UNIVERSITY OFHARGEISA

HARGEISA SCHOOL OF ECONOMICS

THE IMPACT OF MONEY EXCHANGE FLUCTUATION ON LOW INCOME

FAMILIES IN HARGEISA SOMALILAND

BY:

AHMED YUSUF HASSAN

A THESIS SUBMITTED TO THE FACULTY OF ECONOMICS

IN PARTIAL FULFILMENT OF THE REQUIREMENTS
FOR THE AWARD OF BACHELOR’S DEGREE OF ECONOMICS OF
UNIVERSITY OF HARGEISA

ADVISER BY:

MR. MOHAMED YUSUF ABDI

JULY 2019

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 DECLARATION

Ahmed Yusuf Hassan student from Hargeisa school of Economics at University of Hargeisa,
declare that this thesis is my original work and has not been presented for a degrees or any other
academic purpose award in any university or institution of learning.

Ahmed Yusuf Hassan Signature: __________ Date: __________

APPROVAL
I confirm that Ahmed Yusuf Hassan carried out this research thesis under my supervision and

guidance in partial fulfillment of the requirements for the award of bachelor’s degree in

economic art of University of Hargeisa.

Advisor: Mr. Mohamed Yusuf Abdi

Signature: ___________ Date: _____________

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 DEDICATION
We dedicate this thesis to our beloved parents who gave us life, more support, encouragement
and endless love to this academic achievement, also our beloved and helpful family, students,
lecturers, friends, and every one whole helped us and contributed slightest effort on our this
academic achievement.

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 ACKNOWLEDGMENT

First we would like to thank Allah to Allah; allow us to complete this thesis book. We praised
Allah for giving us strength, courage and health to finalize our study.

Our deepest appreciation thank go to our dear family particularly our beloved mothers and
fathers, brothers, sister hoping ALLAH to achieve his forgiveness and end up with them internal
paradise.

We would like to express our deep and sincere gratitude to our supervisor; Professor Mohamed
Yusuf Abdi by giving us the opportunity of carrying out this research project. His certainty to
provide the necessary information and read whole paper at all stages, and giving his sincere
guidance, comments and suggestion to bring this study to this form at the expense of his
invaluable time enriched our professional performance a lot. This paper would not have been
completed like this without his mentioned contribution, thanks for trusting on us.

We further take this opportunity to express our deep feeling and gratitude to all our university’s
lecturers for their tireless efforts throughout the period that we spent in the university. Thanks for
your helping on getting this study into this shape; you have great part on it.

We are very grateful to our honorable classmates for providing us support and moral judgment
throughout the period that we spent in this study and the period that we have taken in educational
field.

Last but certainly not the least, our very special, warm and deep thanks Is to each other, for our
each effort, hard work, commitment, encouragement, and cooperation on this thesis. We are
grateful to each other to have such, honorable and miraculous classmate, friend and partner

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 ABSTRACT
This study aims to investigate the Impact of Money Exchange Fluctuation on low income
families in 31 May district in Hargeisa, Somaliland. Somaliland exchange rate is unstable and it
is fluctuated daily. Since the central bank is not effective it is managed by independent money
exchangers, and this money exchange fluctuation has caused inflation that is unsustainable
having risen in all of the last six years excluding 2013. All the prices have risen but in particular
the food prices are higher than the other items. For instance, according to the Somaliland
National Planning 2016 CPI report in 2016 the food price increase hit 16.6%, while the non-food
items reached 12.6%. Further the exchange rate rose up to 26% during 2016 to April 2017. The
study sought the effect of the money exchange fluctuation on low income families. The study
employed a cross sectional survey design. Data was collected using a questionnaire from sample
size of 77low income families, who were selected using simple random sampling in May, 2019.
Data was analyzed using descriptive statistics, more over the study found that the money
exchange fluctuation affected Hargeisa’s low income families in the areas of food and education.
The low-income families reduced either the quality or the quantity of their food in order to cope
with the inflated prices, poor families also removed their children from school as they were not
able to pay the fees. Based on the above findings the researchers concluded that money exchange
rate fluctuation severely affects the low income families in 31 May district in Hargeisa
Somaliland. The researchers recommended that the government make the central bank work
effectively, to plan policies to tackle this money exchange fluctuations and to bring the control of
exchange rate to the central bank

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 LIST OF ABBREVIATIONS AND ACRONYMS
WB World Bank
CB Central Bank
GDP Gross Domestic Product
CPI Consumer Price Index
OECDD Organization for economic co-operation and development
BCA Current Account Balance
BKA Capital Account Balance
BRA Reserve Account Balance

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 LIST OF FIGURES
Figure 4.1 Money Exchange Fluctuation Effect On Your Family Income .................................. 19
Figure 4.2Money exchange fluctuation reduces family purchasing power parity ....................... 20
Figure 4.3The Money Exchange Fluctuation Affects The Poor Families More Than The Rich
Families. ........................................................................................................................................ 21
Figure 4.4 Printing More Money, Dollarization Economy, Mobile Money Transfer, Local
Production Being Very Low, Livestock Ban And Prolonged Droughts And Being Export
Oriented Are The Courses Of Money Exchange Fluctuation. ...................................................... 22
Figure 4.5 Long Lasting Money Exchange Fluctuation Can Lead To Inflation .......................... 23
Figure 4.6 Except Money Exchange Fluctuation Is There Any Factors That Effect On Low
Income Families ............................................................................................................................ 24
Figure 4.7 Low Income Families Are Most Vulnerable For The Money Exchange Fluctuation. 25
figure 4.8 low income families..................................................................................................... 26
Figure 4.9 Low Income Families Have No Skills Which They Can Manage Their Income
During Severe Money Exchange Fluctuations. ............................................................................ 27
Figure 4.10 Government Doesn’t Subsidies Low Income Families Through Limiting Money
Exchange Fluctuation.................................................................................................................... 28
Figure 4.11 Increasing of Unemployment Rate, Poverty Rate and Low Production Are Not
Effecting Families’ Income........................................................................................................... 29
Figure 4.12 Did You Receive Any Financial Support on Your Family Income ......................... 30

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 LIST OF TABLES
Table 3.1 sample frame ................................................................................................................ 13
Table 3.2Reliability Statistics ...................................................................................................... 15
Table 4.1 Demographic Information of Respondents .................................................................. 17
Table 4.1Correlation Table .......................................................................................................... 31

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Contents
DECLARATION ............................................................................................................................. i

APPROVAL .................................................................................................................................... i

DEDICATION ................................................................................................................................ ii

ACKNOWLEDGMENT................................................................................................................ iii

ABSTRACT ................................................................................................................................... iv

LIST OF ABBREVIATIONS AND ACRONYMS ....................................................................... v

list of figures .................................................................................................................................. vi

CHAPTER ONE ...................................................................................................................... 1

INTRODUCTION ................................................................................................................... 1
1.1 Background of the Study ....................................................................................................... 1

1.2 Problem statement ................................................................................................................. 2

1.3 Objectives of the study .......................................................................................................... 2

1.3.1 General objectives .......................................................................................................... 2

1.3.2 Specific objectives .......................................................................................................... 3

1.4 Research Questions ............................................................................................................... 3

1.4.1 Main Research Questions ............................................................................................... 3

1.4.2 Specific Research Questions .......................................................................................... 3

1.5 Hypothesis ............................................................................................................................. 3

1.6 Significance of the study ....................................................................................................... 3

1.7 Scope of the study ................................................................................................................. 4

1.7.1Geographical Scope ......................................................................................................... 4

1.7.2 Time Scope ..................................................................................................................... 4

1.7.3: Content Scope................................................................................................................ 4

CHAPTER 2 .............................................................................................................................. 5
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LITERATURE REVIEW ............................................................................................................ 5

2.1 Main categories of exchange rate .......................................................................................... 6

2.1.1. Flexible Exchange Rate Systems ................................................................................... 6

2.1.2. Managed Floating .......................................................................................................... 6

2.1.3. Fixed Exchange-rate System ......................................................................................... 6

2.2 Somaliland Background Money Fluctuations ....................................................................... 7

2.3 Theoretical Over View .......................................................................................................... 8

2.3.1 Neoclassicism: Purchasing Power Parity ....................................................................... 8

2.3.2 Balance of Payments Theory .......................................................................................... 9

2.4 Empirical review ................................................................................................................... 9

CHAPTER THREE: ............................................................................................................. 11

METHODOLOGY ................................................................................................................ 11
3.0 Introduction ......................................................................................................................... 11

3.1 Research Design .................................................................................................................. 11

3.2 Study Area ........................................................................................................................... 11

3.3 Sample Design..................................................................................................................... 12

3.3.1 Target Population ......................................................................................................... 12

3.3.2 Sample size ................................................................................................................... 12

3.3.3 Sample frame ................................................................................................................ 13

3.4Sampling Procedure ............................................................................................................. 13

3.5 Source of Data ..................................................................................................................... 14

3.5.1 Primary Data ................................................................................................................. 14

3.5.2Secondary Data .............................................................................................................. 14

3.6 Research Instruments .......................................................................................................... 14

3.6.1 Questionnaire ................................................................................................................ 14

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 3.7 Data Presentation Tools ...................................................................................................... 14

3.8 Data Presentation and Interpretation ................................................................................... 15

3.9.0 Testing validity ............................................................................................................. 15

3.9.1 Testing Reliability ........................................................................................................ 15

3.10 Limitation of the study ...................................................................................................... 16

3.10. Ethical Consideration ....................................................................................................... 16

CHAPTER FOUR ................................................................................................................. 17

DATA ANALYSIS AND INTERPRETATIONS OF THE STUDY ................... 17

4.1 Introduction ......................................................................................................................... 17

4.2 Demographic Information ................................................................................................... 17

4.3 How money exchange fluctuation effect on low income families? .................................... 19

Sources: primary source 2019 ............................................................................................... 22

4.4 Q3 Low income families ..................................................................................................... 25

4.5 To establish if there is significant relationship between money exchange fluctuation on low
income families ......................................................................................................................... 31

CHAPTER FIVE ................................................................................................................... 32

SUMMARY CONCLUSIONS AND RECOMMENDATIONS ............................ 32

5.1 Summary of the Findings .................................................................................................... 32

5.2 Conclusion........................................................................................................................... 33

5.3 Recommendations ............................................................................................................... 34

REFERENCE .......................................................................................................................... 36

APPENDIX A .......................................................................................................................... 38
RESEARCH QUESTIONAIRE ................................................................................................... 38

APPENDIX B .......................................................................................................................... 42

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Time Frame ................................................................................................................................... 42

APPENDIX C .......................................................................................................................... 43
PROPOSED BUDGET ................................................................................................................. 43

APPENDIX D .......................................................................................................................... 44
CRONBARCH’S ALPHA ............................................................................................................ 44

APPENDIX E .......................................................................................................................... 45
permission letter ............................................................................................................................ 45

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 CHAPTER ONE

INTRODUCTION
This chapter will cover the following areas, the background to the study, statement of the
problem, problem statement, specific objective, research questions, scope of the study and the
significance of the study and limitation of the study

1.1Background of the Study

Hargeisa is the capital city of Somaliland, the self-declared state that re-asserted from Somalia
and announced its independence on 18 May 1991.

After three years of Somaliland reassentation in 1994 the Somaliland government printed its own
currency which is comprised of 1 Somaliland shilling coin and 5, 10, 20, 100, 500 Somaliland
shilling Banknotes. In addition to the wars that Somaliland experienced with the British colonial
regime and the regime of Said Bare, other different civil wars exploded among SNM, and
between Somaliland’s newly born government and its own clans after the re-assertion. These
different wars resulted in a massive destruction of Somaliland’s economic and education
infrastructures, while many sectors are led by private companies.

Further, the exchange rate rose from 7700 to 9500 Somaliland shilling per 1 US Dollar from July
2016 to June 2017 (commerce of chamber, 2016, and 2017). Foreign currencies, particularly US
Dollars, are normally used in the country. People can use US dollars for every transaction
including the smallest transactions such as a bottle of water and this has implications for the
economy.

Exchange rate is the value of one currency for the purpose of conversion to another. For
example: today the rate of one dollar can be compared with Somali Shilling. 1 US dollar =
9720.00sl.sh. Exchange rate fluctuations are the increase or decrease in the value of currency as
against the other currency at international level.

The central bank provides exchange services for various currencies at the official government
rate, but most people prefer the better, although unofficial, rates provided by the remittance
(hawala) agents and moneychangers found on the streets of main cities. In October 1995 -98 the
official exchange rate of the Somaliland Central Bank was 3,550 shillings for 1 US dollar. In

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November 2000 the official exchange rate of the Somaliland Central Bank was 4,550 shillings
for 1 US dollar Later on, since the central bank was not strong enough to maintain the exchange
rate which it has set previously, the free exchange rate system has automatically come out and
caused the rate of exchange to fluctuate continuously. Unofficial exchange rates at the time
fluctuated between 4,000 and 5,000 shillings per dollar. In December 2008, the official rate had
fallen to 7,500 shillings per US dollar. The current exchange rate, as of May 2015, is 7,800
Shillings to 1 US Dollar, 2016 is 8000, 2017 is 8500 - 9000 2018 is 10000 -10200 and finally
2019 is 10,000 –9520 “Central Bank of Somaliland’’

. Easterly and Fischer (Easterly & Fischer, 2000) argue that the rich can protect themselves or
benefit from the effect of inflation better than the poor. The rich have better access to financial
instruments which helps protect them from inflation. Poor are more likely to have larger share of
their money in cash also the poor may depend on state-determined income more than the rich,
which is not influenced by inflation, consequently, inflation will reduce their real income.
Therefore, they found supporting evidence for their argument that inflation hurts the poor more
than the rich

Though this study aims to examine the impact of money exchange fluctuation on family income,
inflation also increases the poverty rate, and impacts economic growth. The researchers found
that there is a positive relationship between money exchange fluctuation and poverty.
Accordingly, the poverty rate increment has its impact on economic growth. Datt, Gaurav and
Martin (Datt, Gaurav & Martin Ravallion, 1996) studied 1957-1991 collective state data to
investigate the causes of poverty and found that higher rates of inflation results in higher poverty
rates. Blank (Blank, 1991)

It is undeniable that Somaliland’s inflation may also affect the economy of the country and the
poverty rate. The comparison of the GDPs to study the impact of inflation on the GDP is not
possible in the case of Somaliland because there is only one GDP estimate available, which was
conducted by World Bank in 2012. Yet it is likely to have a negative impact as Somaliland has
the fourth lowest GDP in the world. According to the 2012 figure, Somaliland’s GDP estimation
is 1.4 Billion US dollars with per capita GDP estimated at $347. The poverty rate in urban areas
is estimated at 29% and 38% in the rural areas in Somaliland; this study also found that there is a
high level of inequality in Somaliland (World Bank, 2014).

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1.2 Problem statement
For the last seven years Somaliland cost of living is becoming expensive especially for the low
income earners. As the prices continue to rise, it is evident that wages have remained largely
stagnant.

The decline of value Shilling against the United States America dollar resulted the high cost of
goods hence making production and transportation costs to escalate. The goods is purchased
in dollars thus a weaker shilling implies a higher price in purchasing the commodity. Weak
government intervention, the high cost of goods weaker shilling and Increase money fluctuation.

Somaliland’s community succeeded in building a peaceful state, but the government of

Somaliland has not yet succeeded in curing and controlling the exchange rate fluctuations, which
has occurred in the country as whole and in Hargeisa particularly, which caused that the family
consumption, expenditure is low or their purchasing power parity is near to the ground because
there are many factors surrounding which causes this problem including the low income, high
cost of commodity, high tax rate, cost importing goods, lack of business guidelines, inflation,
demand and supply changes, cost of inputs and exchange rate fluctuation etc. However, the
practical problem above all these mentioned is money exchange fluctuation on Somaliland
shillings, US dollar and Ethiopian birr, particularly directly affecting SLSH and dollar which are
mainly currency used in Somaliland for transactions. The exchange rate fluctuation of these
currency made consumption of the household critical problem and created confusion.

The underclass, are people who are at the bottom of a society having become victims of poverty
trap. This class is largely composed of the young unemployed, long-unemployed chronically
sick, disabled old, or single-parent (usually the mother) families.

1.3Objectives of the study

The purpose of this research is to evaluate the impact of money exchange fluctuation on low
income families in Hargeisa Somaliland.

1.3.1General objectives
1. The overall aim of this research is to discover the impact of money exchange fluctuation
on family income Hargeisa Somaliland.
2. To know the benefit of money fluctuation in the whole economy when output is greater.

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1.3.2Specific objectives
1. To explain how low-income families, feel money exchange fluctuations impact by
describing how they deal with this
2. To Establish How the Money exchange fluctuation effects Low income families in
Hargeisa Somaliland
3. To know the relationship between money fluctuations and the low income families of
Hargeisa Somaliland

1.4Research Questions
1.4.1Main Research Questions
1. What are the effects of money exchange fluctuations on Hargeisa low income families?
2. Does the money exchange rate fluctuation affect low-income families?

1.4.2Specific Research Questions

1. How does money exchange fluctuation effect low-income families’?
2. How low-income families, feel money exchangefluctuations?
3. Is there significant relationship between money fluctuations and the low income
families of Hargeisa Somaliland?

1.5 Hypothesis
There is significant relationship between money exchange fluctuation and low income families in
Hargeisa, Somaliland.

1.6Significance of the study

This study provides comprehensive detail about the impact of money exchange fluctuation on
low income families in Hargeisa Somaliland. The study explains how low-income families are
the most vulnerable to money exchange fluctuations, which can increase the poverty rate and
impact the economic growth of the country. Hargeisa community has lived with inflation for the
last couple of years, where the prices of goods were not sustained and frequently have been
increasing, including through money exchange fluctuation. The result of this study is an
improved understanding of the impact of money exchange fluctuation on family income, and
how they dealt with it.

3
This study will help non organization actors, Government And donors to formulate design
policies, strategies and enact laws that can alleviate food insecurity and maintain Families food
security enabling other affected areas to solve the problem of food insecurity and living
conditions of poverty .The findings will help the government towards achievement of
Development Goals which is eradicating absolute poverty, hunger and malnutrition And Also
Help Central Banking To solve Floating exchange rate in Hargeisa Somaliland

1.7 Scope of the study

1.7.1Geographical Scope
The research was conducted in Hargeisa (slums). This study was conducted On Area which live
Low Income Families where the poorest communities in Hargeisa live. The study targeted
underclass low income Families in the area.

Why we choose {slums} These Area have been chosen because they live for the poor families in
Hargeisa The low income Families are the most vulnerable especially because they do not have
any organization to help them out in sharing the heavy financial burden due to the high cost of
living and the steadily rising prices.

1.7.2 Time Scope

In regard to time spent on this research, its range from February up to June, 2019. Where the first
two months were allocated to the development and approval of the research proposal and the
next two months is mainly for data collection and analysis
1.7.3: Content Scope
The study intends to examine the impact of money exchange fluctuation on low income families
in Hargeisa, Somaliland.

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 CHAPTER 2

LITERATURE REVIEW
Money exchange fluctuations are a natural outcome of the floating exchange rate system that is
the norm for most major economies. The exchange rate between two currencies is that rate at
which one currency will be exchanged with another currency. It is also known as a foreign-
exchange rate, forex rate, Exchange rate of one currency versus the other is influenced by
numerous fundamental and technical factors, These include relative supply and demand of the
two currencies, economic performance, outlook for inflation, interest rate differentials, capital
flows, technical support and resistance levels, Low income families and so on As these factors
are generally in a state of perpetual flux, currency values fluctuate from one moment to the next.
But although a currency’s level is largely supposed to be determined by the underlying economy,
the tables are often turned, as huge movements in a currency can dictate the economy’s fortunes.
{Rupee- Dollar Fluctuations on Indian Economy}

Some of the models of Money fluctuations determination discussed below suggest that Money
fluctuations are jointly determined with macroeconomic variables such as domestic and foreign
money supplies, real incomes, interest rates, price level, and the balance of international
Payments {Journal Volume4, Number1—Winter1990}

There has been an ongoing debate on the appropriate exchange rate policy in developing
countries. The debate focuses on the degree of fluctuations in the exchange rate in the face of
internal and external shocks. Exchange rate fluctuations are likely, in turn, to determine
economic performance. In judging the desirability of exchange rate fluctuations, it becomes,
therefore, necessary to evaluate their effects on output growth and price inflation. Demand and
supply channels determine these effects(Wellink, 2013).

The goal of every economy is to have a stable rate of Money Fluctuate with its partners in trade.
However, it is obvious that in Somaliland, this goal has remained a mirage regardless of the fact
that the country has embarked on countless devaluation exercises in order to promote export and
also stabilize the exchange rate. The inability of the country to bring this goal to fruition has
continually diminished the welfare and standard of living of households and in fact affected the
macro economy adversely.

5
2.1 Main categories of exchange rate
1. Flexible Exchange Rate Systems
2. Managed Floating
3. Fixed Exchange-rate System

2.1.1. Flexible Exchange Rate Systems

The value of the currency is determined by the market, Ex. by the interactions of thousands of
banks, firms and other institutions seeking to buy and sell currency for purposes of transactions
clearing, hedging, arbitrage and speculation. So higher demand for a currency, all else equal,
would lead to an appreciation of the currency. Lower demand, all else equal, would lead to a
depreciation of the currency. An increase in the value of the currency is determined by the
market, the supply of a currency, all else equal, will lead to a depreciation of that currency while
a decrease in supply, all else equal, will lead to an appreciation. Most OECD countries have
flexible exchange rate systems {Mankiw9 Edition} the U.S., Canada, Australia, Britain, and the
European Monetary Union.

2.1.2. Managed Floating

A floating exchange rate in which a government intervenes at some frequency to change the
direction of the float by buying or selling currencies, often, the local government makes this
intervention, but this is not always the case. For example, in 1994, the American government
bought large quantities of Mexican pesos to stop the rapid loss of the peso’s value. The central
bank does not have an explicit set value for the currency; it also doesn’t allow the market to
freely determine the value of the currency. Example: Suppose that Thailand had a managed
floating rate system and that the Thai central bank wants to keep the value of the Baht close to 25
Baht/$. In a managed floating regime, the Thai central bank is willing to tolerate small
fluctuations in the exchange rate (say from 24.75 to 25.25) without getting involved in the
market.

2.1.3. Fixed Exchange-rate System

A system whereby the exchange rates of the member countries were fixed against the U.S. dollar,
with the dollar in turn worth a fixed amount of gold. Governments try to keep the value of their
currencies constant against one another. A country’s government decides the worth of its
currency in terms of either a fixed weight of gold, a fixed amount of another currency or a basket

6
of other currencies. The central bank of a country remains committed at all times to buy and sell
its currency at a fixed price. The central bank provides foreign currency needed to finance
payments imbalances.

2.2 Somaliland Background Money Fluctuations

Since the introduction of Somaliland notes and mint coins, the value of the currency has been
declining almost every year –. The economic system of Somaliland in urban residence is market
economy, thus the exchange rate in the country is primarily determined by the amount of
Somaliland shilling and foreign currency (dollar) in the market.

At the beginning Somaliland currency was not accepted in the country as a whole, in fact part of
the capital city, Hargeisa, didn’t recognize its validity. The initial printed quantity- which was 10
(ten) billion Somaliland shillings- was huge considering the supply of foreign currency (dollar)
and functional geographic area of Somaliland shilling, a week later the initial government rate
was forced to increase, allowing itself to correct automatically. Inseparability of Central Bank
laws and the right to use the printed money by the central government and uncontrolled pumping
of shillings to the market has exacerbated the matter further, leading the shilling to lose value in
greater rates The civil war which broke out in different regions of the country forced the
government to use illegally the money in the Central Bank to finance its war against clan
insurgents and clan leaders whom the governing administration- as well as later administrations-
exploited to disarm the rebels and to put to an end of the civil war.

It became a pattern that each administration prints and uses money whenever it needs- deficit and
debt finance- without having in mind a monitory policy to follow. The illegal exploitation of the
numerous shillings by the government makes the currency worthless. The central bank is an
active and its function is done by market exchange, traders, telecommunications and remittances.
Somaliland shillings lose their value rapidly. Currently, today exchange rate is 8000 to 10000
shillings per US dollar. A days ago, it was 10000 shillings per US dollar, and a decide ago 1994
it has 50 shilling per US, dollar nowadays the central bank of Somaliland has proposed a rules
that regulating the market, they said that the exchange rate per dollar is between 8000 - 9000

7
According to Osman Awed a citizen of Somaliland. He predicts the currency will disappear
soon, since the newly independent country is not stable, and the central bank does not manage
the financial system well.

The families that are income generate is lower than 1.75 per daily mentioned to live with low
standard of life and this is the standard measurement of the World Bank and united nation.

According to World Bank (2013), the urban poverty Rate in a Somaliland is Almost Identical to
The 26% urban poverty rate Recorded in Ethiopia. Rural Poverty in Somaliland Is Higher Than
Ethiopia {38% Compared 30%}.

Fluctuations in the exchange rate have been given an important attention for the presumed
influence it has on macroeconomic variables. Sachs and Warner (2005) stated that instability of
the exchange rate can reduce the standard of living of household by unnecessarily increasing the
cost of living and making the domestic currency to lose its purchasing power.

2.3 Theoretical Over View

In Post Keynesianism, because it is possible for aggregate quantity demanded to fall short of the
quantity supplied, there is no guarantee that all those who wish to be employed at the current
wage rate will find employment. In this environment, financial variables are crucial, as are
interest rates and agents’ attitudes toward liquidity. When agents shift toward more liquid forms
of saving, for example, so employment suffers. This places the economy on a new growth path
and therefore constrains future choices. The past affects the future and money matters in both the
short and long run.

2.3.1 Neoclassicism: Purchasing Power Parity

Power Parity and the Monetary Model. These were selected both because they are extremely
popular and they are presented as long run theories (particularly Purchasing Power Parity).
Beginning with the former, it argues that once exchange rates are taken into account, the average
price of goods and services worldwide should be equal.

Purchasing power parity is the economic theory that price levels between two countries should
be equivalent to one another after exchange-rate adjustment. The basis of this theory is the law of
one price, where the cost of an identical good should be the same around the world. Based on the
theory, if there is a large difference in price between two countries for the same product after

8
exchange rate adjustment, an arbitrage opportunity is created, because the product can be
obtained from the country that sells it for the lowest price.

e = π1-π2/1-π2

Where 'e' represents the rate of change in the exchange rate and 'π1' and 'π2'represent the rates of
inflation for country 1 and country 2, respectively. For example, if the inflation rate for country
XYZ is 10% and the inflation for country ABC is 5%, then ABC's currency should appreciate
4.76% against that of XYZ.

EXPECTED CURENCY APPRECATION = XYZ-ABC/1+ABC = 0.10-0.05/1+0.05 =0.05/1.05

= 4.76%

2.3.2 Balance of Payments Theory

A country's balance of payments is comprised of two segments - the current account and the
capital account - which measure the inflows and outflows of goods and capital for a country. The
balance of payments theory looks at the current account, which is the account dealing with trade
of tangible goods, to get an idea of exchange-rate directions.

If a country is running a large current account surplus or deficit, it is a sign that a country's
exchange rate is out of equilibrium. To bring the current account back into equilibrium, the
exchange rate will need to adjust over time. If a country is running a large deficit (more imports
than exports), the domestic currency will depreciate. On the other hand, a surplus would lead to
currency appreciation.

The balance of payments identity is found by:

BCA-BKA+BRA=0

Where BCA represents the current account balance; BKA represents the capital account balance;
and BRA represents the reserves account balance.

2.4 Empirical review

According to Bacchetta and Van Wincoop (2000) examine the impact of volatility on trade and
welfare in the context of both fixed and flexible exchange rate regimes, employing the general
equilibrium model on the assumption that uncertainty arises only from monetary and fiscal
policy. An interesting finding from their study is that the monetary stimulus in a country that
9
causes depreciation of its currency may not have much impact on its trade as depreciation of the
exchange rate on one hand reduces imports but on the other hand, the increase in domestic
demand relating to the monetary stimulus may increase imports in the same magnitude.

According to Kandil (2004)used different robust co integration and error correction techniques to
estimate a 4 -variables model where exports re regressed against world demand conditions,
relative prices and exchange rate. In their cross-country panel study, the results reveal a robust
evidence of significant and negative, short run and long run effects of exchange rate volatility on
export flows in eight Latin American Countries for a quarterly period 1973 -2004. Using a
sample of 33 developing countries,

According Oyovwi (2012)however argued that in many poor countries, the welfare gain from
expunging volatility could far outweigh the welfare gain from percentage point increase in
growth.

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 CHAPTER THREE:

METHODOLOGY

3.0 Introduction
This is third chapter of the research this involves the selection of a qualitative and quantitative
design and preparation for data collection. Decisions on how the sample will have framed and
developed, how entry to a research site was be gained, data collection methods and research
instruments, and analysis of data is discussedResearch methods, Study area, target population,
sampling methods, sample Procedure, Research Instruments, validity and reliability, ethical
consideration and many Areas were also discussed in this chapter.

3.1 Research Design

This research was used a descriptive analysis type of research, the researcher selected this kind
of topic because it is a well-known problem by the community & academicians and it needs to
describe & analyst it then the research was cover provide alternative solutions &
recommendations. The study aimed at collecting information from respondents on socio
economic challenges they faced, coping mechanisms and opinions in relation to the impact of
money exchange Fluctuation on low Income families, the study adapted both qualitative and
quantitative techniques in collecting data and targeted Families within the study area and later
based its findings on views of low income households in the area assuming them to be typical
of the whole group(Creswell, 2003; Kahn, 1993; Kothari, 2004).

3.2 Study Area

The study was carried out in ONE slum and this is SHEEKH SANCAANI(AYAX4) This slum is
a residential area for the middle and lower income citizens who are unemployed This
stratification is characterized by few families who can afford luxurious life while the rest wallow
in abject poverty. Great number of the population lives below poverty line characterized by lack
11
of proper housing, poor infrastructure, poor access to health care facilities and lack of quality
education. The area was purposely selected as a study location because it has a slum area which
was useful for the study. Major economic activities include running of selling of second hand
clothes, hairdressing, charcoal sale, welding, carpentry,and shoe repair and so on.

3.3 Sample Design

3.3.1 Target Population
Target population is a group of interest to the researcher which the researcher would like the
results of the study to be generalizable. In the study, the target population of this study will be
comprised of 350 internally displaced poor people (IDP) in SHEEKH SANCAANI, Hargeisa,
registered under the Ministry of National planning and development in Somaliland and central
bank of Somaliland department of exchange rate workers their number is 15 where the total
number of target population is 365. The research study concentrated on a target population
involved to Where Low Income Families Live in Hargeisa region, the study conducts in Hargeisa
the capital city in Somaliland.

3.3.2 Sample size

The sample was consisted of 77 respondents randomly selected from a list of 350IDP in Hargeisa
city using a data from MoNP&dev’t. This refers to the numbers of items selected from the
universe to constitute a sample. An optimum sample is one which fulfills the requirements of
efficiency, representativeness and reliability. Some sampling error may occur due to in
appropriate sample size which can be controlled by increase in sample size for high level of
precision. (Lebin & Rubin, 2006, pp378 and Kothari, 2004, pp174). The formula to find out the
sample size (n) of infinite population is given as under: (Kothari, 2004, page-179, para 1&2)

. .
n=

Where, n= sample size

z= the value of standard variation at a given confidence level and to be worked out from table
showing area under normal curve. p= sample proportion q= 1-p e = given precision rate or
acceptable error

12
When the population size is finite, the formula for sample size determination will be modified as
under.

. . .
n= ( ) . .

Now, the value of sample size or ‘n’ will be calculated by putting the formula of finite
population is as under:

. . .
n=
( ) . .

Where N = 350 (population)

z= 1.96 (desired confidence level is 95% and value obtained from table)

p= 0.5 (sample proportion).

q= 0.5 {(1-0.5) i.e. {1-p} e = 10% or 0.1 (precision rate or acceptable error)

By putting the value,

. ( . )( . )
n=
( ) . ( . )( . )
= 76.5 or 77
.

3.3.3 Sample frame

Table 3.1 sample frame
Category Target population Sample Size
Low income families 350 73
Central bank of Somaliland 15 4
department of exchange rate
Total 365 77

3.4Sampling Procedure
The study adopted simple random sampling technique to select the small and medium enterprises
that is involved in this study. Simple random sampling is a technique of selecting a sample in

13
such a way that each member of the population has an equal and independent chance of being
included in the sample (Oso, 2013).

3.5 Source of Data

The research was used both primary data and secondary data.

3.5.1 Primary Data

The primary data of research come the raw facts collected or general in a giving research for the
first time.

The primary data collection method explored the originality of data through gathering
information relevant to the study (Storey& William Kelleher 1999)

Also interviews was used. Interview helps to obtain relevant information that cannot be collected
by questionnaire. This tool was selected because it provides information which ensures the
capability of the data (Kumer, 1999).
3.5.2Secondary Data
The secondary data of the research come from already processed information the data was
retrieved from relevant text books, journals, the internet, and among others.
Secondary data collection surveyed methods supplementary to the above method where data was
obtained reading related literatures from different areas such as dissertations, text books, the
internet and other materials (such as academic journals, newspapers, etc.) and it boosted up the
usefulness to the study. Besides, the researcher used the secondary data in the literature review.

3.6 Research Instruments

3.6.1 Questionnaire
The researchers used to collect schedules with closed and open-ended questions. Primary data
aided the researcher to know the impact of money fluctuations on low income Families in the
study area. The information will provide insights to both the government and Non-Governmental
Organizations and also the victims of problem Oppenheim, A. (1992).

3.7 Data Presentation Tools

The researchers were Presented Data needed tools was used to show how variables interrelate or
affect each other. Depending on the nature of the study decided what type of tools required

14
presenting the data. This study had correlation type of relation between variables. One of the
means we were present were to use tables and graphs.

3.8 Data Presentation and Interpretation

The researchers used descriptive analysis to analyze data by used SPSS (statistical package for
social scientists) and Excel. However personal coding and categorizing data was done manually.
3.9.0Testing validity
The study applied content validity. Content validity is the extent to which a measuring
instrument provides adequate coverage of the topic under study (Kothari, 2004). In the
observance of the content validity of the instruments to be measured, this study will employ pre-
testing of instruments making use of experts. Validity of a measure is the degree to which it
accurately addresses research questions, hypothesis, and objectives, or the extent to which it
actually measures what it is intended to measure (Oso, 2013). Validity of instruments was
ensured through use of experts. The questionnaire was given to two experts to evaluate and judge
the relevance of each item in the instruments to the objectives. Validity is a comprehensive
construct that cannot be definitively measured in any one given statistic, and that this
instrumental testing property is often even less understood than reliability (Crocker and Algina,
1986).
3.9.1Testing Reliability
If a researcher administers an instrument to a respondent twice and gets the same results on the
second administration as the first instrument, then there is reliability of the instrument (Mugenda
and Mugenda, 1999). Reliability of the instrument refers to the degree to which the instrument
consistently measures whatever it is measuring (Amin, 2005). Reliability is concerned with
consistency, dependability or stability of a test(1996). According to Kothari (2004), the
reliability of instruments is the ability of the study to stay stable over time of period. As this
describes the steadiness of results of an instrument internal consistency approach was used
employing Cronbach's alpha. The result of the reliability analysis obtained by this study was
0.857 greater than the acceptable standard which is 0.7 (Pavot, Diener, Colvin & Sandvik, 1991).
Table 3.2Reliability Statistics
Cronbarch’s Alpha Cronbach's Alpha Based on Standardized Items N of Items
0.657 0.646 17

15
3.10 Limitation of the study
There was several challenges and limitations that the researchers faced during this study in order
to fully complete and include fallowing: -

1.Extraneous variables: This is variables which will be beyond the researcher’s control such as
respondents’ honesty, personal biases and uncontrolled setting of the study.
2.Questionnaire retrievals: Not all questionnaires may be returned completely answered nor
even retrieved back due to circumstances on the part of the respondents such as travels
sickness, hospitalization and refusal/withdrawal to participate. In anticipation to this, the
researcher will reserve more respondents by exceeding the minimum sample size. The
respondents also were reminded not to leave any item in the questionnaires unanswered and
were closely followed up as to the date of retrieval.
3.Adapting and using the most appropriate statistical tools to come with precise result and
findings
4.Availability of data: This is also another limitation because there is lack of reference such as
books and related reports, and this makes impossible to obtain sufficient information about
the research

3.10. Ethical Consideration

The purpose of the study was explained verbally and written to the eligible respondents.
Confidentiality and anonymity was assured to the respondent and also these Ethics is very
necessary our research.

1. The researcher will request for permission through a written request to the reward on
employee performance included in the study.
2. Not harming or forcing the respondents to take part of the study
3. Freedom of response, I am not share Another person in his information

16
 CHAPTER FOUR

DATA ANALYSIS AND INTERPRETATIONS OF THE STUDY

4.1 Introduction
The research study was designed to find out the impact of money exchange fluctuation on family
income in SHEEKH SANCAANI District Hargeisa. The purpose of data analysis is to give the
findings of the impact of money exchange fluctuation on family income in AYAXA4 district,
Hargeisa and the way that the money exchange fluctuation effect on family income

4.2Demographic Information
This part presents the background information of the respondents who participated in the study.
The purpose of this background information was to find out the characteristics of the respondents
and show the distribution of respondents in the study. The demographics tackle the gender of
respondents, age, marital status, Level of Education and their Occupations by respondents

Table 4.1 Demographic Information of Respondents

Respondents Frequency (F) Percentage (%)
Gender
Male 34 44.2
Female 43 55.8
Total 77 100.0

Level of Education

Primary 8 10.4
Secondary 13 16.9
University 32 41.6
Post Graduate 4 5.2
Other 20 26.8
Total 77 100.0

Age
20-30 30 39.0

17
 31-40 15 19.5
41-50 14 18.2
ABOVE 51 18 23.4
Total 77 100.0

Marital status
Single 24 31.2
Married 38 49.3
Divorced/ Separated 7 9.1
Widowed 8 10.4
Total 28 100.0
Occupation
Employee 31 40.3
Unemployment 46 59.7
Sourc
Total 77 100
e:
Primary Data (2019)
The above tables present the findings on the demographic characteristics of respondents. The
demographics are presented in forms of Gender respondents, Level of Education, Age, Marital
status and Level of Experience by respondents of SHEEKH SANCAANI population and Central
BANK staffs, Hargeisa Somaliland
The gender of the respondents consisted of male and female, 55.8 %( n=43) of the respondents
were female and 44.2% (N=34) of them were male, so the majority of the respondents were
female, this implies that the researchers were not biased since we researched on both genders
On the Education characteristics of respondents were majority of the respondents were for
University (degree) that constituted 41.6% (N=32) of the respondents, the uneducated (other)
candidates were 26.0% (N=20), Secondary level is 16.9% (N=13) of the respondents, while the
primary graduates were become 10.4% (N=8) in the total respondents and finally Post Graduates
are 5.2% (N=4) of respondents. The findings on this imply that majority of the respondents were
educated, it is of no doubt that researcher attained data from the educated people.

18
The age categorization of respondents age present findings which show that the Most of the
respondents were in the age of 20-30 (N=30) were 39.0%, the second most age categories
areAbove 51 (N=18) were 23.4% and the third categories are at the age 31-40years (N=15) were
19.5 and the least categories are 41-50 (N=14) were 18.2%.
On the marital status of the respondents, the findings were that majority of the respondents were
Married (N=38) with 49.3% of the respondents but the Single respondent were (N=24) with
31.2%% and those who widowed were (N=8) 10.4% of respondents while the divorced are
(N=7) with 9.1% in the total number of the respondents. The findings reveal that responses were
attained from responsible respondents since majority are married
On the occupation respondents, the findings were the majority of the respondents were
unemployment and 59.7% (N=46) while 40.3% (N=31) of respondents are employed. It indicates
the majority of research respondents are female who are recently unemployed

4.3How money exchange fluctuation effect on low income families?

Figure 4.1 Money Exchange Fluctuation Effect on Your Family Income

53.2

28.6

7.8
6.5
3.9

AGREE STRONG AGREE NO COMMENT DISAGGREE STRONGLY

DISAGREE

Source: Primary Data 2019

4.3.1 it shows that The Above par chart respondents responded by 53.2 percent said agree, 28.6
percent said strongly agree, 7.8 percent of respondents said no comment while 6.5 percent said

19
disagree and 3.90 percent said strongly disagree that means, the money exchange fluctuation can
effect majority of the families

Figure 4.2Money
Money exchange fluctuation reduces amily purchasing power parity
reduce family

4%
17%

39% Agree
6%
Strong Agree
no comment
Disaggree
strongly disagree
34%

Source: Primary Data 2019

The Above pie chart 4.3.2 it shows that
tha respondents responded by 39 percent said Agree,
34percent said
d Strong agree, while 6 percent said no comment, 17 percent said disagree and 4
percent said strong disagree that means that money exchange fluctuation can cau
cause to reduce
family purchase power, so their consumption has decreased.

20
Figure 4.3 The Money Exchange Fluctuation Affects The Poor Families More Than The
Rich Families.

40.0
36.4
35.1
35.0
30.0
25.0
20.0 16.9
15.0
10.4
10.0
5.0 1.3
0.0
Agree Strong Agree no comment Disaggree strongly disagree

Source: Primary Data 2019

The results on figure 4.3.3 shows that majority of communities agreed The money exchange
fluctuation affects the poor families more than the rich families 36.4%, Strong agree 35.1%, no
comment 10.4%, disagree 16.9 Strong Disagree 1.30% these results Shows that the money
exchange fluctuation affects the poor families more than the rich families .

21
Figure 44 Printing More Money, Dollarization Economy, Mobile Money Transfer, Local
Production Being Very Low, Livestock Ban And Prolonged Droughts And Being Export
Oriented Are The Courses Of Money Exchange Fluctuation.

35.1
32.5

16.9
11.7

3.9

AGREE STRONG AGREE NO COMMENT DISAGGREE STRONGLY

DISAGREE

Sources: primary source 2019

The above par chart shows 32.5 percent of respondents said agree, 35.1 percent of respondents
said strongly agree, 16.9 percent of respondents said no comment, while 11.7 of respondents said
Disagree and 3.9 percent of the respondents said Strongly Disagree.

22
Figure 4.5 Long Lasting Money Exchange Fluctuation Can Lead To Inflation

32.5 32.5

20.8

11.7

2.6

AGREE STRONG AGREE NO COMMENT DISAGGREE STRONGLY DISAGREE

Source: Primary Data 2019

The above bar chart 4.3.5 show the percentage respondents of 32.5 percent said agree, 32.5%
percent said strong agree,11.7% percent said no comment,20.8% percent said disagree and
2.60% percent said strong disagree, so that the most respondents said agree and strong agree that
means the huge reason of inflation is caused by money fluctuation so there is positive
relationship between Inflation and money exchange fluctuation so that, the government should
be create the Strong central bank who control the money exchange fluctuation.

23
Figure 4.6
6 Except Money Exchange Fluctuation Is There Any Factors That Effect On Low
Income Families

34%

yes
66% no

Source: Primary Data 2019

the above pie chart 4.3.6 shows that the respondents of questionnaire responded 66% percent
said Yes, and 34 percent said No, this means that other factors have caused
sed in low income
families the factors that respondent has told as unemployment, low production, poverty, bad
governance and low infrastructure

24
4.4 Q3Low income families
Figure 4.7Low Income Families Are Most Vulnerable For The Money Exchange
Fluctuation.

44.2

33.8

11.7
9.1

1.3

AGREE STRONG AGREE NO COMMENT DISAGGREE STRONGLY DISAGREE

Source: primary source

The above bar chart 4.4.1 shows that the percentage respondents of questionnaire 44.2% percent
said agree, 33.8%percent said strongly agree, 11.7% percent said No comment, 9.1% percent
said disagree and 1.30 percent said strongly disagree so that this bar chart have shown that the
most vulnerable of money exchange fluctuation is Low income families in Somaliland because
these people should use local money.

25
FIGURE 4.8 low income families

33.8 35.1

15.6 14.3

1.3

AGREE STRONG AGREE NO COMMENT DISAGGREE STRONGLY

DISAGREE

Source: primary source

The above bar chart 4.4.2 shows that the percentage respondents of questionnaire 35.1% percent
said strongly agree 33.8 percent said agree, 15.6 percent said no comment 14.3percent said
disagree and 1.3percent saidstrongly disagree so that this bar chart shows that the impact of
money exchange fluctuation in Somaliland is large especially in Hargeisa,this increased poverty,
and low income families has become most victims of money exchange fluctuation.

26
Figure 4.9 Low Income Families Have No Skills Which They Can Manage Their Income
During Severe Money Exchange Fluctuations.

31.2
29.9

16.9 16.9

5.2

AGREE STRONG AGREE NO COMMENT DISAGGREE STRONGLY

DISAGREE

Source primary source 2019

From above par chart 4.4.3 shows that the respondents of questionnaire responded by 31.2%
percent said agree, 29.9% percent said strongly agree, 16.9% said no comment 16.9% percent
said disagree and 5.2% percent said strongly disagree, this means that low income families has
no skills inSomaliland government should build the skills of low income families and give talent
work to survive the situation of money exchangefluctuations.

27
Figure 4.10GovernmentDoesn’t Subsidies Low Income Families Through Limiting Money
Exchange Fluctuation.

31.2

20.8
18.2
15.6
14.3

AGREE STRONG AGREE NO COMMENT DISAGGREE STRONGLY DISAGREE

Source: primary source 2019

From above par chart 4.4.4 shows that the respondents of questionnaire responded by 31.2%
percent said agree, 18.2% percent said strongly agree, 20.8% percent said no comment,14.3%
percent said disagree and 15.6% percent said strongly disagree this means that Somaliland
government has not subsidies in the low income due to implemented well

28
Figure 4.11Increasingof Unemployment
nemployment Rate, Poverty Rate and
and Low Production Are Not
Effecting Families’ Income

strongly disagree 33.8

Disaggree 16.9

no comment 13.0

Strong Agree 27.3

Agree 9.1

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0

Sources: primary source 2019

the above par chart 4.4.5 shows that the respondents of questionnaire responded 33.8% percent
said strongly disagree, 27.3% percent said strongly agree, 16.9% percent said Disagree, while
16.9% percent said 9.1 percent said Agree this
no comment and 9.1% means that the
unemployment, poverty and low production are the variables that effect on low income families
in Somaliland
aliland especially IDPs places where live most victims of poor families because
scarcity of job and lack of local production are not exist in our country .

29
Figure 4.12 Did You Receive Any Financial Support on
on Your Family Income

yes
39%

no
61%

yes no

Sources: primary source 2019

The results on pie chart 4.4.6 also shown that majority of communities has not access a financial
% percent has answer that don’t ha
support because 61% have
ve a financial support and 39
39% percent has
answer that they have a financial support, The reasons that the low income families caused that
the poor families have not access a financial support are cause the laws of banks has had to
borrowing the poor families due to afraid for risk and the government don’t have subsidies due to
the low budget.

30
4.5To establish if there is significant relationship between money exchange fluctuation on
low income families
Table 4.1The Relationship Between Money Exchange Fluctuation And Low Income Families

Correlations
Money exchange
fluctuation low income families
money exchange Pearson Correlation
1 .0371
fluctuate
Sig. (2-tailed) .001
N 77 77
low income families Pearson Correlation
.0371 1

Sig. (2-tailed) .001

N 77 77

Correlation is significant at the 0.01 level (2-tailed).

Source: primary source 2019
Pearson linear correlation analysis shows that there is strong relationship between money
exchange fluctuation and low income families where (r = 0.371) at 0.01 level of significance.
The value indicates that there is a close relationship betweenmoney exchange fluctuation and
low income families since the level of significance is less than 0.05. The findings imply that
there is a significant positive relationship between money exchange fluctuation and low income
families and the economic development in Somaliland.Therefore, hypothesis (Ho)was accepted
saying that there a significant relationship between money exchange fluctuation and low income
families in Hargeisa Somaliland.

31
 CHAPTER FIVE

SUMMARY CONCLUSIONS AND RECOMMENDATIONS

5.0Introduction

This chapter presents the findings, conclusions and recommendations drawn from the study.
From the analysis and data collected the following discussions, conclusions and
recommendations were made. The response was based on the objectives of the study and areas
for further research suggested.

5.1 Summary of the Findings

This investigation was to search out the demographic characteristics of the respondents. This
result indicated the majority of the respondents are female 55.8 percent, it also showed the
majority of the respondents had university level 41.6 percent, while majority of the respondents
their age between 2o-30 and their percentage is 39.0, on the other hand the majority of the
respondents are married 49.3 percent and the majority of the respondents are unemployment or
joblessness 59.7 percent

The study findings were the majority of the respondents 81.8% said that the Money exchange
fluctuation can Cause to reduce family purchasing power parity, We found that the majority of
the respondents agreed The money exchange fluctuation affects the poor families more than the
rich families because 71.5% has told that the effect of exchange rate has more effect poor
families than rich community, the majority of the respondents 67.6% said Printing more money,
Dollarization economy, Mobile money transfer, Local production being very low, Livestock ban
and Prolonged droughts and being export oriented are the causes of money exchange fluctuation,
the study findings were the majority of the respondents 65.0% said Long lasting money
exchange fluctuation can lead to inflation, finally the majority of the respondents 66.0% said
there’s another factors that effect on low income families such like unemployment, droughts,
inflation, low production and so, on

The study findings were the majority of the respondents 78% said Low income families are most
vulnerable for the money exchange fluctuation, while the majority of the respondents said , on
the other hand the majority of the respondents 61.1 said Low income families have no skills

32
which they can manage their income during severe money exchange fluctuations, while 31.2% of
the respondents said Government doesn’t subsidies low income families through limiting money
exchange fluctuation, although the majority of the respondents 50.7% said increasing of
unemployment rate, poverty rate and low production are not effecting families income which
means all of this factors are effect family income and also finally the majority of the respondents
61% doesn’t receive any financial support

Pearson Linear correlation analysis shows the correlation between money exchange fluctuation
and low income families in Hargeisa Somaliland. The level of significance was 0.001. The sig
figure of 0.01 indicates that there was a relationship between money exchange fluctuation and
low income families in Hargeisa. This is because (0.01< 0.05). Therefore, null hypothesis was
rejected saying that there a significant relationship between money exchange fluctuation and low
income families in Hargeisa Somaliland

5.2 Conclusion
Money exchange fluctuations have had an extreme effect on low income families, whether it is
impacting their commodity basket, education or even their moral. One of the core things that
make them more vulnerable is that the price of food items and the exchange rate have risen.
Since most of the poor families in Hargeisa receive their income in Somaliland shillings, while
many transactions take place in USD (including but not limited school fees and electricity bills)
both inflation and exchange rate fluctuation effects them. Further this can lead poverty; though
there isno poverty estimation study with the exception of one by the World Bank carried out in
2014, the participants expressed that their situation had worsened due to the inflation rates.
Therefore, low income families who have been effected by the inflation caused by the exchange
rates have removed their children from the schools since they could not pay school fees while
others have sent them to lower quality and cheaper schools that they can pay for.

The core reasons that market the low income families victims or more vulnerable are that the low
income families receive their income in Somaliland shillings which decreases whenever the
exchange rate decreases. Furthermore, since many transactions are based in USD like house
rents, school fees and so on this forces them to exchange the money

33
Shames a 54-year businessperson and mother, said “Though I feel that I and my family are better
comparing to the neighboring houses since I do not use in USD in any of my transactions
excluding the house rent and the electricity bill while I receive this amount from the abroad. This
mean that any way these money exchange fluctuations has affected me because I make a
business in the livestock of meat market and the number of transactions that I used to make last
year reduced extremely”. She continued, saying that butchers sell less meat per day so they buy
less livestock in return and this is because the prices rose and the people who are able to buy
meat become fewer.

5.3 Recommendations
Based on the findings of this study, the following recommendations have been suggested which
are: To Central Bank of Somaliland

The capacity of Central Bank will need to be addressed. Such as:

 The government of Somaliland Should be allowed the central bank to be Independent

 Policy issues and implementation- In addition to the supervisory role, the central bank is
tasked with monetary policy and currency issues. Specific areas for assistance here will
include: technical advice on design and issue of currency; experts to assist
withformulation of monetary policy (for example, based on controlling inflation
rate), including introduction of monetary policy instruments and policy
implementation, as the need for various options (for example, open market operations)
becomes clear; and Development of a research function within the bank with capacity
for statistical collection and analysis of data, particularly with reference to balance of
payments.
 Organize exchange visits to other countries with functioning central bank.
 Support in developing and operationalizing the strategic plan.
 The central bank to be control floating exchange rate and used monetary policy

To The Government of Somaliland

 The government should adopt policies to reduce the foreigndependency by using imports
substitution policy.

34
 The government subsidy Low Income Families when increase Foreign money{USD}
because the respondent Interview TheyAnswered they dependent in local Money {SLSH}
 Since money supply and exchange rate affect directly the inflation in the long and short
run, it is evident that the instability of themoney exchange fluctuations in Somaliland for a
long time is caused by excess supply of money and the deterioration of the exchange rate
inSomaliland shilling against foreign currency so the government of Should use fixed
exchange rate to establish in the exchange rate.

35
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37
 APPENDIX A

RESEARCH QUESTIONAIRE
Dear respondent:

We are senior students, studying Bachelors’ Degree in Economics from University of Hargeisa
(UOH). As partial fulfillment for the award of our degree, we required to write thesis on this
title. The study is intended to determine impact of money exchange fluctuation on low income
families in Hargeisa, Somaliland.

This questioner will help us to collect necessary data for our research paper, please provide the
following information to the best of your ability, and kindly return your completed questionnaire
to the researcher. Also, information will be treated confidential and results will be reported only
in aggregate form.

If you have any question or need further information, please do not hesitate to contact with us
through the phone numbers or emails provided.

1. AHMED YUSUF HASSAN

Your Sincerity_______________________________

SECTION A

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Personal information

Kindly provide the following information by checking (√) the most relevant alternative

Q1: Gender

A. Male
B. female

Q2: age

A. 20- 25
B. 26-30
C. 31-36
D. above 36

Q3: Marital status

A. single
B. married
C. divorced
D. window

Q4: Education level

A. :primary
B. secondary
C. university
D. none

Q5: What’s your occupation?

A. Employment
B. Unemployment

SECTION B

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MONEY EXCHANGE FLUCTUATION

Indicate the following information in the item by checking (√) the alternative most appropriate to
you or by filling in the blanks where appropriate. Do not tick more than one alternative on one
item.

Key: SA= Strongly Agree, A=Agree, NC=No Comment, DA= Disagree, SDA= Strongly
Disagree

STATEMENT RESPONSE
SA A NC DS SDA
1. Money exchange fluctuation can effect in your family
income.
2. Money exchange fluctuation can Cause to reduce
family purchasing power parity.
3. The money exchange fluctuation affects the poor
families more than the rich families.
4. Printing more money, Dollarization economy, Mobile
money transfer, Local production being very low,
Livestock ban and Prolonged droughts and being export
oriented are the causes of money exchange fluctuation.
5. Long lasting money exchange fluctuation can lead to
inflation.

6. Is there any factors that effect on low income families?

A. Yes
B. No

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SECTION C
Low income families
Indicate the following information in the item by checking (√) the alternative most appropriate to
you or by filling in the blanks where appropriate. Do not tick more than one alternative on one
item.

Key: SA= Strongly Agree, A=Agree, NC=No Comment, DA= Disagree, SDA= Strongly
Disagree

STATEMENT RESPONSE
SA A NC DS SDA
1. Low income families are most vulnerable for the money
exchange fluctuation.
2.
3. Low income families have no skills which they can manage
their income during severe money exchange fluctuations.
4. Government doesn’t subsidies low income families through
limiting money exchange fluctuation.
5. increasing of unemployment rate, poverty rate and low
production are not effecting families income

6. Did you receive any financial support on your family income?

1. Yes
2. No

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 APPENDIX B

TIME FRAME

No Duration Activity

1 25 Feb, 2019 – May 5 2019 Proposal writing

2 10 May 2019 - 18 May 2019 Prepared research questionnaires

3 20 May 2019 – 27 May 2019 Gaining access of the study sites

4 30 May 2019 - 1 Jun 2019 Submission of the proposal

5 3 Jun 2019 – 20 Jun 2019 Analyze data

6 21 Jun 2019 – 25 Jun 2019 first draft submission

7 25 Jun 2019 – 28 Jun 2019 Submission of final draft of thesis

8 First July 2019 Printed the thesis book

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 APPENDIX C

PROPOSED BUDGET

ACTIVITIES COSTS

Transport and Refreshment $45

Printing and Binding $30

Internet use $12

Stationary tools $17

TOTAL $109

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 APPENDIX D

CRONBARCH’S ALPHA

Cronbarch’s Alpha Internal Consistency

α ≥ 0.9 Excellent

0.9 > α ≥ 0.8 Good

0.8 > α ≥ 0.7 Acceptable

0.7 > α ≥ 0.6 Questionable

0.6 > α ≥ 0.5 Poor

0.5 > α Unacceptable

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 APPENDIX E

PERMISSIONLETTER
Researcher's Curriculum Vitae

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