Foreign financial institutions setting up shop in Somalia is something we should all be proud of

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How ready is Somalia to host foreign banks? In May this year, KCB Group Ltd., the largest bank in Kenya, and Nairobi-based Commercial Bank of Africa Ltd held talks with Governor Bashir Issa Ali. “They are expressing an interest to gain a foothold in Somalia,” Ali is quoted to have said in an interview. Its is also understood that there are a number of Middle East based banks seeking licenses to operate in the country. In total, 12 commercial banks have supposedly applied for a banking licence in Somalia.

This will not be the first time Somalia will be hosting international banks. Barclays Plc and lenders from Italy, India and Egypt, have operated branches in the country between 1920 and 1970, when all international banks were nationalized notes the Central Bank’s website.

Just like most other institutions in Somalia, the financial sector collapsed when the government imploded in 1991.

International Monetary Fund predicts that government reforms and donor funds will help the economy expand about 3.7 percent through 2017. Financial institutions are good to help economies grow – they led money and of course safely keep your money. But what does it mean to host international banks? Would the central bank print new notes and hope that residents would quickly stopping using the dollar and re embrace the Somali shilling?

A lot needs to be done to win confidence of citizens into their buying of using formal financial institutions. Why would I want to start using a Visa card while I can pay my bills using my cell phone? This is just one of the many factors that the Central Bank/ foreign banks will have to deal with as they prepare to set foot in Somalia.

However, mega businesses are coming up in the country and so are non-governmental and aid agencies who have started operations into Somalia (instability had kept Aid agencies from having physical offices in Somalia and opted to do so from Nairobi yet serving Somalia).

Similarly, there is projected growth anticipated from Somalis in diaspora who are putting up investments. More and more Somalis abroad are not only sending money for daily upkeep but also for long term investments such as building homes. Above all, relative peace has been witnessed in recent years.

All in all, the Central bank of Somalia will need the support of the federal government for the introduction of new bank notes to succeed. Foreign banks will also need endorsement from the federal government and cooperation from the business community.