Microfinance in Somalia
Microfinance is the provision of financial services to low-income individuals
who lack access to traditional banking services. In Somalia, it plays a
significant role in lifting people out of poverty and promoting financial
inclusion.
by Isse Abdishakur Ali
History of MicroDahab
MFI
. What is MicroDahab?
We are a microfinance institution located within the Somali
Territories that works on creation of employment opportunities for the youth
through startups, giving access to finance to the un-bankable in the society,
taking the vulnerable to the state of sustainability through access of finance and
supporting low income business women
Why did MicroDahab start?
MicroDahab was founded as a way for Dahabshiil Group to give back to the
communities
When did MicroDahab start?
MicroDahab was founded in 2014
The Somalian Context
Instability
Drought and
famine
Informal
economy
plagued by decades of
Natural disasters such as
Many Somalians rely on
instability and conflict,
drought and famine have
the informal economy,
which has made it difficult
led to high levels of
which often operates
for formal banking
poverty and a lack of
outside the formal
institutions to operate.
economic opportunities in
banking sector.
Somalia has been
many parts of the
country.
Challenges of Accessing Finance in
Somalia
High risk
Due to high levels of instability and a lack
of regulation, many banks are reluctant to
operate in Somalia.
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Limited infrastructure
Lack of collateral
Somalia lacks many of the basic financial
Many Somalians lack the collateral needed
infrastructure needed for traditional
to secure traditional bank loans.
banking services.
The Challenges of the Non Bank Financial
Sector in Somalia:
At the Macro or Policy Level:
 Absence of an enabling law or Policy that recognizes the existing MFIs and other Informal NonBank Financial Institutions
 Absence of greater coordination between the government, the Central Bank, the financial
service providers, donors and end-users;
 Lack of government buy-in, the Central Bank and other Stakeholders like the donors;
 Limited understanding of microfinance as a development tool.
The Challenges of the Non Bank Financial Sector
in Somalia:
At the Meso or Industrial Support level:
 Absence of a strong Industry support infrastructure for Microfinance (Network, Credit
Bureaus, National Payment Systems, Agent-Led Mobile Networks);
 Limited Capacity of umbrella body/Apex institution like SOMMA to help in the supervision of
the activities of Non-Bank Financial Institutions;
 Limited presence of local experts with skills in microfinance and best practices to help drive
the financial sector;
 Limited capacity of SOMMA to mobilize resources for the network activities and funding;
 Limited capacity for advocacy and information sharing about best practice standards of
operation ;
 Inability to conduct industry-wide compilation of performance data through use of the
Performance monitoring Tool ( PMT).
The Challenges of the Non Bank Financial Sector in
Somalia:
At the Sector Level
 Poor coordination of financial sector players;
 High transaction costs in delivering financial services
 Insecurity limiting the sector’s role and capacity,
 Limited use of technology limiting access to financial services for the poor.
 Absence of legislations that would promote the sector’s role and capacity;
 Limited technology Capacity of the key players and the absence of the use of technology in
service delivery.
 Absence of partnerships with other financial institutions like banks that would increase client
outreach
 Absence of partnerships with other financial institutions like banks that would increase client
outreach
 Absence of dedicated targeted interventions for the poor such as Vulnerable’ Group fund,
Youth fund, Women-only fund.
The Challenges of the Non Bank Financial Sector in
Somalia::
At the Micro or MFI level ( House-hold level):
 Limited capacity for NBFIS, MFIs, VSLAs to offer innovative financial services to the poor;
 Lack of support in areas such as risk management, management Information systems,
internal controls, credit risk management, Board governance, product development,
Internal Audit and Performance measurement ;
 Lack of grant capital to increase outreach to the very poor with financial services;
 Lack of transparency and efficiency in the delivery of financial services due to limited use
of technology in their operations;
 High demand for financial services;
 Low levels of client livelihood as evidenced by lack of access to finance;
 Lack of awareness about microfinance amongst the clients;
Role of Microdahab in Promoting
Financial Inclusion in Mogadishu
Renewable energy
WOMEN AND YOUTH
ENTREPRENEURSHIP
FISHING
Fishing The challenges of working in this sector
Women and Youth Entrepreneurship
have been numerous, however,
Renewable energy is a cross-cutting investmentWomen in the Somali Corridors are still hugely
sector for MicroDahab as products In this unbanked or more under-banked than men. PROJECTS Financing (fuel, ice, nets & food)
for boat owners Financing (fish) for..
Category are financed through our
Women dominate the Micro and
sector-specific portfolios in Agribusiness,
Small Enterprises (MSE).
livestock etc.
AGRICULTURE
Agriculture (Crops) Agriculture i.e.
farming crops is another productive sector that
MicroDahab focuses on
PROJECTS Investing in Cooperatives Buy greenhouses
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Our Productive Sectors
Self Help Groups
MicroDahab focuses on the Self Help
Groups with the unique point being they
don’t need to provide a third party
guarantor
MicroDahab gives livestock herders access to finance
by buying for them the livestock and dairy
Livestock and Dairy
MicroDahab finances the fishermen equipment`s
such as the fish nets, boats etc.
Fishing
Manufacturing
MicroDahab helps the manufacturing and
craftsmen by financing their equipments as a loan
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Youth
Education
Women
Agriculture
Youth`s are the future of tomorrow,
MicroDahab helps them by giving them
access to finance through startups
MicroDahab helps the student to get easy
access to their educational needs by buying
their equipment's, paying fees etc.
MicroDahab empowers women by
offering access to microfinance services
to the low income women
MicroDahab focuses on giving access to finance
for the farmers, most of them buy green
houses, seeds, stock in form of vegatables and
grocery
Impact of Microfinance on
Poverty Reduction in Somalia
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Increased income
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Entrepreneurship
Microfinance has helped
By providing access to
many Somalians increase
credit and financial
their income and provide for
services, microfinance has
themselves and their
helped to promote
families.
entrepreneurship and
create economic
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Financial inclusion
opportunities.
Microfinance has enabled many Somalians to access basic
financial services, which has helped to reduce poverty and promote
economic development.
Future Prospects of Microfinance in
Somalia
Regulation
Technological
Innovation
Partnering with
Local Institutions
microfinance in Somalia is
New technologies such as
Many microfinance
the lack of regulation and
mobile banking and digital
institutions are partnering
oversight. Efforts are being
payments are helping to
with local NGOs and
made to establish a formal
overcome many of the
community-based
regulatory framework to
challenges of operating in a
organizations to help better
help promote the growth
conflict-ridden environment.
understand the needs and
A key challenge for
and sustainability of the
challenges faced by
microfinance sector.
Somalians in accessing
financial services.
Conclusion
Financial Empowerment
Access to Financial Services
Microfinance has the potential to play a key
New technologies and innovative solutions are
role in empowering Somalians and breaking
helping to overcome many of the challenges of
the cycle of poverty.
operating in Somalia, and provide hope for the
future.