Somalia ready to vie for a share of East Africa’s banking pie

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Somalia Members of Parliament have been having a busy 12-monthlong legislative agenda, aiming to better the investment climate as well as providing the necessary support base for businesses to thrive in a new regulatory regime that remains pro-business.

Somalia is ready to shake off a violent past. The country has embraced a brand new face marked by a series of laws aiming to create an attractive investment climate. Mogadishu is also moving towards institutional reform amid an intensified campaign to become the next frontier for foreign investment.

Somali ambassador to Kenya, Gamal Mohamed Hassan, a soft-speaking diplomat and a veteran of international relations, talks of a surprising interest on Somalia’s banking sector. This follows a major investment forum organized by the Somali Embassy in Kenya and attended by the most-influential bankers in East Africa’s financial services hub.

“We had not expected the kind of turnout we received when we held the Somalia investment forum in Nairobi,” Ambassador Gamal Hassan told The Somalia Investor Magazine during a courtesy call at the Somali Embassy in the up-scale Kilimani area in Nairobi.

The Central Bank of Somalia (CBS) is currently  reviewing a new series of licenses to new banking institutions, the Ambassador revealed.

Somalia currently has six banks with assets currently valued at US$194 million. The Somali government believes the money-transfer service providers, known as the Hawallas, provide a safe launch-pad for banks entering Somalia, to mop up the excess liquidity and to begin core capital bases for a sustained growth into the future.

Before the announcement of the pre-selected banks and their licensing, however, the government is using the services of Somali embassies abroad to coordinate the training of Somalia’s top bureaucrats, bankers and environmentalists, the Somali Investor reports.

At least 12 banks have applied for licenses in Somalia, including local and foreign banks. The authorities believe the new licenses would provide an opportunity for new market entrants and the possible mergers and acquisitions of the existing banks in the local economy.

Ahead of the anticipated changes on the local and regional banking landscape, which is likely to turn Somalia into one of the region’s largest recipient of foreign direct investments, the government and the private sector in Mogadishu is undertaking initiatives to prepare Somalia for the changes.

Training for various cadres of the Somali elite is taking place in Kenya, supported by various institutions including the World Bank, IMF, US Treasury Department and others. These are meant to enhance the administrative capacity of individuals required to manage the economy. The Somali ambassador said training efforts were currently focused on training Somali information technology experts to handle issues such as the running of core-banking systems for banks.

Kenya’s top-tier banks, Equity Bank, the Commercial Bank of Africa (CBA), the National Bank (NBK), Kenya Commercial Bank (KCB) and a number of insurance companies, are currently preparing to enter Somalia’s largely virgin economy.

The commercial banks are also backed by international and regional banks, which are known as the development finance institutions. They include the African Development Bank (AfDB), the Islamic Bank, the World Bank and its private sector wing, the International Finance Corporation (IFC).

“These people all have one thing in common, to strengthen the trade and business environment in Somalia. We will revive the Somali economy,” Ambassador Gamal said in an interview.

Meanwhile, the Somali embassy has sought the services of a consultant to carry out studies on the nature and scope of Somali businesses currently operating in Kenya, the ambassador revealed.

The idea behind the initiative is to begin formalizing the Kenya-Somali trade relations as per the recently signed Joint Commission for Cooperation (JCC) Agreement. The results of the study would be used to gauge the extent to which Kenya and Somalia currently trade.

Ambassador Gamal said getting information about the nature of businesses the Somali business community is currently engaged on with their Kenyan counterparts, is also important as the two sides intensify their high-level state-to-state diplomatic relations. This information will also help Somalia in ensuring that Somali businesses in Kenya get the necessary support and protection they need.

Somalia is a high-return investment destination, we have vast untapped natural resources and we are also the largest single exporter of livestock to the Middle East. We have a vibrant business community.

Somalia’s vibrant livestock sector provides an opportunity to investors seeking to diversify to new high-growth-high return segments. Most foreign investors, from Cape Town to Cairo, are looking to diversify to new sectors such as agriculture, moving away from the mining sector, currently facing low demand.

The presence of livestock and the potential to revive agriculture and fisheries, interrupted by the decades of civil strife are likely to propel Somalia’s economy on the path to micro-economic and macro-economic stability. This is because the secure food environment would work against food price hikes, which is good for the economy.

“Somalia is a high-return investment destination, we have vast untapped natural resources and we are also the largest single exporter of livestock to the Middle East. We have a vibrant business community. The Somali people are an entrepreneurial in nature.” Gamal Hassan, the Somalia ambassador to Kenya.

For external investors, Somalia Members of Parliament have been having a busy 12-monthlong legislative agenda, aiming to better the investment climate as well as providing the necessary support base for businesses to thrive in a new regulatory regime that remains pro-business. The Ministry of Foreign Affairs and Investment Promotion has an investment portfolio dubbed SomInvest, which guides investors and encourages investment opportunities in the country. Ambassador Gamal said.

The law protects foreign investors.

“It is a liberal law,” Ambassador Gamal said, of the new investment law and business regulations currently in place in Somalia to provide investors with the guarantees necessary to secure their businesses. “We have also passed the Anti-Money laundering law which is also meant to protect the banking sector”.

The various laws now in place are meant to ensure the safety and guarantee of foreign investments into Somalia. The government has also put in place measures to ensure faster dispute resolution. ““We will protect the investors to ensure there is return on investment,” Ambassador Gamal added.

The Somali economy, almost one tenth of the Kenyan economy, provides a new avenue for the Somali and Kenyan business communities to flourish further.

The stability inside Somalia has seen at least 30 flights taking off from Kenya into Somalia daily.

Ambassador Gamal said the business vibrancy on the Somali side calls for further diplomatic engagements between Somalia and Kenya, to remove any restrictions on the free movement.