to regulate the economy as in Egypt and Sudan, the consequences of this development differed. In Somalia informal financial networks facilitated a thriving commercial sector comprised of firms oriented around clan families. It was not religious or class affiliations, but rather ethnic mobilization and conflict that became the most salient. This difference was due to two factors: the dearth of formally organized institutions (i.e., official banks, and publicly registered enterprises); and the fact that President Siad Barre pitted one clan against another in his search for legitimacy and financed a patronage system excluding clans and constituencies that opposed his rule. Thus, with the expansion of the parallel economy, the politics of ethnicity and personalistic networks quickly eclipsed the power of the state.

In Sudan the era of the oil boom resulted in a flood in labor remittances that circumvented official financial institutions, thereby undercutting the state’s fiscal and regulatory capacity and fueling the expansion of the informal foreign currency trade. Initially, developments in Sudan paralleled those in Egypt as the boom witnessed the rise of an Islamist-commercial class that formed as a result of its successful monopolization of informal financial markets. However, in contrast to Egypt, by 1989 Sudanese Islamists were able to take over the levers of the state via a military-coup. This development was made possible by Sudan’s weaker state capacity and the extreme weakness of its formal banking system. As a result, the financial power of the Muslim Brotherhood continued to increase in relationship to the state as they continued to profit from participation in the lucrative speculation in black market transactions and advantageous access to import licenses.

In Somalia the boom in labor remittances inflows fueled a different type of informal economy. More specifically, while the oil boom period reduced the Somali state’s ability to regulate the economy as in Egypt and Sudan, the consequences of this development differed. In Somalia informal financial networks facilitated a thriving commercial sector comprised of firms oriented around clan families. It was not religious or class affiliations, but rather ethnic mobilization and conflict that became the most salient. This difference was due to two factors: the dearth of formally organized institutions (i.e., official banks, and publicly registered enterprises); and the fact that President Siad Barre pitted one clan against another in his search for legitimacy and financed a patronage system excluding clans and constituencies that opposed his rule. Thus, with the expansion of the parallel economy, the politics of ethnicity and personalistic networks quickly eclipsed the power of the state.