Financial Crime World

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Introduction

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Finance and financial inclusion play a crucial role in promoting national economic growth, improving productivity at industry and firm levels, and alleviating poverty. Access to finance features in several Sustainable Development Goals (SDGs) set by the United Nations for 2030.

Importance of Finance in Somalia

Somalia’s economy is heavily reliant on remittances from diaspora communities, which account for a significant portion of the country’s GDP. Therefore, it is essential to develop a robust financial system that promotes access to finance and facilitates economic growth.

The Current State of Finance in Somalia

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Somalia’s financial system is dominated by Money Transfer Operators (MTOs), with mobile money being the most popular tool for financial transactions within the country. Key statistics include:

  • 75% of the population use mobile money transfers
  • Only 15% have bank accounts (UNIDO, 2020)
  • The Central Bank of Somalia was re-established in 2009, but its capacity is minimal

Challenges Facing Financial Development in Somalia

Despite the importance of a sound financial system, several challenges hinder financial development in Somalia:

Limited Infrastructure and Capacity

Somalia has yet to develop an adequate financial infrastructure or strengthen laws pertaining to accounting, insurance, bankruptcy, commercial credit, etc.

Rule of Law Enforcement

The ability to enforce legal rights in courts can impact financial institutions’ decisions and thus individuals’ access to credit. Limited capacity to enforce the rule of law prevents the development of formal, contract-based credit culture.

The Role of SMEs in Economic Development

Small and Medium Enterprises (SMEs) play a vital role in developing economies by generating growth, employment, and significant export earnings. However, the development of this sector in Somalia is constrained by several factors, including lack of access to finance.

Objectives of the Study

The major objective of this study is to provide a comprehensive analysis of the state of access to finance and financial inclusion in Somalia, as well as assessing potential impediments to access to finance.