The central bank of Somaliland, a breakaway republic in northern Somalia, expects lawmakers to enact a draft banking law by June, enabling commercial lenders to extend credit to borrowers for the first time.
Somaliland is in talks with Banque pour le Commerce et l’Industrie, based in neighboring Djibouti, and two other lenders to grant them banking licenses “right away,” Bank of Somaliland Governor Abdi Dirir Abdi said in an interview in the capital, Hargeisa, yesterday. The nation of 3.5 million people currently has no banks.
“Once we see credit to small businesses then our economy will start to grow,” said Abdi, a 61-year-old former trade-financing expert with the Islamic Development Bank. “The presence of international banks will help us trade with the world.”
Somaliland’s annual gross domestic product is estimated at $500 million, of which remittances from overseas workers represent about 80 percent, Abdi said. The remainder of the Horn of Africa nation’s economic output is mostly generated by the export of camels, cattle, sheep and goats to the Middle East and North Africa, he said.
Abdi, who received his MBA from Northrop University in Los Angeles, was appointed governor six months ago by President Ahmed Silanyo, who came to power following a June 26 election. Somaliland is stable relative to its southern neighbor Somalia, where a civil war has been raging for the past two decades.
Somaliland, a former British colony, declared independence in 1991, following the ouster of former Somali dictator Mohammed Siad Barre. No sovereign state has formally recognized the region as independent, posing concerns for potential funders who question whether their investments can be legally protected.
“We have constraints of course because we’re not recognized as a state. The risk averse may not come to invest in Somaliland,” Abdi said. “We should be in a better position economically soon. Our democratic institutions and human rights record are strong, and we would like to see ourselves recognized as a state.”
Legislators are also soon expected to approve legislation expanding the central bank’s role to include regular monetary operations including supervising lenders, accumulating foreign currency reserves and controlling inflation, Abdi said.
“We expect the GDP to start growing,” he said, without providing a specific forecast.