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Financial Sector Overview

Economic landscape

Somalia is slowly emerging from more than two decades of conflict and anarchy. The country is making progress towards consolidating peace, entrenching state-building, and slowly driving economic recovery. Between 2013 and 2017, real Gross Domestic Product (GDP) grew by an average of 2.5%. Growth is expected to pick up at 3.5% in 2019 and 2020, compared with a forecast of 3.1% in 2018, as the country recovers from drought that had reduced farming output. The services sector—particularly telecommunication and mobile money—has been an enabler of economic growth. About half of all Somalia live in poverty, and almost a third live in extreme poverty. The country has embarked on a program with support from the International Monetary Fund (IMF) to increase revenue collection and improve expenditure management as a means to expand the provision of public services and support inclusive growth. The political and security situation is still fragile, and the country remains ineligible for most financial assistance program due to its longstanding arrears. These factors impede the emergence of the strong financial sector needed to support the economy's wholesale recovery.

Financial Sector Overview

Before the civil war began in 1991, Somalia's financial system was rudimentary, comprising of the Central Bank of Somalia (CBS) and three commercial banks. All financial institutions collapsed in 1991 and depositors lost all their savings, which eroded public confidence in the financial system and the banks. Between 1991 and 2009, there were no formal financial institutions in the country outside the semi-autonomous northern regions of Somaliland and Puntland. The CBS reopened in 2009 under the Transitional Government of Somalia. In 2012, a Central Banking Act and a Financial Institutions Act were passed that provide a legal framework for financial institutions to operate in the country with supervision from the CBS.

Prior to these developments, the informal financial sector that had developed and grown throughout Somalia’s protracted conflict filled in the gap left by the formal financial sector to provide basic financial services to businesses and the Somali population, especially trust-based loans and money transfer services. The latter, called hawalas, played a vital role facilitating international remittances and domestic financial transactions. A process to regulate and supervise these institutions began in 2012.

Today, Somalia’s financial sector is still at a nascent stage and intermediation remains weak. Monetary policy is limited, as the economy continues to be highly dollarized. Total financial sector assets are equivalent to about 4.3% of GDP. Credit to the private sector is about 1.3% of GDP, although growth has been relatively rapid recently. The government intends to start broad-based reforms to spur financial sector development, while strengthening compliance with the Anti-Money Laundering and Counter-Terrorism Financing act (AML/CFT) and improving data reporting. Also, the CBS has recently approved new banking regulations, including annual relicensing and periodic financial reporting requirements. Similarly, it has defined minimum prudential ratios and set up inter-bank payment, clearing and settlement systems and other critical market infrastructures needed to improve the efficiency of financial intermediation.

Despite making significant progress, the sector faces numerous constrains to greater financial stability and intermediation: There are considerable trust and information deficits; Financial institutions lack capacity and financial infrastructure (credit information, judicial, legal). Mobile money penetration is high but lacks interoperability. In addition, access to credit/finance is usually at unfavourable terms and conditions with insufficient collateral for the majority of the public.

Banking Sector

Banks provide a mix of islamic and conventional financial products. Commercial banks provide non-interest-bearing deposits and lend to the private sector. Formal banking is not common in Somalia partly because anyone under the age of 40 was not old enough to hold a bank account before the start of the two-decade long war. Only about 15% of the population has a bank account, and less than 5% of people with bank accounts are active users.

Six banks operate in Somalia with branches located in urban areas only. Commercial banks function mainly as trade financing institutions. They also finance key areas of the economy: real estate, car loans and construction. Although relatively small, the sector is highly liquid with total loans to deposits ratio around 47%. Banks are also financially sound and adequately capitalized with total capital to total assets ratio above 15%.


Money transfer businesses emerged organically as an alternative to the traditional banking system after the collapse of the government and economy in 1991. Remittance inflows (20% of GDP) represent Somalia’s lifeline and an opportunity for inclusivity and broad access to financial services. Fourteen hawalas, or money remittance providers, have been licensed or registered by the CBS. Although they mostly facilitate international remittances, a few have adapted their business model to include banking, microfinance, and mobile money. However, Somali hawalas are struggling to build networks of correspondent banks for cross-border transactions due to fears about money-laundering and terrorist financing. In 2015, Merchants Bank of California which handled 60 to 80% of the money sent to Somalia from the United States closed its accounts with Somali-American transfer companies, virtually ending remittance services by all major U.S banks to Somalia. Despite recent efforts on anti-money laundering and combating the financing of terrorism, the country continues to suffer from pressures related to the reduction of global correspondent banking relationships. This could result in lower and volatile remittances inflows. As part of the financial sector roadmap, the CBS intends to enhance its control of the Money Transfer Businesses (MTBs) compliance with AML/CFT regulations and to establish a digital ID system to monitor and reduce suspicious transactions.

Financial Inclusion

Access to formal financial institution services is very low in Somalia. In 2017, only 7.9% of adults held an account at a formal financial institution, compared with the sub-Saharan Africa average of 32.8%. Far fewer (2.8%) held savings at a formal financial institution, compared to the sub-continental average of 16%.

Digital Finance

For years, mobile money has substituted for the lack of a formal banking sector, and all mobile network operators now provide mobile money services. It is one of the main channels used to access financial services in Somalia: In 2017, about 73% of the population had access to a mobile money account, with only a 5% gap between men (75%) and women (70%). Mobile money wallets are also used for savings. More than half of people who save do so with a mobile money account. Approximately 26% of Somalis report using phones to pay bills (as compared to 13% in Kenya) and 32% reported using their phones to receive money, compared to 30% in Tanzania. These statistics demonstrate that mobile technology can serve as a potential catalyst to accelerate financial inclusion in Somalia.

Insurance Sector

As for most financial institutions in Somalia, the insurance industry is at its infancy. Somalia has been without any form of insurance since 1991. The sector is now largely driven by Islamic insurance, or Takaful, a cooperative scheme in which participants pay a premium in a common pool to guarantee each other against loss or damage. Takaful business emerged for the first time in Somalia at the beginning of 2014. First Takaful and Retakaful (FISO) and Takaful Insurance of Africa are the two companies actively working in Somalia.

    Contact Details Information of Banks operating in Somalia







     Garowe  Puntland State of Somalia

     (+252) 907790431


      KM4 Hodan Mogadishu Somalia  

     (+252) 615994664


     Hamarweyne, Mogadishu                                                        Somalia

     (+252) 617060070


     KM4. Hodan, Mogadishu  

     (+252) 615666676


     Sakhawadin Road                                                                    Mogadishu Somalia

     (+252) 1654345


     Makka Al-Mukarama Road, Taleh Street. Mogadishu

     (+252) 619621228



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    At a Glance

    At a Glance Source
    Population in thousands (2019): 15,442.90
    GDP per capita (current US$) 2019 - World Average 10,721.61: 478.34
    Account (%) age 15+) - (2014 vs 2017): 39% (2014)
    Agriculture Orientation Index - Credit ( Agriculture, Forestry and Fisheries share of GDP) (2015 vs 2016): n/a
    Financial Inclusion Strategies: n/a
    Domestic credit provided by financial sector (% of GDP) 2017: n/a
    Made or received digital payments in the past year (% age 15+) (2014 vs 2017): 38% (2014)
    Remittances % of GDP for 2017: n/a
    Mortgage Interest Rate / Mortgage Term (years): 10% | 20

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    Latest News & Events

    Jun 16, 2021 | Voice of America
    The United Nations is urging reforms that make it easier for migrants to send money back to their home countries, as it observes its annual Interna