Somalia Banking: Transfers, Challenges and Opportunities

This paper discusses the challenges and opportunities of the banking segment in Somalia. It reviews current systems for financial transfers and discusses the possibility of the introduction of a two-tier banking system.

Key Findings

Though the trajectory appears promising, major gaps still exist in the enforceability of contracts, provision of skilled manpower, protection of property rights, and the establishment of a national registry of citizens. A possible solution to the dearth of Somali-based brick-and-mortar banking outlets could follow Coasian bargaining theory, by mitigating political risk using the same principle that lies behind special economic zones (SEZ). In an SEZ, national laws may remain suspended, and an investor would then use a recognized third country’s legal regime.