Financial Crime World

Somalia Takes Crucial Steps to Modernize National Payments Systems

Introduction

Nairobi, January 18, 2018 - The Central Bank of Somalia (CBS) and Somali Financial Institutions (SFIs) are making significant strides in streamlining the country’s national payments systems. With the support of the World Bank, the CBS and private financial institutions are working together to strengthen the inter-bank payment, clearing, and settlement systems in Somalia.

Strengthening National Payments Systems

The move follows a five-day consultative forum held in Nairobi, Kenya on National Payment Systems Development, where stakeholders established public-private understanding and created a common ground for setting up an efficient national payment system. The Automated Transfer System (ATS) and National Switch will complement each other, with the ATS facilitating large payments and the National Switch ensuring interoperability of retail payment systems.

Expected Outcomes

  • Positive impact on economic activity
  • Improved management of monetary aggregates
  • Reduced transaction costs
  • Development of new financial products
  • Increased trust in Somali financial institutions

Key Commitments for Implementing National Payment Systems

  • Industry harmonization
  • Standardization of a tiered Know Your Customer (KYC) system for transactional accounts
  • Enhancement of fraud and credit risk control
  • Promotion of centralized clearing and settlement

Support from the World Bank

The World Bank supports CBS in strengthening central bank supervision and regulation through the Somali Core Economic Institutions and Opportunities (SCORE) Program. The SCORE program aims to improve the enabling environment for financial and private sector development, catalyze private investment and job creation across Somalia.

Funding Partners

  • Multi Partner Fund (MPF)
  • United Kingdom’s Department for International Development (DfID)
  • European Union (EU)
  • Germany’s KfW Development Bank
  • Swedish International Development Cooperation (SIDA)
  • Royal Norwegian Embassy
  • Danish International Development Agency (DANIDA)
  • Swiss Agency for Development Co-operation (SDC)
  • Ministry of Foreign Affairs of Finland
  • United States Agency for International Development (USAID)
  • Italy’s Ministry of Foreign Affairs and International Cooperation
  • World Bank’s State- and Peacebuilding Fund (SPF)

Conclusion

The implementation of national payment systems in Somalia is a crucial step towards modernizing the country’s financial sector. With the support of the World Bank and other international partners, Somali authorities are increasing their financial governance capabilities, which will contribute to financial stability and boost domestic and foreign trust in Somali financial institutions.