Banking Development in Somalia
9 Pages Posted: 19 Jan 2007
Somalia, so named from the Somali inhabitants, lies in East Africa, between the Gulf of Aden and the Indian Ocean. The Somali Republic was formed in the Horn of Africa by the amalgamation of Somalia under Italian trusteeship administration, formerly Italian colony, with the British protectorate of Somaliland in 1960. The collapse of the State occurred in 1991, when the dictator ruling the country since 1969, was dethroned by a civil war. The paper examines the development of banking system and the monetary management in the Somali Republic since the achievement of independence up to the beginning of the 70s. It appears that the financial sector of Somalia was one of the least sophisticated in Africa south of Sahara. Particular attention is given to the analysis of organization and functions of the Somali National Bank, the central bank. Before the coup d'état of 1969, the banking system of the country was open to expatriate banks and commercial banking business was carried out by the Banking Department of Somali National Bank as well as by branches of four foreign banks: Banco di Roma, Banco di Napoli, National and Grindlays Bank Ltd. and Banque de Port Said. All the eight branches of foreign banks were, however, nationalised in 1970 and the reform of banking system, implemented also by means of concentration and mergers, brought to the establishment of two financial institutions, both state owned: the Somali Commercial Bank and the Somali Savings and Credit Bank. An other public financial institution, devoted solely to medium- and long-term lending, the Development Bank survived. In this two-tier shaped banking system the Somali National Bank had to limit its functions to those typical of a central bank.
Keywords: Somalia, African banking, Nationalization
JEL Classification: O16, N27
Suggested Citation: Suggested Citation