Somaliland: Plans to Establish Central Bank
Legislation will be passed in Somaliland, before the end of February 2012, to establish the country’s first central bank. At present Somaliland’s domestic banking sector is limited and citizens are forced to rely on transfers from abroad, as ATMs and conventional loan facilities are unavailable.
Below is an article published by Reuters Africa:
Somaliland's central bank governor said on Thursday [insert date] parliament is expected to pass a law within three weeks that will formerly establish a central bank, paving the way for foreign commercial banks to start operating in the self-declared country by 2013.
Somaliland, a breakaway state in the northeast of Somalia, remains unrecognised internationally. It has no formal banking sector and its people rely heavily on remittances from diaspora communities in Europe, North America and the United Arab Emirates, as there are no ATMs or loan facilities.
"We expect to finalise the (Central Bank) act within a maximum of three weeks," Abdi Dirir Abdi told Reuters in an interview in the Somaliland capital of Hargeisa.
The act was brought before parliament in November 2011.
"The Commercial Banking Act will follow in the next six to 12 months," he said. That legislation will allow foreign commercial banks to be set up in Somaliland and offer credit and cash withdrawal facilities.
Somaliland declared independence from Somalia in 1991 and has enjoyed relative stability compared to the rest of Somalia.
Several foreign lenders have expressed interest in operating in Somaliland where they are keen to capitalise on its untapped market potential.
"We are still awaiting the regulation. Once it is passed we will open a head office in Hargeisa and branches in five cities in Somaliland. We are ready to open immediately," said Saad Djama, a representative of Djibouti-based Banque pour le Commerce et l'Industrie-Mer Rouge in Hargeisa.
"This is a good market. The business in Somaliland is free, the rate of taxation is also very cheap," Djama said, referring to limited government interference in the business sector.
Djama said his bank currently catered to about 60 customers, mostly companies and non-governmental organisations. He hoped that number would rise to 1,000, once full branches are opened.
Yemeni state-owned bank CAC, Djibouti-based Salaam African Bank, and Banque de Depot de Credit Djibouti, a subsidiary of Switzerland-headquartered Swiss Financial Investments, have all approached Abdi about commencing operations in Somaliland.
"I think (the presence of foreign banks) will enhance our mobile banking system. But banks will bring in cash machines (ATMs) also," Abdi said.
"We are eager to issue licences to commercial banks so that the economy will pick up, because people will have access to credit."