Mogadishu

University

Faculty of economic management

Dep. Finance&banking
Submitted By: Abdullahi Muuse Ibrahim

ID.No:15419

2nd .Year , 4th .semester

Supervisor By: Ahmed abdulkhadir

At the 10th .april.2017

FINANCIAL INSTITUTIONS IN SOMALIA

Somalia has passed many different political environments from colonization to civil
Governments to revolutionary Government. As the political environments changed
rapidly also the financial institutions changed from time to time depending on regimes
existed there.-

Brief history about the Somali financial institutions 1969-1990

1960:- was established in Mogadishu the central Bank of Somalia,
With branches in Hargeisa, Berbera, Kismayo, Bosaso, Qardho, Galkayo, Baidoa and
Beletwein.
1968:- Somali development Bank was established.
1971:- two commercial Banks were established
a) Somali savings and credit Bank
b) Somali commercial Bank
Finally under listed Banks were operating in Somalia at 30 December 1990.
Central Bank of Somalia.
Government and Savings Bank of Somalia.
Somali Development Bank.
Somali Commercial Bank.
But these too many Banks and financial institutions existed in different times, some of
these Banks were closed later, some of them were widened and some others were
nationalized by the national Governments where many laws and acts were conducted
differently to different institutions.
For these and some other reasons these financial Banks and institutions worked
defectively, operating in an incomplete process due to un trained workers and nepotism
employed Bankers these reasons made the financial institutions worked inactively and
incompletely
THE FRIST ESTABLISHED CENTRAL BANK OF SOMALIA (CBS)
The history of the Central Bank of Somalia began when the United Nations Trusteeship
Administration A.F.I.S. established on 8th April, 1950 a new currency institution
regulator Cassa per la circolazione monetaria della Somalia with its Head Office in
Rome (Italy). During the 1950s, as independence approached, on 6th April, 1959 the
Head Quarter has been moved to Mogadishu, taking over all the assets, liabilities,
operations of the Banca dItalias Mogadishu branch.
On 3rd June, 1960 it ceased to exist and its functions have been transferred to the newly
established central bank Somali National Bank

The central Bank of Somalia was established in june30-1960 by the decree No.3 and
converted into law No.2 of january13-1961.
The central Bank of Somalia was the supreme monitory authority, its in charge of ensure
financial stability, maintaining the external and internal value of local currency and
promoting credit and exchange conditions that facilitate the balanced growth of national
economy, with in the scope of its powers it also contributes to the financial and economy
policy of Somali Democratic Republic. The head quarter of central Bank was Mogadishu
with many branches in all over the 18 regions of our country;
These branches used to control the issues of currency and perform the central Banking
function of the state.
Monitory policy in the (CBS)
The Bank exercise any type of central Banking functions and shall enjoy all prerogatives
of a central Bank, and with out 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 main function of these banks
1. price stability
2. formulating and implementing monitory and exchange rate policies
3. maintaining and enhancing the value of Somali shilling
4. maintaining financial stability
5. Harmonizing and coordinating government fiscal policies with monitory policies.
The governor serves as chairman of the board and is the Banks CEO; he/she reports to
and is a member of the board of directors. The director general deputies for the governor
and also assumes the role of Banks chief operations officer
The CBS was supervising some other institutions including: Commercial Banks,
Credit institutions, Forex bureaus and Money transfer operations (MTO)

Foreign banks in Somalia period (1950 -1990)

1950 Italian commercial banks, such as Banco di Roma and Banco di Napoli re-ope-ned
their branches in Mogadishu
1950 The Italian Trusteeship Administration (A.F.I.S.) established on 8th April, 1950 a
new currency institution regulator Cassa per la circolazione monetaria della Somalia
with its head quarter in Rome
1952 In Hargeysa for the first time was opened a branch of National Bank of India, a
commercial bank owned by the British Government.
1954 The National Bank of India opens another branch in Berbera.
1954:- in Mogadishu was established the first Government owned Bank the (credito
Somalo) but closed 1968 due to liquidity crises
Mainfunctionsofthebankswere:
a)Treasuryservices
b)AdvancestoA.F.I.S.forshorttermloan
c)Issuanceofcircularchequesandcurrentaccountscheques
d)Acceptanceofdepositsfromthepublic
e)Buyandsellforeigncurrenciesandgold
f)Buyandsellgovernmentbonds
g)Rediscountcommercialbanksbills
h)Investitsassets,exceptcashkeptasguarantee

EstablishmentofSomalishillingsinSomali

Somalia mostly was under Amministrazione fiduciaria italiana della Somalia

(acronimo"A.F.I.S.")In1921,theShillingwasmadetheofficialcurrencyofSomalia,

phasesthatSomaliacurrencyhave

Coins:In1950,coinswereintroducedindenominationsof1,5,10and50centesimiand
1somalo.Thethreelowerdenominationsweremintedincopper,withthehighertwo
beingstruckinsilver
Banknotes:TheCassaperlaCircolazioneMonetariadellaSomalia,headquarteredin
Rome,beganoperations1950andwasauthorizedtoissue55millionshillingsinpaper
money.Itreleasednotesindenominationsof1,5,10,20and100somalion22May
1950.
Asmallerversionofthe5SomalinotewasputintocirculationinMay1951.Thesenotes
were withdrawn beginning 15 December 1962 and ceased to be legal tender on 31
December1963.
In1967,newcoinsweredistributedwithvaluesof50cents,10cents,5cents,and1
Somalishilling.

Thesewerefollowedin1978bynotesofthesamedenominationsissuedbytheCentral
BankofSomaliaby50shilin/shillingsnoteswereintroducedin1983,followedby500
shilin/shillingsin1989and1000shilin/shillingsin1990

TheCentralBankActDecreeLawNo.16of19/10/1968mandatestheCentralBankis
theonlyauthoritymandatedtoissueSomalicurrencybanknotesandcoinsaslegaltender
As a result of rising inflation, advanced additional Shilling notes were issued in
denominationsof500and100shillingbanknotes.
Duetocivilunrestinthecountry,newShillingswereissuedthatwereequivalentto100
ofthepreviousShillings
References
www.somali-banca.org/finsncial-institutions/brief-history-of-the-financial-
institutions.html
www.enotes.com/topic/central-Bank-of-somalia.html

http://www.nationsencyclopedia.com/Africa/Somalia-BANKING-AND-
SECURITIES.html

http://digilander.libero.it/pgl63/Somalia/Monete2-2.html

www.pjsymes.com.au/articles/somalia%28part1%29.htm
http://digilander.libero.it/pgl63/Somalia/Banconote3-4.html

http://banknote.ws/COLLECTION/countries/AFR/SOM/SOM0031.htm
Appendixes
Somali shilling paper