somali banking system

Somalia Banking: Transfers, Challenges And Opportunities

January 1, 2013
Author(s): Victor Owuor Category: African Banking, Somalia Economy
Publication Type: Market Sector Report
  • This paper is a primer that discusses the challenges and opportunities of Somali banking. A foreign investor interested in Somalia would need answers to the following questions:

    • How do investors connect their money with projects?
    • What type of banking institutions already exist?
    • How are existing institutions used?
    • Why aren’t there any “traditional” investment banks in Somalia?

    The paper presents three avenues used for transferring foreign currency into Somalia. These range from the ubiquitous Hawala system to “investment-in-kind” and cross-border currency movements. Recent examples of the documented uses of each channel are provided in the primer. Methods for accessing funds already in the country are also highlighted. Under conventional financial protocols, these funds should be accessed from well-established banks, finance houses and foreign exchange (Forex) bureaus. However, the Somali jurisdiction does not, as currently constituted, lend itself to conventional finance. The primary movement of funds within the region is through innovative mobile telephone schemes. The Somali model is based on lessons learned from the more established mobile money transfer schemes in Kenya.


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