Financing small scale businesses is vital for Somalia
MOGADISHU, Somalia - In Somalia, it is usually hard for people to finance business ideas. Most of the investment institutions are not designed to support the establishment of new businesses for entrepreneurs even where they are set to make profits. The understanding and the culture to create business ideas don't work.
This has forced many promising business ideas not to take off due to lack of the capital to set up the business. This is a big loss to all who would have otherwise made profits out of these ideas directly and indirectly.
The leading Salaam Somali bank is trying to change this with the set-up of the Entrepreneurship Investment Facility that has made many business ideas to be executed into viable businesses.
Levels of unemployment in Somalia
Somalia has an estimated population of 15 million and has a largely youthful population estimated to more than 75 percent. This staggering statistic is seen as a significant threat to the national security and stability of the nation. Existing research also points the limited employment opportunities have caused youth to emigrate in large numbers.
According to research by Mohamed Saney Dalmar conducted in 2017, it is estimated that more than 60% of Somalia's youthful population have the objective of leaving the country to get a better living abroad.
It is estimated that not more than 6000 people are on the government payroll. Small businesses are the major employer for many of the people who are not government employees.
This is a big reason why financially struggling people need a financial facility that can support the already existing small businesses and funds to set up new ones.
"We have supported many youths with funds to execute their business ideas and will continue doing the same," said Ahmed Farax Fiidwo, the Head of Murabaha at Salaam Somali Bank.
Benefits of financing small businesses
The idea to provide financial support to an individual with low or limited income is a culture that governments and humanitarian organizations started. In the latter years, privately-owned financial institutions joined these efforts to support small businesses.
Usually, the person refunds the capital he was loaned to start his business and take home the profit. To safeguard the investment, most lenders ensure the value of the money is the same when the business repays the capital it was loaned.
The profit of the small business is, therefore, also has a massive impact on the lender. Finally, it is a win for all as the government will also collect tax from the business.
In Somalia, many brilliant minds with excellent business ideas are finding it hard to find financiers for their ideas. It is the reason why many are forced to take up paid jobs as their ideas fall on the wayside.
"I urge that small business struggling with finances should be supported and given a shoulder to lean on," said, Dr. Zuhuur Ibrahim Hirsi whose pharmacy shop was about to close but salvaged by finance from Salaam Somali Bank.
Institution financing small scale business
Not many institutions are designed to support small-scale businesses in Somalia. However, the introduction of the Entrepreneurship Investment Facility is a game-changer that will revolutionize the sector. Many small businesses rely on this facility as the only lifeline to support their businesses.
For Ali Deeq Artan Abdi, a trained economist, the support of Salaam Somali Bank was instrumental for him to achieve his dream of setting up his car spare parts shop in 2017.
"Initially, we struggled, but with the support of the Salaam Somali Bank, a lot changed for the better," said Ali. "I am now able to order the spare parts from outside the country,"
He explains that the support of the Salaam Somali Bank was a crucial eye-opener for his business.
Supporting small-scale business is not a burden to the lender and is very significant for the business. However, there are many individuals with brilliant business ideas with no support.