Somali The Somali Banking System

1456 Words Nov 23rd, 2015 6 Pages
The Somali Banking System

Anna Koontz
Dr. Darcy Hartman
AEDE 4536
21 November 2015

A: Introduction and Problem Description Somalia is a war-torn nation in East Africa that has been systematically affected by political, economic, and social issues for decades. These issues have profoundly impacted the way that the nation functions as a whole. One of the most significant economic issues that plagues Somalia today is its lack of an effective central bank, and the general scarcity of banks throughout the country. The Central Bank of Somalia does exist, but it is essentially inoperative, as it has no substantial authority and has not officially printed a single bank note since the 1990s1. Currently, the Central Bank of Somalia does not dictate monetary policy whatsoever, and only conducts surveys as it attempts to reconstruct itself 2. Because of this, counterfeit currency makes up a sizable proportion of the money in circulation, and most Somalis rely on remittances transferred from family members abroad to survive. In fact, it is estimated that around 45% of Somalia’s economy is made up of these remittances that come from places like Kenya, Ethiopia, and the United States, where large populations of Somali refugees and immigrants currently live3.
Not surprisingly, the lack of a banking system has led to currency substitution that appears in many forms. Some use foreign currency or the plentiful counterfeit bills, while others use money issued by regional…
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