But as the international community enters the scene, how can they most effectively support private sector businesses in Somaliland and relatedly, in other African fragile states? In a forthcoming report entitled "Supporting Private Business Growth in African Fragile States" we present a three-pronged framework to increase the effectiveness of private sector assistance in Africa's most challenging environments.
The framework defines three criteria:
1.Identify and target the most severe constraints to business growth. In African fragile states, the most frequently cited constraints to businesses are electricity, roads, and access to finance.
2.Invest in sectors with proven track records. Successful sectors vary widely across African fragile states.
3.Align project goals with stated aims of the host government. Government priorities also vary widely, but often parallel the needs of private business.
Applying this framework to Somaliland's central bank, we find that the parliament's intervention aligns with all three targets. The central bank will 1) help alleviate business' need for finance, 2) promote a successful sector via mobile banking and money transfer services, and 3) help achieve government priorities. The impact of the new central bank may already be evident -- investors are taking risks in Somaliland, and their actions can pay large dividends. Stay tuned!
By Vijaya Ramachandran.
(Senior Fellow, Center for Global Development, World Bank)