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Published On: Wed, Jul 1st, 2015

The Somalilands worst economic challenge is paucity of financial institutions

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HargeisaBy Mohamed Kunle

Republic of Somaliland has a population of 3.5 million and locates horn of Africa. It is bordered by Somalia to the east, Djibouti to the northwest, and Ethiopia to the south and west.

Somaliland got its liberty from Britain in 26 June 1960, but four days later Somaliland united with the former Italian Somaliland to form great Somalia. That union did not succeed and Somaliland separated from Somalia in 18 may 1991. Somaliland has been an independent state for last 25 years and met all the requirements needed to become a sovereign state. Somaliland has directly elected president, functioning government branches, multiparty political system, national passport and currency. Even though Somaliland deserves to be recognized, but no international body has yet recognized.

The backbone of Somaliland economy is livestock resource, camels, sheep, goats, and cattle. The main public revenue is a tax collected from livestock export to Arabian countries. The majority of Somaliland people are pastoral nomads and get their daily subsistence from livestock which they rear in plains and range areas. Urban people also directly involved in livestock industry either in terms of trade or consumption of livestock product. Nowadays Crop farming is becoming the second most important economic activity in the country, after livestock, with up to 20-25% of the population depending on it for their livelihoods. The predominant crops are: sorghum, maize, fruit and vegetables.

Other primary horticultural crops include tomatoes, cabbages, lemons, lettuce, onions, peppers, papaya, and oranges. Rain-fed farming is about 90% of the total cultivated land, while the land under irrigation system accounts for only 10%.Somaliland is also frankincense abundant country, but the main problem is absence of factories to process and purify frankincense. Consequently this frankincense are exported and processed outside the country. As many international oil companies proofed Somaliland is also endowed with oil and minerals, and there are many oil companies like Genel Energy who are operating now in Somaliland to extract oil and minerals. As reported by World Bank Somaliland GDP per head was US$348 in 2012, which ranks Somaliland above three African countries—Burundi, the Democratic Republic of Congo and Malawi.


The Somaliland public sector is strong enough, and the government provides some indispensable public goods like health, water, education, and electricity with free of charge or with reasonable price. The Somaliland government collects different taxes, but the major taxes are custom duty taxes. The last year’s Somaliland budget was $ 251m of which high income was allocated to security and development related expenses.

The private sector plays a paramount role when it comes to business and job creation, and large number of Somaliland labor force are employed in private sector. Somalilanders have entrepreneurial skills by nature; as a result many modernized businesses are created every day .The Somaliland Diaspora remit nearly &700 million to Somaliland every year, which rescues the lives of many families who do not have another sources of income.


The Somaliland’s worst economic challenge is paucity functioning financial institutions, and since the establishment of this state there have been no commercial banks. The shortfall of financial institutions impedes the local entrepreneurs to get credit facilities for which they can use investment. The first private bank ,DAHABSHIL BANK, has been initiated in 2014 and so far it has vitalized many local small businesses.

Finally Somaliland is a nation which is not recognized at all, and lack of international recognition hampers this state to get bilateral and multilateral loan from foreign countries and international institutions. Although still there are numerous hindrances like unemployment and inflation but Somaliland has managed to build functioning economy and booming business.



Witten by Mohamed Ahmed Farah-kunle BA degree in economics holder

Lecturer at Burao University














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