Financing small businesses is crucial for Somalia
MOGADISHU, Somalia – In Somalia, it is usually difficult for people to finance business ideas. Most of the UCITS are not designed to support business start-ups, not even where they are meant to make money. The understanding and culture for creating business ideas does not work.
This has forced many promising business ideas not to start due to lack of capital to start the business. This is a great loss for anyone who would otherwise have made gains directly from these ideas and indirectly.
The leading Salaam Somali Bank is trying to change this with the establishment of the Entrepreneurship Investment Facility, which has enabled many business ideas to be implemented into viable companies.
Levels of unemployment in Somalia
Somalia has an estimated population of 15 million and has a youth population estimated at more than 75 percent. These dizzying statistics are seen as a significant threat to the nation’s security and stability. Existing research also indicates that the limited employment opportunities have led young people to emigrate in large numbers.
According to research conducted by Mohamed Saney Dalmar in 2017, it is estimated that more than 60% of Somalia’s youth population have the goal of leaving the country to get a better living abroad.
It is estimated that no more than 6,000 people are on government salaries. Small businesses are the largest employer for many of the people who are not government employees.
This is a major reason why financial struggles need a financial facility that can support existing small businesses and funds to create new ones.
“We have supported many young people with the means to implement their business ideas and will continue to do the same,” said Ahmed Farax Fiidwo, Head of Murabaha at Salaam Somali Bank.
Benefits of financing small businesses
The idea of providing financial support to an individual with low or limited income is a culture that governments and humanitarian organizations started. In recent years, privately owned financial institutions have joined these efforts to support small businesses.
Usually, the person repays the capital he was lent to start his business and take home the profit. To protect the investment, most lenders ensure that the value of the money is the same when the company repays the capital it lent.
The profit for the small company therefore also has a huge impact on the lender. Finally, it is a profit for everyone because the government will also levy taxes from the business.
In Somalia, many brilliant minds with excellent business ideas find it difficult to find financiers for their ideas. This is the reason why many are forced to take up paid jobs because their ideas end up on the road.
“I urge small businesses struggling with finances to get support and a shoulder to lean on,” says Dr. Zuhuur Ibrahim Hirsi, whose pharmacy was to be closed but saved by financing from Salaam Somali Bank.
Institution that finances small businesses
Not many institutions are designed to support small businesses in Somalia. However, the introduction of the Investment Facility for Entrepreneurship is a game changer that will revolutionize the sector. Many small businesses rely on this facility as the only lifeline that supports their businesses.
For Ali Deeq Artan Abdi, a trained economist, the support of Salaam Somali Bank was crucial for him to achieve his dream of starting his car spare part in 2017.
“Initially we fought, but with the support of Salaam Somali Bank, a lot changed for the better,” says Ali. “I can now order the spare parts from abroad”
He explains that the support from Salaam Somali Bank was a crucial eye-opener for his business.
Supporting small-scale businesses is not a burden for the lender and is very important for the business. However, there are many individuals with brilliant business ideas without support.
AXADLETM
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