Africa > East Africa > Somalia > Somalia Finance Profile

Somalia: Somalia Finance Profile

2015/01/26

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Somalia practically collapsed in 1991 following the outbreak of the civil war. Formal economic activities and their accompanying institutional and regulatory framework vanished following the collapse of a functioning national. The lack of access to reliable data makes the assessment of the country’s economic activities very difficult, but estimates suggest that GDP per capita declined from US$280 in 1986 to US$226 in 2002, with approximately 43 % of the people living in extreme poverty.

However, real economic increase for the last three years was estimated to average 2.6 %. Somalia has a relatively healthy informal economy that is mainly centered on the agricultural sector, accounting for about 65 % of GDP. The country has benefitted from significant private investments fueled by remittance flows into the country, amounting to an average US$ 1 billion a year.

Other significant activities include a relatively large hotel industry which caters to the private security militias, the construction sector, and a small but expanding export sector which is mainly involved in processing agricultural products and light manufacturing. The country’s former industrial sector, which focused on the processing of agricultural products, has come to a virtual standstill.

Since 1991, Somalia has been functioning without banks. The country’s economy mainly comprises the Central Bank of Somalia, money transfer agencies and microfinance institutions. Money transfer agencies are the only financial services providers and, in the absence of formal commercial banking activities, all economic transactions are settled in cash.

There are no fixed gain markets in Somalia and, as of April 2011, the country received no sovereign rating by any of the three major credit rating agencies.