Somalia's Business World
Despite the civil unrest that has gripped the country in the recent past, Somalia has managed to maintain a robust but informal economy, which is based on money transfers, livestock, and telecommunications. Because of civil war and a lack of statistics released by the government, it is hard to guess the size of the economy, but CIA estimates put the 2009 GDP at $5.73 billion.
According to a report released in 2007 by the British Chamber of Commerce, the private sector has seen growth, especially the service sector. Unlike Somalia before the civil war, where most industries and the entire service sector were run by the government, today's country is more open to foreign investors (although exact amounts are not known).
Market growth is mainly financed by the Somalian diaspora, and it includes marketing, trade, money transfers, transportation, fisheries, communication, airlines, education, health, hotels and construction. The higher economic activity is attributed to Xeer, the Somali customary law, which is believed to help stabilize the business environment.
The official financial authority is the Central Bank of Somalia, whose responsibility it is to form and implement fiscal policy. There is little confidence in local currency, so the US dollar is commonly used, right alongside the Somali shilling. The frequent issuance of the shilling has fueled price increases and contributed to inflation. However, the inflation is expected to ease as the Central Bank takes the helm and replaces the currency that's making its way through the private sector.
Somalia had no central financial authority for the fifteen years after the civil war broke out, and the country's payment system is actually quite advanced considering that the Central Bank wasn't reestablished until 2009. The widespread money transfer operators work as an ad hoc banking system. These transfer stations have become big business in Somalia, with over $1.6 billion paid into the region by Somalis. Most of these firms, called hawalas, are accredited members of SOMTA.
As the reformed Central Bank assumes all of its responsibilities, some of the money transfer firms are expected to get the licenses necessary to become commercial banks. That will help Somalia's payment system to expand to the point where checks could be included.
Want to know more? Below is a list of more resources, both on our site and on other great sites on the internet. Check them out, and let us know if you have any suggestions for other resources.