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All financial activity in Somali Democratic Republic falls under the International Bank Act 2003 as an important part of the country’s legislation. According to it the
Somalia International Financial Centre is the body responsible for regulating the financial activity of the country.
The Somalia financial industry operates in several directions including banking, insurance and remittance business.
The main bank of the country, responsible for the finance sector of the economy is the Central Bank of Somalia, situated in Mogadishu. It regulates currency and credit,
acts as banker to Government and public bodies, functions as bankers’ bank, supervises other commercial banks of the country, provides management of the external
reserves of the country, operates exchange control and conducts economic and statistical research.
The SIFC has always aimed at creating most favorable environment for doing business internationally. One of the best examples of international banking is First Oceanic
Bank Ltd., operating within the frames and under the guidance of SIFC. The principle aim of the First Oceanic Bank Ltd. is to provide its international clients with a
full range of effective and high quality banking services including Personal and Corporate Banking, Currency Exchange, Institutional Banking etc.
The insurance sector of financial industry in Somalia is yet to be developed. Nevertheless, there are all necessary conditions for creating two types of insurance
companies: either captive or general insurance company. Current legislation of SDR and the International Banking Act 2003 in particular, make different types of insurance
possible for international and local clients: life insurance, term insurance, pension and retirement programs, etc.
The most efficient and profitable sector of the SDR financial industry is its remittance system, or the 'hawala' system. Any remittance system is based on the idea
of sending funds to the native country from successful people from all over the world in order to support families or relatives. But the Somalia 'hawala' system is
unique because of the several facts. First, the Somalian so-called clan society has traditionally consisted of a definite number of families having strong relations
and family ties. Thus, the kinship relations between the immigrants and their relations in SDR have a very strong and positive influence on the creation and development
of the country's remittance system.
Second, during the recent years the ancient traditions of kinship have intermingled with the modern technological advances in the sphere of communication: the development
of cell-phone networks, Internet and the emergence of offshore banking. The result of this interaction of traditional and modern approaches mixed within the frames of the
financial industries a fast, reliable and prosperous remittance system of Somalia.
The annual amount of international remittance received in SDR is around 1 billion USD. The largest Somalia remitting companies include Dahab Shiil, based in Hargeisa,
which transmits $5 million monthly, and Dalsan, which handles $2 million in monthly transactions.
The current remittance system of Somalia opens an opportunity of creating a well-established financial system, one that takes the cultural features of the country into
account, but also makes full use of the innovative procedures offered by modern technology.
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