Central Bank of Somalia and Somali financial institutions take steps to modernize banking sector

The Central Bank of Somalia (CBS) and Somali Financial Institutions (SFIs) have announced that they will begin strengthening the inter-bank payment, clearing and settlement systems in Somalia in a bid to modernize the banking sector.

The announcement was made on the heels of a five-day consultative forum in Nairobi focused on establishing public-private understanding and creating a common ground regarding the most efficient and effective way of setting-up national payment systems in Somalia.

“National payment systems contribute to the development of modern financial markets and promotion of market-based financial service provision,” said Abdishakur Mohamud, Central Bank of Somalia. “Centralizing clearing into the actual movement of money from one account to another with speed, lower cost, reliability, and convenience.) and settlement will contribute to financial stability in Somalia, and evoke domestic and foreign trust in Somali financial institutions.”

The changes will open doors to manage international payments in the country from a single platform.

The World Bank expects that the developments will have a positive economic impact and the development of new financial products can become an important source of fee income for financial institutions. These steps are crucial to bringing Somalia one step closer to the international banking standards.

One of the commitments for the national payment system is the strengthening of the ‘Know Your Customer’ (KYC) system and the use of a communal interbank digital ID system to enhance fraud and anti-laundering controls.

“With the Central Bank leading this process, it is clear that the financial governance capabilities of Somali authorities are increasing,” said Thilasoni Benjamin Musuku, Senior Financial Sector Specialist, World Bank.