Author Archives: Mohammed Dahir Ahmed
Somaliland has in abundance investable natural resources such as minerals, oil, marine resources, frankincense, livestock, and various other raw materials.
The private sector is the backbone of Somaliland economy and the biggest employment generator. However, it has inherent limitations which limit its potential to expand and pool together capital in the form of shareholding. The Majority of Somaliland businesses are sole proprietorship, family owned and partnerships. There are few shareholding companies, who operate on the basis of mutual trust rather than systematic corporate governance frameworks where the rights of shareholders are protected. It is time that Somaliland private sector should operate in a formal framework where operations and investment are not only done on individual trust and clan linkages but internationally accepted formal corporate governance frameworks.
Piracy in the Gulf of Aden and Indian Ocean started in 2005 by Somalia pirates and reached its climax in 2011 when they have attempted to hijack 237 vessels and at year’s end, seized 11 vessels, keeping a total of 216 people as hostages. At the time pirates used to make on average 2 million dollars for every ship seized and ransomed.
According to the World Bank; Promoting a well-functioning, competitive private sectors is a major undertaking for any government, especially for one with limited resources and technical capabilities.
Somaliland is a small nation in the Horn of Africa with a population of around four million inhabitants. Its economy is dependant on Diaspora remittance and livestock export to the Arab gulf countries. It has an infancy stage banking and financial services industry dominated by remittance business. As a result of anti money laundering regulations in the remittance originating countries in North America and Europe, remmitance lifeline to Somaliland is always at risk of disruption unless local regulatory environment and anti money laundering fighting mechanisms are installed and applied rigorously.
Written by Mohammed Dahir Ahmed
One of the somber challenges faced by Somaliland private sector is access to finance regardless of its form-Islamic or conventional. In a survey done by the World Bank, 48.8 percent of the firms surveyed in Somaliland indicated that access to finance as the number one constraint as far as doing business is concerned compared to a world wide average of 16.9 percent. It is a well documented fact that access to finance creates innovaton, job creation and growth. In Somaliland, formal and regulated financial services are almost non-existent, neverthless informal and unregulated financial services exist.
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.
The financial services sector in Somaliland is presently dominated by the remittance business, which offers such services as well as checking accounts. However, several banks have obtained licenses from the Somaliland Central Bank, under the Islamic Banking Act.
Somaliland is one of the leading markets of mobile banking platforms in Africa. It has been acknowledged by renowned individuals, such as Bill Gates of Microsoft, and international finance and development institutions, for its innovation and customer reach. It has made easy payment systems for goods and services. It is also free, unlike in most other countries.