Smaller and more innovative ideas, such as financing to support the creation and growth of small and medium enterprise would be instead more productive to jumpstart this economy from within. My unwavering believe in the spirited culture of entrepreneurship and savvy of local business owners only got stronger, and makes me believe that indeed, given the right support, they can manage and innovate through the existing macro economic constraints that prevails in the country.
It doesn’t take a phd in anthropology to notice that entrepreneurship runs in the blood and bones of our communities.
From Amoud, Hargeisa and Ergavo, the meat shops, money transfer agencies and the apparel stores abound. Naturally, every business owner I met so far is eager to expand its enterprise into something a little bigger one day, protect their harvest through insurance or perhaps buy a new land to start diversifying their current enterprise.
Given the magnitude of this potential, I have founded outrageous that financing for small enterprise has not been more of a priority for both the government and large financial institutions.
Having said the above, this is not a moral quest to name and shame elected official, but rather an objective look at an economic development policy that has failed thus far to produce concrete results.
The consensus amongst economists on the value of economic policies centered on SME is overwhelming. SMEs are the engine of economic growth in every country; this becomes increasingly more important in developing countries. According to the International Finance Corporation, SMEs account for about 90 percent of businesses and more than 50 percent of employment worldwide1. If we think about it practically, when an SME need to hire more staff they look for local employees. These typically tend to recruit friends of current staff, family members or their neighbor.
A multinational however would enter into Somaliland market with loads of expatriates and managers from regional office. So if the government’s lenses are not equipped with the foresight to see the obvious, what is stopping experienced financial institutions such as Dahabshil and Telesom’s newly created bank, Salaam Bank, to cater financial service to the SMEs in Somaliland?
In the wake of global financial crisis, a common misguided assumption is that access to financial services for SMEs is limited in Africa because of the unavailability of credit, and Somaliland in particular due to its lack of political recognition. This thought is one that needs to be challenged. Given, the amount of private equity investment and development financing flowing into the continent and the region, there is ample capital for financial institutions to provide this type of service for SMEs.
The IFC’s, a member of the world bank, whose officials were in passage in Hargeisa last week to meet with the Vice President, committed $9.6 billion to SME finance portfolio through financial intermediaries in the past year.
By December 31, 2010, IFC investee banks had an outstanding SME portfolio of $127.8 billion, comprising 1.7 million loans.
Beyond the IFC, the African Development Bank another active multi-lateral player has recently announced the African Grantee Fund (AGF): a permanent regional conduit for channeling guarantees and technical assistance to financial institutions in Africa with the objective of generating enhanced growth in the SME sector, thereby creating increased employment opportunities in the economy, particularly for the youth.
Now with all these leverage available to local and regional banks currently operating in the country, it is a mystery how they haven’t expand their services to business.
I think by far, Somaliland business climate is more competitive, accessible and less saturated than many other countries in the world, and the region including its neighbor, Djibouti. I fear however with our gazes fully fixed on the outside for international recognition, we might have forgotten the potential within.
Banks like iCICI in India have shown to the world, that if implemented efficiently, a commercial strategy that offers credit to rural dweller and small businesses, is a win-win strategy both for their bottom line and the development of the country.
I just wished the banks and government had the same motivation to do the right thing. I see in my students.
MOHAMED-KHADAR ELMI, MBA, PMP(Visiting professor at Abaarso Tech University)