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February 7th, 2017, doing business in somaliland: looking beyond the regulatory environment.

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Estimated reading time: 10 minutes

Nimo-ilhan Ali and Nasra Jama detail some of the challenges facing small-scale entrepreneurs in Somaliland.

Amaah , a Somali word that roughly means ‘loan’, is perhaps one of the most important words used in Somaliland to describe the relationship between customers and small business owners. To ensure customers loyalty, small businesses selling basic food and non-food essentials have to offer a line of credit, amaah , to the majority of their customers for an extended period of time. Failure to offer amaah results in losing customers who would simply take their business to the next shop willing to extend them a line of credit.

Both of the above options have a detrimental impact to business owners: Offer amaah and face the threat of going bankrupt when customers fail to clear their accounts either on time or at all, refuse, and you would lose customers and potentially face bankruptcy anyway. Standing surrounded by a wide range of fresh vegetables and other basic food and non-food items, a shop owner in Hargeisa, the capital of Somaliland, whom we call Abdi, deliberates this issue. He shakes his head and says:

 “It will be better and healthier for my business if I lowered the price of all my goods instead of giving them out as amaah. But, I have no choice. None! You have to give amaah if you want to keep customers.”

The dilemma faced by Abdi and many other many small business owners in Somaliland is rarely covered in policy documents and studies about the ease of doing business in these settings. In fact, when we talk about the ease of doing business in different African countries, we pay a disproportionate amount of attention to the regulatory environment that firms face in establishing and maintaining their businesses. The focus in these discussions is the relationship between the state and medium-to-large scale firms with the assumption that once the state provides an enabling regulatory environment, then firms should thrive.

A host of indicators to gauge the regulatory environment – covering the initial registration process, the ease of accessing credit, the protection of investors, the paying of taxes, the judicial processes to monitor contracts, and the laws surrounding insolvency – have been developed and are used to rank and compare the ease of doing business in Africa with other economies around the globe.

While the regulatory environment is indeed crucial especially for medium-to-large scale entrepreneurs operating in relatively formal environments, what gets much less attention is the environment in which a large number of very small-scale entrepreneurs, the largest category on the continent, operate.

Like Abdi, these entrepreneurs are very small and largely operate in informal settings where the majority of indicators developed to measure the ease of doing business, simply do not apply. Though important, it is not their relationship with the state that determines the success or failure of their businesses, rather, it is their relationship with their core customers, the countless number of poor households struggling to make ends meet, that matters the most.

The ubiquitous very small entrepreneur

Although livestock continues to be the bedrock of the Somaliland economy in regards to its contribution to the country’s GDP, the number of people benefitting directly from this sector has significantly declined. In the 2012 Labour Force Survey  , The International Labour Organization (ILO) found that in contrast to prevailing expectation, the biggest employer in the country was not the livestock sector, but the sales and services sector. This sector is also the biggest employer of women.

While the sales and services sector in Somaliland contains a handful of medium sized firms such as the money transfer companies, telecommunication, construction and wholesale suppliers, the bulk of businesses in this category are extremely small employing no more than one or two family members. These businesses are mostly small shops selling basic food and non-food items.

An analysis of the initial investments used to start these businesses highlights just how small the endeavours are. In our research where we interviewed 141 business owners in Hargeisa, we found that 85 per cent of the businesses were established for US$5,000 or less. Many within this group had been initiated for less than US$2,000. In fact, over a third of the all businesses we interviewed were established for US$1,000 or less.

Given the small size of initial investments, business owners reported that access to formal credit facilities, a key indicator of the ease of doing business, was not one of their key concerns when starting their business. Although this might be due to the lack of formal credit institutions in the country, it might also reflect the fact that establishing a business for the largest part of the Somali population has always been a family affair and formal credit, even before the war, was not accessible to many potential small business owners.

Entrepreneurs reported that although they utilised multiple sources to secure initial funding, family and relatives was their main source. Often funds came from multiple family members and relatives residing across different countries. Although most of this support was a gift and therefore did not need to be paid back, a small proportion were loans from relatives that needed to be paid back at a later date. Given the small size of investments, some entrepreneurs noted that they used their own savings to start their business. Former wages and salaries were noted to have been a key source of these savings. A small minority noted that they had sold their assets, mainly land and livestock, to finance their business endeavours.

Staying in business

While establishing even a very small business is not without its challenges – such as lack of local market know-how as well as difficulties finding a suitable location for the business – business owners in Hargeisa reported that establishing their businesses was much easier compared to the challenges they faced in trying to maintain them. Overwhelmingly, almost all of the business owners reported that maintaining their businesses was heavily compromised by the prevailing amaah practice.

To keep customers returning to their shops, shop owners have to advance a credit facility for a customer to take items without having to pay upfront for an extended period of time, often a month but sometimes more. Although some customers clear full or part of these loans after a month and begin a new cycle, others fail to clear their debt leaving owners struggling to restock their shelves and keep their business afloat.

This practice is heavily utilised by a large number of households in Hargeisa especially for accessing basic food and non-food essentials. This system is in fact an important household strategy to manage their scarce resources. For many households in Hargeisa, monthly incomes are almost entirely derived from their remittance incomes, which mainly arrive once a month from a single sender. Remittance incomes tend to be fixed with little variance in the amounts received each month.

An analysis of the monthly expenditure patterns of urban households suggests that they spend a large proportion of their monthly remittance incomes on food, followed by basic non-food items. Key non-food expenditures include education, gifts to relatives, healthcare and electricity. While remittance incomes are more or less fixed, the amount households spend on food varies depending on the prevailing food prices: food prices tend to go up during drought and currency fluctuations. In addition, healthcare costs can increase in a particular month leaving households short of funds.

Since it is a lot more difficult for households to access credit to pay for key non-food expenditure such as education (children are sent home when they fail to pay their school fees), when funds are short households are forced to reduce the cash amount allocated to basic food and non-food items. However, since households cannot, in reality, survive without these key essentials, approaching their neighborhood shop owners for a line of credit is their only option.

Shop owners have little option but to extend this credit. Given the abundant number of shops selling similar items located next to each other, customers would simply try next door. To keep customers, shop owners have to agree to this arrangement. Each day, shopkeepers diligently record items customers take with the hope that at the end of the month, when customers receive their remittances, some accounts will be cleared.

While this system works as an efficient overdraft facility and provides a crucial livelihood lifeline for these households, it presents business owners with enormous challenges. Even though a large number of households do clear their accounts in part or full at the end of each month, some do not clear on time (for instance when their remittance is late) or fail to clear completely for one reason or another. Taking into account how small these businesses are, the loss of this income can have huge ramifications to the owners’ ability to restock shelves and the outcome for most is bankruptcy.

Surviving Amaah

Some business owners are, however, coming up with strategies to survive the inevitable amaah practice. Some have formed similar arrangements with their supplier and can continue restocking their shelves without having to pay for the stock upfront for an agreed period of time. Others have diversified their businesses and have started to offer other services in their shops such as tailoring, which are largely excluded from the amaah practice.

Nonetheless, for many very small businesses operating in Hargeisa, businesses that are crucial for employment and livelihood opportunities for a large number of people, keeping their businesses afloat while maintaining their customer base, remain an immeasurable challenge. If they refuse to extend credit, they lose customers and if they agree, they could potentially lose their businesses.

For these entrepreneurs, it is not dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency – as captured by Doing Business in Hargeisa 2012  – that constrains them. It is the type of business relationship that they are embedded in with their customers – a relationship that is akin to being trapped between a rock and a hard place – that crucially restrains their ability to thrive.

A version of this article was first published in the Finnish journal, African Sarvi.

Nimo-ilhan Ali ( @IlhanNimo )  is a post-doctoral research associate at SOAS, Development Studies Department. She’s the author of ‘Going on tahriib: The causes and consequences of Somali youth migration to Europe’ (Rift Valley Institute 2016). She can be contacted at [email protected] .

Nasra Jama is a senior researcher at Altai Consulting based in Hargeisa, Somaliland. She can be contacted at [email protected]

The views expressed in this post are those of the author and in no way reflect those of the Africa at LSE blog or the London School of Economics and Political Science.

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World Bank report 'Somaliland's Private Sector at a Crossroads'.

2016, Book Review

Somaliland’s Private Sector at a Crossroads: Political Economy and Policy Choices for Prosperity and Job Creation (2016) is the World Bank’s first comprehensive analysis of the private sector in Somaliland. The 90 page report takes stock of the evolution of the private sector over the past two decades, it identifies priority policy options as well as the necessary reforms that would enable the private sector to take advantage of opportunities. The report draws on a political economy lens to study how dynamics of power, interests and relationships between key (economic, social and state) actors and sociocultural contexts interplay and influence public policy and private sector activites. The report focuses on three sectors: enterprise, finance and government with a bundle of policy recommendations proposed for each. Overall the report emphasizes the need to formalize the private sector and build the capacity of civil servants to lead this formalization process. Doing so would, according to the World Bank, enable Somaliland’s economy to take advantage of opportunities, promote a climate that favours investments as well as job creation. In my attempt to review this report, I take the position of someone who has lived and worked in Somaliland for the past five years. I summarize the report’s main findings and explain how they resonate with my previous research experience on economic actors and dynamics in Somaliland.

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Garyaqaanka Guud

Somaliland is one of the world's least developed countries and its economic performance is heavily dependent on the livestock and majority of the population depends either directly or indirectly on livestock and livestock products for their livelihood. The country exhibits very open economy with a high ratio of foreign trade to gross domestic product, a low level of monetization and a dominant informal sector. Due to the limited capacity of the government, the private sector provides most of the basic services and it accounts for over 90% of the country's gross domestic product (GDP), and employment. Despite the substantial growth in the Somaliland's private sector and its contribution to the development of the economy, it has been constrained by a number of factors, including; the absence of financial institutions, Inadequate infrastructure and lack of effective enabling legal and regulatory frameworks. Therefore, the purpose of this paper is to address the above mentioned problems and challenges through investigating factors that affect the overall performance of the private sector investment which need to be mitigated in order to create an enabling environment for businesses and achieve government policy objectives of promoting private sector as key drivers of economic development in Somaliland

Ahmed M . Musa

Unrecognised internationally, Somaliland operates as a hybrid political order where a range of state and non-state entities provide security, representation and social services. Local business elites have impacted state formation after war by lobbying against a range of regulations, providing the government with loans and contributions rather than paying sufficient taxes, and by hindering the development of sound financial institutions. The success of such activities has led to de facto protectionism, where foreign ventures have had limited access to the Somaliland market. While such protectionism may have negatively impacted economic development and growth opportunities, recent engagements by multinational corporations in the Berbera port suggest that foreign private investments risk sparking violent conflict. In contrast, domestic businessmen have played a role in preventing or resolving violent conflict at crucial stages in Somaliland’s recent history. Based on fieldwork in Somaliland, we argue that the impact of international corporate actors in post-war contexts needs to be understood in light of local culture and power dynamics, in which the political and economic roles of local business elites are central.

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Dr. Ahmed Abdirahman Herzi ( PhD)

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Michelle Spearing

Logan Cochrane

This issue of NokokoPod presents a discussion of the informal institutions in Somaliland. The annotated PDF is available on the Nokoko journal website. This conversation took place between June 30th and September 1st, with Logan Cochrane in Ottawa and Ahmed M. Musa in Hargeisa. This version of the PDF has been reviewed by Logan Cochrane and Ahmed M. Musa. In addition to the conversation, a set of annotations have been added as footnotes so as to strengthen the value of these publications and enable them to act as a resource for listeners and readers who want to have additional context and/or find additional resources on the topics discussed.

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Going Digital Makes Life Easier for Somalia’s Business Owners

Yuusuf Shire at his shop in Mogadishu. PHOTO/Courtesy – Ministry of Commerce and Industry

Summary: The Somalia Business Registration and Licensing System has made it easier and faster for entrepreneurs to register new businesses and obtain licenses.

MOGADISHU, June 16, 2022— When Yuusuf Shire , a small trader of electronics and home appliances in Somalia's capital Mogadishu, ventured into business five years ago, he says nothing prepared him for the lengthy and cumbersome process of applying for a business license. It took him three weeks to register his business; renewing the license every year was no better. But all that hassle is now behind Shire and hundreds of thousands of other Somali business owners.

The government of Somalia, with support from the International Finance Corporation and the World Bank, officially launched an online business registration and licensing system in March 2022, after an initial 12-month pilot to test the system.

The new online system has made it easier and faster for entrepreneurs to register new businesses and get licenses to operate, helping to fuel the growth of new businesses, especially micro, small and medium-sized enterprises (MSMEs).  

"We spent so much time commuting to the ministry offices and queuing to submit documents,” Shire said. “This online system has saved us time. I can access my business documents in soft copy and share with banks and business partners hassle-free.”

The waiting period for business registration is down to four days on average from more than two months previously. Likewise, steps to register a business are now down to three on the online system from the nine steps the previous system required.

This is making it easier for informal businesses to formalize, according to Somalia's  Deputy Minister  for  Commerce and Industry , Abdulkadir Sharif Shekuna Maye.

"We developed the online system to reduce lengthy registration and licensing procedures and save businesses time and operational costs. This is particularly true for informal and smaller businesses seeking to formalize their operations but not having substantial resources," Minister Maye said.

Between 2021 and April 2022, around 1,089 businesses registered on the new online system during the pilot phase, and the number continues to grow after the official launch in March 2022. Somalia targets registering about 5,000 businesses by December 2025, of which it aims to have 30% be women-led.

Business registration reforms can enhance business formation, job growth and productivity, as well as reduce informality and gender disparity in entrepreneurship, according to a World Bank Group guide: Reforming Business Registration Toolkit .

“Business registration reform is one of the first critical steps toward fostering private sector-led growth. Simplifying the business registration process and making it faster and cheaper will bring benefits to the whole Somali economy,” said Kristina Svensson, World Bank Country Manager for Somalia.

System efficiency studies by the Ministry of Commerce and Industry reveal that reserving a company name in Somalia now takes 25.3 hours, down from the previous 34.4 hours. Getting a business license is now down to about 16 hours, compared to 45.6 hours previously.

"The Somalia business registration reform is significant for firms and investors because it enhances credibility of firms, creates a platform for addressing duplicate registrations, and reduces the need to travel back and forth to obtain the service," said Amena Arif, IFC Country Manager for Somalia.

Local businesses are not the only beneficiaries of the online system. It’s a boon for global investors, too.

Kube Energy , a Norwegian renewable energy services company that provides cost-effective and reliable solar mini-grid solutions in fragile and hard-to-reach areas, is among international investors who have benefited from the new system. 

“We wanted to expand our venture to Baidoa in Somalia and were doing a lot of study and research to try and understand Somalia’s regulatory framework on energy and how to register a company,” said Kristen Petillon, Kube Energy business development director.

As fate would have it, Petillon’s research led him to Mohamed Dubo’s LinkedIn profile, the director of the Investment Promotion Office (SOMINVEST), who introduced him to his team and the online system. Kube Energy became one of the pilot companies using the online system.

“The experience was better than establishing a company in some European countries,” said Petillon. 

The World Bank supported this project through the Somalia Capacity Advancement, Livelihoods and Entrepreneurship Digital Uplift Project (SCALED-UP) . IDA and the Multi-Partnership Fund jointly funded the project with support from Denmark, European Union, Finland, Germany, Italy, Norway, State & Peacebuilding Fund, Sweden, Switzerland, the United Kingdom, and the USA. The program was also supported by IFC's Somalia Investment Climate Reform Project II (SICRP2 ), with funding from the government of Denmark, the European Union, and the United Kingdom's Foreign Commonwealth Development Office.

Somalia Capacity Advancement, Livelihoods and Entrepreneurship Digital Uplift Project (SCALED-UP)

IFC's Somalia Investment Climate Reform Project II (SICRP2 )

The World Bank in Somalia

The World Bank in Africa

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With relative stability compared to previous decades of conflict and a burgeoning middle-class that includes diaspora returnees, Somalia is experiencing economic growth, and many economic sectors are recording progress.  Investment activity is seen in the agriculture, food, education, health, transport, logistics, banking, financial sector, energy, oil and gas, and real estate.  Private investments in the agricultural production sector alone were estimated to reach $67.5 million over the last five years.  In 2022, primary U.S. exports to Somalia totaled $85.1 million and goods imports totaled at $1.1 million.  Primary U.S. exports were cereals, vehicles, electricals, and machinery equipment.

According to demographic data, about 47 percent of Somalia’s population resides in urban cities and towns.  Somalia’s urbanization and changing consumer habits are generating greater demand for shelf-stable and ready-made products throughout major urban centers.  Much of this demand surge has been met by low-cost imports, creating stiff competition to match cost and quality for locally produced and processed products, particularly by the country’s growing Small and Medium Enterprises (SMEs).  The country imports processed food valued at over $1.5 billion annually, including raw sugar (14 percent), rice (5.8 percent), wheat (3.9 percent), pasta (3 percent), and other food-related products.  Somalia may offer especially promising opportunities to invest in its agribusiness and food sectors.

Agriculture and food play significant roles in Somalia’s economy, both in terms of employment and in terms of food security.  The agricultural sector currently accounts for about a quarter of overall employment, is the second largest export sector, and plays a significant role in partially meeting domestic food demand.  According to the ninth National Development Plan and estimates available from a World Bank/Food Agriculture Organization (FAO) report, Somalia has about 8.9 million hectares of cultivable land, of which almost 2.3 million hectares produce or could produce crops under rain-fed conditions.  Demand for food has been high and is expected to grow for domestic and imported food.  This demand is being increased by rapid population growth and large remittance inflows.  

In the electricity sector, Somalia has Africa’s highest renewable energy potential (USAID, Power Africa).  Solar power could potentially generate an excess of 2,000 kWh if the country reached its total capacity, and onshore wind power could generate between 30,000 to 45,000 MW.  The African Development Bank  highlighted  research showing that Somalia had more “on-shore wind potential” than 21 other African countries, including Algeria, Egypt, Libya, Mauritania, Morocco, and Tunisia.

Studies suggest Somalia has one of the highest potentials for gas and oil in the region.  Geo-seismic studies have shown that Somalia may have more than 30 billion barrels of oil and gas reserves.  The country began the licensing of offshore oil and gas blocks in 2022 after the parliament passed legislation on oil and gas revenue sharing and agreed on a legal framework for the exploration and extraction of oil and gas resources.  Coastline Exploration was issued the first oil and gas exploration Profit Sharing Agreement (PSA) in 2022.  Additional licensing for other multinational companies is expected in the coming years.

Mobile money is widespread and estimated at 73 percent of penetration.  According to a World Bank report, Somalia has a large diaspora, and diaspora remittances are estimated at nearly $2 billion annually, comprising about 20 percent of GDP.  Transfers, mobile banking, and payments present opportunities for inclusivity and broad access to financial services.

The aviation sector in Somalia is growing in terms of volume and quality of services, presenting opportunities for investors.  After over 30 years, Somali airspace has regained its Class A classification by the International Civil Aviation Organization (ICAO).  As a result, increased air traffic and passenger travel is expected to and from major global destinations, opening trade and investment opportunities in the country.

Somalia is among the Heavily Indebted Poor Countries (HIPC).  According to the Federal Ministry of Finance, Somalia is anticipated to meet the completion point for the IMF’s HIPC initiative in the last quarter of 2023, significantly reducing its total debt burden.  Somalia will then be eligible for international loans which is expected to increase public investment in infrastructural development.  Major government contracts in the infrastructure sub-sector are expected to be announced in order to repair and expand dilapidated economic infrastructure.

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Entrepreneurs breathe new life into Somalia

Through the Sahamiye Foundation, Ahmed will invest in healthcare, education and infrastructure projects over the next 10 years; he will do so by investing in building the capacity and skills of the local community to become literate, get jobs, and run businesses. He is also keen to invest in Somaliland’s startup accelerators. 

Ahmed is alive to the devastating impacts that decades of conflict have had on the economic growth of the country and the well-being of its people, with illiteracy, due to the collapse of the education system, being a key contributor to the sorry state of affairs. Hundreds of entrepreneurs are joining Ismail to pick Somalia from the ashes of war by supporting enterprises that are creating jobs and contributing to the overall economic growth of the country. 

Changing the narrative of unemployment

"Somaliland is a nation that has built itself from the ground up, embracing technology and entrepreneurship to make progress that was never thought possible,” Ahmed said in a statement. “However, Somaliland still faces development challenges that require significant investment to lay the foundations for economic growth, good health and prosperity.”

In a country with one of the youngest populations in the world ( over 70 percent  of it is under the age of 30), Somalia has also had to grapple with one of the highest levels of youth unemployment. 

But young Somalis are now changing the narrative by being job creators than seekers. From ICT and agriculture to retail and manufacturing, small businesses being led by young men and women are becoming commonplace. These businesses have become safe havens for young people keen on turning away from crime. 

“Micro, Small and Medium Enterprises (MSMEs) are an important part of Somalia's business environment. Indeed, sectors such as manufacturing, services and ICT are not as advanced," notes a report  dubbed The Somali Micro Small and Medium Enterprises ecosystem: challenges and opportunities .  

"It is widely recognised that entrepreneurs play a vital role in promoting the private sector and economic growth in Somalia because they embody private ownership and entrepreneurial skills, and contribute to job creation and the diversification of economic activity," the report further states. "MSMEs have been viewed by some governments and donors as a means of creating employment opportunities and alleviating poverty. MSMEs promote entrepreneurship and innovation in Somalia, which play a vital role in achieving development goals in the country.” 

Such entrepreneurs include Amina Farah, who founded the Khayraad Development Association. A multi-purpose self help group, the association is involved in fishing business, boat making and processing of resins and gums targeting the beauty industry. 

Having moved into the fish drying business, Amina is now into exporting fish, having captured the Ethiopia, UAE, Rwanda and Yemen markets.

“The fish business has opened opportunities for me by connecting me to more local and international markets. With the expansion of business, this has also meant increasing the number of people I work with which means more jobs for especially the young people," Amina told FairPlanet. "Having diversified into other areas of business for sustainability also means more jobs for ordinary Somalia people." 

While there are no official figures on the number of enterprises registered in the country, Somalia’s Directorate of SMEs estimated them to be 6,000 spanning from small stories to large companies. 

Bureaucracy and high costs hinder young Somali entrepreneurs 

But these businesses have had to contend with the prohibitive cost of doing business and a tough operating environment that has slowed down their ambitions.

The World Bank Ease of Doing business 2020  ranked Somalia as the worst country to do business in out of the 190 countries reviewed, citing the number of days it takes to open a business and the costs involved. An entrepreneur spends 70 days and pays $900 to have a business license.

The government, alive to these hiccups, has, through various interventions - among them the 2020-2024 development plan, been investing in creating an enabling an environment for entrepreneurs to run businesses and thrive in.

“The Somalia entrepreneurship ecosystem and the dedication by local businesspeople, among them youth and women to find sources of income while rebuilding their country is a classic example of how boosting local investment is a key dirver of economic growth, irrespective of how long this may take,” said Naomi Otande from the University of Nairobi School of Economics. 

Image: Ismail Salad Hajji dirir. 

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5 Somali entrepreneurs who dare to invest

Together with Business Sweden and Sida, ForumCiv supports Somali entrepreneurs who dare to invest in a market few other dare to touch.

Entrepreneurs can apply for support to their business ideas with clear human rights and sustainability objectives through the program SSBP (Swedish Somali Business Programme). Recently 42 entrepreneurs gathered to develop their ideas and share experiences. Here a five ambitious entrepreneurs who are part of the SSBP programme.

Samira Mohammed, People2work, dairy production

– It was such a wow-feel when I realized I was first on the local cheese and dairy market. It was during the drought that it hit me that we must make use of all available resources. Despite the meet consumption being high in Somalia there are actually very few who drink milk. I appreciate being able to mix in a Swedish perspective on the market in Somalia, to be able to run a company that also strengthens women’s opportunities and that has a well-founded environmental perspective.

Rhoda Elmi, Elmimedic, import and distribution of medicine

– Everything is optimized in Sweden. That is not the case in Somalia, but we have great potential and opportunity to grow. When I investigated the quality of medicine in Somaliland I realized that the pharmacies only sold medicine that is banned within the EU. Why shouldn’t Somalians have access to the same medicine as Swedes? Health is a prerequisite when building a sustainable society, especially for women and youth. I want to import medicine in order to improve the living standard in my country.

Bile Antar Huseyn, Swedhorn, online sales

– Somalia hasn’t come very far within the field of online sales. My plan is to start a version of Blocket in Somalia, but bigger. People will be able to sell their things through the service but wholesale retailers will also be able to use the platform to sell their goods. I already have a partner in Sweden and several contacts in Somalia to be able to carry through this idea. SSBP has taught me that there are many risks and that challenges are many but that you can’t give up.

Muna Magan, Riyan Organics, skin care and cosmetics

– To me the SSBP programme had nothing to do with the grant. It was about the exposure and connection to Business Sweden and Forum Syd. The training and mentorship has really benefitted my business. I employ female workers in my business because they are loyal, motivated and with their salary they provide for more people. Children to a woman who can support herself will go to school. It benefits the whole society.

Khadija Omar, Rage 3K, paint production and sale

– In Somalia women primarily operate in the informal economy and few are registered business women. I want to be a role model as a business manager and hire women to improve their lives. People in Somalia have to repaint their houses every three months since the paint doesn’t stick. Me and my brother, who is teaching chemistry at a university in Canada, will develop paint that is better suited to the Somali climate. It will save people time, money and be environmentally sustainable.  

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Our team has enormous experience in working in Africa. Our focus is entirely on growing business and investment into Somaliland and other African countries. We have raised funding for multiple African companies and led many business investment missions across Africa to discover and promote Africa’s most interesting business and investment opportunities. We also run the annual AFSIC – Investing in Africa event that has become one of Africa’s most important business and investment events and which is a great place to promote business and investment opportunities from Somaliland and across Africa, as well as to meet many of Africa’s most important investors ( About Us Page ). As such we can to assist you:

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Voices of women entrepreneurs in a changing Somalia

Sophia friedson-ridenour.

In Somalia, entrepreneurship is a driving force of the economy. An estimated 76%of all jobs come from entrepreneurial activities - and except for large businesses, women play a leading role in this area. In Somaliland, women own more than half of all household enterprises. In Mogadishu and Bossaso, they own approximately 45% of established formal businesses.

Many Somali women say they prefer self-employment citing flexibility, freedom, and independence. However, critical gender gaps in entrepreneurship remain; women have lower revenues compared to their male counterparts and are largely excluded from higher-earning segments of value chains. So, what is holding back women entrepreneurs? To try to answer this question, we collected stories from entrepreneurs working in the livestock, dairy, fisheries, retail, and trade sectors in Hobyo, Bossaso, Burao, Hargeisa, and Mogadishu about the challenges women entrepreneurs face. This research is part of the recently concluded Somalia Country Economic Memorandum (CEM), which examined what constraints needed to be overcome to create more and better jobs for Somali men and women.  

Across sectors, three issues, stood out:

Women lack access to capital “Financial institutions have made borrowing so restrictive that it’s almost impossible for women to borrow. This is because, [banks] ask for either a guarantor or security in the form of an asset. Both are not within the reach of women.” – Woman working in the fisheries sector, Hobyo Many women pointed out that land ownership and inheritance laws favor men, making it very hard for women to meet the requirements necessary to secure bank loans. Some people explained that men do not like to be guarantors for women because they are worried women, who tend to be engaged in small-scale and low-earning businesses, will default on their loans. Other women said they did not consider bank loans because of the cost and the short repayment periods. As a result, most women rely on savings groups or loans from family and friends when they need money. However, the amounts they save and borrow are generally small, making it hard to make large investments in their businesses. Women’s businesses are concentrated in local daily markets “Our market is very small and the number of women selling fish are many. Therefore, our big challenge is on market, and the fact that we have no capacity to reach neighboring markets where fish is in high demand.” – Woman working in fisheries sector, Hobyo Across sectors, women talked about the challenges of operating in constrained local markets. In the dairy and fisheries sectors, for example, women generally cannot afford refrigerators or refrigerated trucks. This means they cannot store or transport their products to nearby towns where they can get better prices and they are therefore stuck selling their products in the daily local market where there can be problems of over-supply. Recent research from Ghana finds that this kind of ‘over-crowding’ leads to lower demand for female-owned firms and lower profits for women. In the livestock sector, women entrepreneurs described seasonal challenges. For example, during the Haj season, when the demand for animals is higher, men with larger operations tend to sell to traders who export to places like Saudi Arabia. This drives the price of livestock up, negatively affecting women who operate smaller businesses, trying to buy livestock for resale in local markets. It was clear that women who operate in more limited markets are at a disadvantage in finding buyers and sellers. Women’s businesses are often in suboptimal locations “Most women-run businesses are small, and most of them are based in the neighborhoods rather than the main city center. They therefore have less interaction with suppliers and are often stuck with one supplier.” – Woman business owner, Hargeisa Across sectors, women described constraints to business location. A combination of household and childcare responsibilities often required women to work close to home. In other instances, prohibitive requirements to pay one or more years rent in advance, and challenges securing a guarantor made it more difficult for women to rent desirable shop space. As a result, it was not uncommon for women’s businesses to concentrate on the outskirts away from city centers or near their homes, impacting their ability to attract and reach clients.

Under the best of circumstances—much less in times of crisis such as drought, pandemic, or instability—women entrepreneurs often need to be creative and innovative just to keep their businesses going. While more research is needed to figure out how to best support women entrepreneurs in Somalia, innovations in other countries provide clues to the types of interventions that might help.

In Nigeria, for example, the Women Entrepreneurship Finance Initiative is piloting a digital cash flow loan to help women entrepreneurs overcome collateral constraints. In Ethiopia, micro finance institutions, as part of the Women Entrepreneurship Development Project , have used cash-flow lending techniques to reduce collateral requirements for women seeking loans.

In terms of business location, if the obstacle is cost, offering subsidies or help with guarantees could help women secure more optimal business locations. When cost is not the primary obstacle, but rather household and childcare responsibilities, then childcare interventions might be more relevant. In Uganda, for example,   a study found that bringing a child to work is associated with a “baby profit gap”— 45% lower profits for women.

As we look for solutions tailored to Somalia, the Africa Gender Innovation Lab is a great place to find other evidence from across the region on how to close the gender gap in earnings, productivity, assets, and agency. If projects are going to better support women, they will need to think about innovative ways of addressing their most pressing challenges. As one male entrepreneur in Hobyo said, “They [women] can do well, if given a chance.”

This blog is part of a blog series curated by the World Bank’s Somalia Women’s Empowerment Platform to highlight evidence and solutions on women’s and girls’ empowerment in Somalia.  Read more blogs in the series:

• Breaking the cycle – Supporting inclusive access to more and better jobs in Somalia
• Want to keep internally displaced people in Somalia out of poverty? Increate women’s economic opportunities
• Jobs & Development
• International Women’s Day

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Social Development Specialist in the World Bank’s Africa Region Gender Innovation Lab (GIL)

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Understanding sectors for growth in somaliland and economic opportunities for migrants, attachments.

The Danish Refugee Council (DRC) with support from Danida carried out a labor market assessment (LMA) in Somaliland conducted in September 2023, intending to provide a comprehensive understanding of the region's labor and market dynamics, focusing specifically on key economic centers including Berbera, Burao, Borama, Hargeisa, Ainabo, and Wajaale.

The primary objective of the assessment is to gain detailed knowledge about employment trends in the region, key sectors for growth and identify gaps in the job market. Additionally, the assessment seeks to determine market needs by examining the demand for various skills and occupations. By analyzing the existing labor market, the assessment aims to identify potential areas for expanding labor opportunities and promoting economic growth. It also aims to create an updated profile of in demand skills, ensuring alignment between the available workforce and job market requirements. Furthermore, the assessment focuses on identifying and addressing barriers that hinder access to decent and productive employment in Somaliland, particularly for migrants and refugees. The findings of the assessment can inform targeted interventions for stakeholders to overcome employment challenges faced by migrants and refugees and enhance their access to livelihood opportunities.

The Labor Market Assessment will play a vital role in strengthening the DRC’s programmatic strategic goals in Somaliland by providing a comprehensive understanding of local labor market dynamics. The assessment aimed to achieve several objectives:

Understand the economic landscape in Somaliland, gaining insights into the different sectors and financial landscape. Identify high-demand sectors, skills and competencies as well as areas with skill gaps within the local labor market. This information will guide the design of training programs and skill development initiatives to improve employability and bridge existing skill gaps.

Identify livelihood opportunities for migrants and refugees within the local labor market by examining sectors and industries for existing job prospects and areas of potential growth. This understanding will inform effective strategies to integrate migrants and refugees into available employment opportunities.

To achieve these goals, the LMA actively engages with stakeholders in Burao, Berbera, Borama, Odweyne, Hargeisa, and Wajaale in Somaliland. This inclusive approach involves close collaboration with local communities, employers, government agencies, local NGOs, and other relevant stakeholders, especially migrants and refugee population groups. By involving these stakeholders, the assessment ensures that their perspectives and experiences are considered, providing a comprehensive understanding of the labor market dynamics. Engaging with employers and government agencies allows valuable insights into employment trends, market needs, and potential opportunities. The involvement of relevant stakeholders also enables a comprehensive understanding of the challenges faced by migrants and refugees in their pursuit of employment and livelihood opportunities, as well as their integration into the broader job market.

Data collection for the assessment relied on a combination of primary and secondary sources. Primary data was collected through surveys, key informant interviews, and focus group discussions with stakeholders, including local communities, employers, government agencies, and organizations. Secondary data was gathered from existing sources such as government reports and publications from other organizations.

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Businesses urged to seize investment opportunities in Somaliland

Aug 07, 2020

The UK and Somaliland rallied businesses to make the most of Somaliland’s rich agricultural and investment opportunities to create a thriving economy and reduce its dependency on aid.

The call to business was made ...

at a conference, co-hosted in London by both governments, on trade and investment in Somaliland.

The UK delegation was led by the Foreign Office and Department for International Development’s Ministers, James Duddridge and Lynne Featherstone. The Somaliland delegation was led by President Ahmed Mohamed Mahmoud Silanyo.

Attendees at today’s conference agreed that whilst the aid relationship will remain important, it will be business and investment that will prove increasingly important in creating jobs, sustainable growth and prosperity in Somaliland.

In Somaliland, where 63 per cent of men and 80 per cent of women between 25 and 34 years of age are unemployed, this need is particularly pressing.

Speaking at the event, Foreign Office Minister James Duddridge said:

The British Government is keen to build partnerships across Africa, and Somaliland is no exception. We want to help harness the power, the optimism and the drive of the people of Somaliland. We want to build on that and create a business environment which attracts inward investment, and which encourages the brightest talent in Somaliland to stay, and those who have left to return.

Department for International Development Minister Lynne Featherstone said:

Business will be central to Somaliland’s growth and development. It is already happening – Hargeisa teems with people starting new businesses and shops. It is only through investment, trade and jobs that Somaliland can reduce its dependence on aid and remittances. People want the opportunity to work their own way out of poverty. People want the dignity that comes with a job and being able to provide for their own family. And the people of Somaliland, with all their entrepreneurial potential, are no exception.

The UK Government remains committed to help build a more economically stable and prosperous future for Somaliland. UK aid supports areas such as health, education and strengthening public financial management and governance, and importantly is helping to rebuild crucial infrastructure and create jobs.

But much of Somaliland’s potential remains untapped. The rich agriculture and livestock sectors could produce goods with much higher added value. Businesses can play a vital role in growing these sectors, and others like services and manufacturing, through investment.

The UK and Somaliland have a close and long standing relationship. The UK opened an office in Hargeisa in 2012 and recent months have seen several high level visits in both directions, including by the previous Minister for Africa, Mark Simmonds, who visited in April this year.

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MOGADISHU — Salaam Somali Bank which is a privately owned bank continues to contribute to Somalia’s economic growth by providing free microfinance funds to develop small businesses.

On Sunday, Nov 21, the Bank’s HQs in the Bakaro market provided funds to the local traders in Mogadishu, who were in dire need of support that will help grow their mini commerce.

The beneficiaries expressed gratitude to Salaam Somali Bank’s management and staff, saying it’s an Exemplary step to follow by other financial banks in the country.

“We’re very happy with the Micro-finance fund provided by the Salaam Somali bank,” said one of the business owners who have today benefited from the Qardu Hassan program. This is part of the Bank’s package aimed at improving the small businesses in all regions across Somalia to play a vital share in boosting the economy and alleviating poverty. Qardu Hassan was designed to be rolled out in all regional and urban banking centers in the country and is destined to raise and motivate the growing businesses.

The bank has already provided such free microfinance to the small merchants at its main headquarters, including the Somali capital, and several towns in the south and central regions.

The main purpose is to uplift the productivity of evolving businesses and encourage entrepreneurs in a bid to revive the economy in Somalia with high unemployment rates.

Source: Radio Dalsan    Origin: View original

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