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SBA seek to streamline the Somalia Banking sector

Abdirahman Yusuf

As Somalia seeks to put its house in order, financial sector reforms is also key to anchor its sustainable recovery path.

Central to these reforms is the establishment of accountable public financial institutions that can instill confidence to Somalia’s partners in its financial management.

The private sector has not left behind in this journey of financial sector confidence building. Osman Halane, head of Dahabshiil Bank International South Central Somalia and chairman to the recently formed Somali Banker’s association, admits that “the reform agenda is tedious and one that needs a strong public-private partnership to ensure both public and private financial institutions gains the prerequisite governance and legislative reforms.” He adds that currently Somali banks only transact [externally] in Euros and not in Dollars although Somali economy remains highly dollarized.

Just like any other institutions in Somalia, the financial sector collapsed when Siad Barre’s government was overthrown in 1991.

After the retreat of Al Shabaab from Mogadishu and other main urban centers, Somalia government got an opportunity to rededicate its energy in creating an enabling environment for the country’s political, social and economic revival.

The central bank was reopened in 2009 and quickly put in place policies that allowed Sharia-compliant banks to operate easily. Somalia bankers association (SBA) was later formed with an aim of streamlining the banking sector and was registered as financial industry association on July 1, 2016. Some of its daunting tasks are to provide long term investments for mega projects that a single bank might not be in a position to invest in order to jam start economic growth.

The core functions of the Association are to promote industry development and economic growth by engaging the government and sector regulator, Central Bank of Somalia (CBS).
SBA acts as the umbrella body of commercial banks licensed under the Banking Act. It has endeavored to reinforce a reputable and professional banking sector. Currently, all central bank licensed banks are members of the association.

“The reform agenda is tedious and one that needs a strong public-private partnership to ensure both public and private financial institutions gains the prerequisite governance and legislative reforms.”

Osman Halane, head of Dahabshiil Bank International South Central Somalia and chairman to the recently formed Somalia Bankers association

As Somalia is in the process of reintroducing its currency, SBA is critical in this development as it can enhance stakeholder negotiations, consultations, as well as putting in place the necessary banking environment that will ultimately propel economic growth.

That said, however, SBA needs to deal with other short term concerns. One is that currently, there is no inter-banking Payments Systems which forces each bank to wholistically carry out its business without reliance of any other local bank. SBA needs to come up with mode of payment like Real time gross settlements (RTGS), mobile payment, internet banking, and Swift payment. Equally important is the immediate establishment of Automated Clearing House with modern clearing house such as cheque truncation and standardizing security future cheques. Another immediate task of the association is to come up with a standardized Know Your Customer requirement for all member banks. Currently, the country has no unified national identification for proper identification of persons.

Lastly, SBA needs to standardized tariffs such as the financing profit rates, account maintenances charges and swift charges for all member banks.

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