 | |
 Central Bank of Somalia, Mogadishu | |
| Headquarters | Mogadishu,Somalia |
|---|---|
| Established | 30 June 1960; 65 years ago (1960-06-30) |
| Ownership | 100%state ownership[1] |
| Governor | Abdirahman M. Abdullahi[2] |
| Central bank of | Somalia |
| Currency | Somali shilling SOS (ISO 4217) |
| Website | centralbank |
TheCentral Bank of Somalia (CBS) (Somali:Bankiga Dhexe ee Soomaaliya,Arabic:البنك المركزي الصومالي) is themonetary authority ofSomalia. Somalia has struggled to reestablish a functioning state since the collapse of an authoritarian regime in 1991. Somalia has been cited in academic contexts as a case of decentralized governance and informal legal structures following the collapse of its central government. The Transitional Federal Government, formed in 2004, was recognized as the central government of Somalia. Among other duties, it is in charge of ensuring financial stability, maintaining the internal and external value of the local currency, and promoting credit and exchange conditions that facilitate the balanced growth of the national economy. Within the scope of its powers, it also contributes to the financial and economic policies of the State.[3]
15 November 1920, theBanca d'Italia opened a branch inMogadishu. This was the first banking institution inItalian Somaliland.[4][5] Then in 1938Banco di Napoli established a branch inMogadishu. (Banco di Napoli replacedCassa di Risparmio di Torino, which had opened an office in Mogadishu in 1932).
In 1952,National Bank of India (NBI), which later merged with Grindlays Bank to formNational and Grindlays Bank, established branches inBerbera andHargeisa inBritish Somaliland (nowSomaliland). NBI was the first bank in British Somaliland and was the banker to the colonial government until theState of Somaliland (the former British Somaliland) joined theTrust Territory of Somalia (the former Italian Somaliland) to form theSomali Republic in 1960. After the union, National and Grindlays opened a branch in Mogadishu.
In 1940, there were five local bank branches in Italian Somaliland. Banca d'Italia had three: in Mogadishu,Kismayo andMerca.Banco di Roma had two branches; one in Mogadishu and another in Merca. Banco di Napoli had one in Mogadishu. Both Banco di Roma and Banco di Napoli also had branches in other parts of the region, inEritrea andEthiopia.
On 1 July 1960, the newly independent Somali Republic established theBanca Nazionale Somala (National Bank of Somalia) to take over the activities of theCassa per la Circolazione Monetaria della Somali and the Mogadishu branch ofBanca d'Italia. The new bank combined central banking activities withcommercial banking activities.
In 1968, theSomali Republic's civilian government merged the Somali Credit Bank (Credito Somalo) with the Banca Nazionale Somala. The earlier trusteeship administration had established the Somali Credit Bank in 1954 in theTrust Territory of Somalia.
After the bloodlesscoup d'état of 1969 that sawMohamed Siad Barre's ascension to power, the government in 1971 nationalized the four foreign banks. The government combinedBanco di Roma,Banco di Napoli, and National and Grindlays Bank to form the Somali Commercial Bank. The government also established theSomali Savings and Credit Bank to take over the commercial branches of Banca Nazionale Somala andBanque de Port-Said, leaving the Banca Nazionale Somala with only central banking functions. The Somali Savings and Credit Bank had branches inBaidoa,Beledweyne,Berbera,Bosaso,Burco,Galkacyo,Qardho,Hargeisa andKismayo, and for a while inDjibouti. The Somali Savings and Credit Bank had been established with the technical assistance and aid provided by theAssociazione Bancaria Italiana[6] in the context of an overall cooperation policy of the European savings banks.[7]
On 8 February 1975, the government renamed the Banca Nazionale Somala to the Central Bank of Somalia (Bankiga Dhexe ee Soomaaliya). It also merged the Somali Commercial Bank and Somali Savings and Credit Bank (Cassa di Risparmio e Credito della Somalia) to form the Commercial and Savings Bank of Somalia, which was at the time the only bank in the country. In 1990 the Commercial and Savings Bank of Somalia discontinued operations. At some point the Central Bank of Somalia too ceased functioning.
In 2009, theTransitional Federal Government re-opened the Central Bank of Somalia in Mogadishu as part of its campaign to restore national institutions.[8] The Bank had an additional branch in Baidoa that was already operational with personnel in place.[9]
In September 2013,Yussur A.F. Abrar was named the new Governor of the Central Bank of Somalia. A former Vice-President atCitigroup and Vice-President of Credit Risk Management at theAmerican International Group, she was the first woman to have been appointed to the position.[10] In November 2013,Bashir Isse was appointed on an interim basis as Somalia's Central Bank Governor, following the resignation of his predecessor Abrar earlier in the month.[11] In April 2014, the federal Cabinet approved Isse as the new permanent Central Bank Governor.Maryan Abdullahi Yusuf was also named his new Deputy Governor.[12]
In accordance with the Central Bank Act, the organs of the Bank are as follows:[13]
The Governor serves as Chair of the Board and is the Bank's Chief Executive Officer. The Governor reports to and is a member of the Board of Directors. The Director General deputies for the Governor, and also assumes the role of the Bank's Chief Operations Officer.[13]
The Central Bank of Somalia's functions are divided into nine departments:[13]
The Board of Directors includes:[14]
Chapter II, Art. 2, Section (2) of the Central Bank of Somalia Act stipulates that the functions of the Bank are as follows:[18]
The Bank [may] exercise any type of central banking function and shall enjoy all the prerogatives of a Central Bank, and without prejudice to the generality of the foregoing shall in particular have the power to issue currency, regulate the banking and credit system, and manage the external reserves of the Republic.
The Central Bank of Somalia's medium and longer-termmonetary policy objectives are:[18]
In terms of financial management, the newly revived Central Bank of Somalia is in the process of assuming the task of both formulating and implementing monetary policy.[18]
Owing to a lack of confidence in the local currency, theUS dollar is widely accepted as a medium of exchange alongside the Somali shilling.Dollarization notwithstanding, the large issuance of the Somali shilling has increasingly fueled price hikes, especially for low value transactions. This inflationary environment, however, is expected to come to an end as soon as the Central Bank assumes full control of monetary policy and replaces the presently circulating currency introduced by the private sector.[18]
Although Somalia has had no central monetary authority for upwards of 15 years between the outbreak of the civil war in 1991 and the subsequent re-establishment of the Central Bank of Somalia in 2009, the nation's payment system is actually fairly advanced due primarily to the widespread existence of privatemoney transfer operators (MTO) that have acted as informal banking networks.[9]
Theseremittance firms (hawalas) have become a large industry in Somalia, with an estimated US$1.6 billion annually remitted to the region bySomalis in the diaspora via money transfer companies.[19] The latter includeDahabshiil, Qaran Express, Mustaqbal, Amal Express, Kaah Express, Hodan Global, Olympic, Amana Express, Iftin Express and Tawakal Express. Most are credentialed members of the Somali Money Transfer Association (SOMTA), an umbrella organization that regulates the community's money transfer sector, or its predecessor, the Somali Financial Services Association (SFSA).[20][21]
As the reconstituted Central Bank of Somalia fully assumes its monetary policy responsibilities, some of the existing money transfer companies are expected in the near future to seek licenses so as to develop into full-fledged commercial banks. This will serve to broaden the scope of the national payments system to include formal cheques, which in turn is expected to reinforce the effectiveness of the use of monetary policy in domesticmacroeconomic management.[9]
The financial institution Decree Law No. 37 of November 23, 1989, mandates the Central Bank of Somalia to oversee domestic financial institutions through the CBS' banking supervision department.[22]
Financial institutions supervised by the CBS are:[22]
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