Challenges Faced By Somaliland Small and Medium Sized Enterprises

In Somaliland, the small and medium enterprise (SME) sector is the biggest income and employment generator. It hosts thousands of people and is the largest business sector. SMEs that trade in clothes, food, agricultural products, consumables, gold, beverages and fruits are visible on the streets of every city and town of Somaliland. And these traders support families who may find it difficult to get alternative sources of income.

In addition, as a result of the 1990s civil war, many families lost their breadwinner (father), which in turn forced the mother to strive for sustaining the household income. Since education for girls and women is minimal in Somaliland, mothers often turn into small business operators. Those who have inherited some assets or have received some support from their relatives in the Diaspora entered into gold retailing and small scale trading, which can be seen on the Dubia-Wajale-Somaliland route. Ultimately, they support their families and close family members through income earned in this sector that resides on the fringes of formality and informality.

Hence, it is very clear that SMEs are the backbone of Somaliland’s economy. No doubt, then, that it deserves appropriate technical, financial, legal, and political support from the top.

Although the private sector in general, and the SME sector specifically, take the lion’s share in the development of Somaliland’s economy and contribute significantly to household income, it is increasingly facing many obstacles. The challenges vary in both nature and magnitude.

Enterpreneurs working in the sector are often uneducated. The unavailability of entrepreneurship courses and one-stop business set up information centres is a huge problem. Thus, it is easy to find new entrenpreneurs making unnecessary mistakes, such as starting small partnerships with oral agreements and without sufficient and adequate feasibility studies. This results in quick dissolution of the businesses.

There are no strong financing schemes that target SMES. Commercial banking and micro-finance institutions targeting SMEs are not available in Somaliland. And this puts further strain on those businesses that face shortage of liquidity.

Lack of basic knowledge of book-keeping, sales, marketing and business planning further complicates the problems the SME sector in Somaliland is facing. Non-existence of periodic workshops on evaluation of business health, entreneurship and business management training is another plight.

Further, the regulatory framework in Somaliland is not conducive to SMEs. There is almost no commercial legal framework and commercial arbitration mechanism at SMEs. Hence, conflicts are often resolved abruptly.

Lack of linkages with international and regional businesses continues to erode the chance of sharing best business practices. The pain is even more intense for female entrepreneurs, who face inherent stereotypes and cultural bottlenecks.

Recently, university graduates in Somaliland are opting to start their own businesses, instead of seeking employment by others. They too are affected by the absence of an established support system.

Without support, there is a chance for them to fall prey to terrorist groups, such as al-Shabaab, those who smuggle people to European countries, and mafia cartels such as the piracy cartel. Thus, youth unemployment sometimes results in youth turning to undesirable addictions with subsequent health hazards, such as HIV and AIDS.

The absence of non-government bodies specializing in private sector development draws a picture of lack of national importance to the donor and UN agencies. The non-existence of professional bodies with an international standing such as certified public accountants, commercial lawyers and business tax experts further isolates the SMEs sector in Somaliland as no man’s land. Adding to this is the lack of SMEs associations, lobby bodies, and special parliamentary committees.

Sadly, not even the media gives sufficient attention to SMEs. It is unfortunate that the nerve centre of our economy is left unattended by all stakeholders. We should have realised that SMEs are the basis of our survival, as an economy. We cannot afford to give low attention and inadequate support to them.

Hence, it is time for Somaliland to stand for SMEs. Crafting the essential institutional systems that enhance their growth is a timely issue for us.

By:Mohammed Dahir Ahmed


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