For Somalia to develop the banking system has to change

[cow]

Right now in Somalia you can borrow money from dahabshiil, hormuud, amal banks and so forth if you are deemed to be a safe bet. however the terms are ridiculous.

first you can only borrow for a very short period maximum i have seen so far is 3 years and even then they expect double figure percentages as their fees. compared to for example in the UK where you can borrow money and with only 2 percent interest and the length being up to 25 years.

Somalia right now is being mainly built on cash by the diaspora. but cash can only get you so far. for a sustained economy the fees on loans has to come down and the length of borrowing has to increase which is why international banking should start getting into the somali market.

imagine building a house in somalia while you are in the west and only paying 350 dollars a month for 10 years without the huge upfront cost it would create a lot of jobs back home and people inside the country would be able to borrow money to create businesses and buy house/car and so forth.

 

[NordicSomali]

if you even mention interest or riba the typical somali will go into an emotional tirade about the evils of riba and how jews want to enslave you

 

[Sultan keenadiid]

Right now in Somalia you can borrow money from dahabshiil, hormuud, amal banks and so forth if you are deemed to be a safe bet. however the terms are ridiculous.

first you can only borrow for a very short period maximum i have seen so far is 3 years and even then they expect double figure percentages as their fees. compared to for example in the UK where you can borrow money and with only 2 percent interest and the length being up to 25 years.

Somalia right now is being mainly built on cash by the diaspora. but cash can only get you so far. for a sustained economy the fees on loans has to come down and the length of borrowing has to increase which is why international banking should start getting into the somali market.

imagine building a house in somalia while you are in the west and only paying 350 dollars a month for 10 years without the huge upfront cost it would create a lot of jobs back home and people inside the country would be able to borrow money to create businesses and buy house/car and so forth.

do you have evidence they are charging 100% plus ? Or are you making it up ?

because that would be riba and I don’t think they practice it

 

[DR OSMAN]

@cow It's my personal dream to see local puntites who have business ideas turn that into reality by going to the bank and getting a business loan.

I dream of a day when Puntland encourages a banking culture to develop locally. I even want to see local employees of various professions becoming new home-owners or car owners and hand down trans-generational wealth to the next generation of puntites. The reason for poverty is simple. It's because they wasted a life-time by not creating any assets and the next generation does the same thing and it becomes a vicious trans-generational poverty cycle.

That's how wealth is created and banks are the 'industrial machine' needed. Imagine the value chain growth if each puntite got a home-loan, construction industries wud become multimillion dollar industries over-night and technical trades such as plumbers, electrician, importers of doors-windows-nails and other materials will also enjoy a surge of work which will cut down on our unemployment rates.

 

[IPushFatKids]

What you say obviously make sense but at the end of the day the huge bottle neck always comes back down to expensive electricity or lack thereof.

Building homes in Somalia is expensive, way more than neighbouring countries since no construction materials are made locally. Good financing might help a little but won't do much imo, housing costs need to come way down first.

 

[Ahmed Ato]

You're not realising the real problem as to why these Banks in Somalia don't lend as easily as the Banks in other countries do.
It is because in Somalia, if you lend money to Someone and if that person doesn't pay back the loan, you have no where else to turn to get your money (no civil court in Somalia) where in other countries, you can sue that person to get your money.
In Somalia, they will ask you damiin especially someone who is either very known or someone who works at the bank as far as i am aware and that shrinks the number of people they can give loan to.
The government need to make reforms to the court system.

 

[DR OSMAN]

You're not realising the real problem as to why these Banks in Somalia don't lend as easily as the Banks in other countries do.
It is because in Somalia, if you lend money to Someone and if that person doesn't pay back the loan, you have no where else to turn to get your money (no civil court in Somalia) where in other countries, you can sue that person to get your money.
In Somalia, they will ask you damiin especially someone who is either very known or someone who works at the bank as far as i am aware and that shrinks the number of people they can give loan to.
The government need to make reforms to the court system.

Even if the banks don't get their loans back they can repossess business assets and home properties. Home and business loans are one of the most secured type of loans available becuz u will need 'collateral' to be put up in the event you can't re-pay your loan. The bank can quickly seize the property and sell it and get their money back thru forecloures. All Somali banks need to do is ask for 'collateral' that is worth the loan being given.

Most Somalis have family who own properties already, this can be used as collateral damage by the banks in the event someone doesn't pay up their loans.

 

[Ahmed Ato]

Even if the banks don't get their loans back they can repossess business assets and home properties. Home and business loans are one of the most secured type of loans available becuz u will need 'collateral' to be put up in the event you can't re-pay your loan. The bank can quickly seize the property and sell it and get their money back thru forecloures.

I understand that But can they do that in Somalia since there isn't strong civil court in Somalia?.

 

[DR OSMAN]

I understand that But can they do that in Somalia since there isn't strong civil court in Somalia?.

They have processes for home purchases, many Somalis purchase properties, I am not sure of what the process is exactly, but some dude can't just run away with your money when u purchase a house, they exchange over property ownership details and register with the local council. The same process can be done with ppl who don't pay back their loan, their collateral family property is given to the bank.

There is really no excuse for why banking isn't booming, how is someone to start a business or buy a property when no-one is lending to begin with. This is the only answer out of poverty and aid dependency. The diaspora should be coming together to create banks rather then investing cash or properties into Somalia. It's a better chain of value in the economy when you can make money thru the loan while you also create a new start-up or property asset for a local who in turn generates wealth. Thru this lending n borrowing cycle, you will see the locals eventually out of poverty.

 

[DR OSMAN]

@Ahmed Ato we need to ban remittance from the diaspora to able bodied people. Hawala's should only be used by the elderly/disabled, the rest must be told they can't have an account. The govt responsibility is to ensure these people are literate, healthy and have a marketable skill-set or enterpreneurship. The private sector should be the ones generating jobs thru borrowing n lending to the locals to begin start-ups, hire employees.

Employees should then circulate to the bank thru home loans so they become homeowners and u continously revolve the economy around this cycle and u will see the GDP explode becuz there is more economic activity happening where it counts which is 'local base'.

Foreign investment, Diaspora investments won't change the GDP by much if the majority of the people are sitting around doing nothing except sucking on remittance or relying on aid money which is the crumbs left over from developed countries budget. How u gonna build a nation on the crumbs left over by the western world? you simply can't. U will simply remain in poverty.

 

[Ahmed Ato]

@Ahmed Ato we need to ban remittance from the diaspora to able bodied people. Hawala's should only be used by the elderly/disabled, the rest must be told they can't have an account. The govt responsibility is to ensure these people are literate, healthy and have a marketable skill-set or enterpreneurship. The private sector should be the ones generating jobs thru borrowing n lending to the locals to begin start-ups, hire employees.

Employees should then circulate to the bank thru home loans so they become homeowners and u continously revolve the economy around this cycle and u will see the GDP explode becuz there is more economic activity happening where it counts which is 'local base'.

Foreign investment, Diaspora investments won't change the GDP by much if the majority of the people are sitting around doing nothing except sucking on remittance or relying on aid money which is the crumbs left over from developed countries budget. How u gonna build a nation on the crumbs left over by the western world? you simply can't. U will simply remain in poverty.

You cannot just cut the remittance to able bodied overnight since they are not that many opportunities in the country but they should invest some of the remittance instead of consuming all.

People will become homeowners if they got a good job. So, the government should improve the business climate so that people can invest their money and that will create jobs.

Foreing direct investment (FDI) is very important and will stimulate the economy by creating jobs. To get FDI, the country has to become stable in the eyes of investors and the government need to improve the business climate by introducing company law and other laws that are needed in Business

 

[IPushFatKids]

Alll the above is useless without cheap electricity. You cannot build quality houses affordably & cheaply without some materials being made locally. Like cement, steel rebar, bricks, framings, furniture etc. You have to make some stuff locally. No financial wizardry can overcome that. Name another country that has a good/viable construction industry (and isn't an island somewhere in the pacific) that imports all materials. Every house you build should have a multiplier effect on local construction businesses so that the next house can be cheaper.

Government needs to prioritize finishing transmission line from Gode to Somalia to kickstart construction materials factories. Anything else is window dressing.

Even if the banks don't get their loans back they can repossess business assets and home properties. Home and business loans are one of the most secured type of loans available becuz u will need 'collateral' to be put up in the event you can't re-pay your loan. The bank can quickly seize the property and sell it and get their money back thru forecloures. All Somali banks need to do is ask for 'collateral' that is worth the loan being given.

Most Somalis have family who own properties already, this can be used as collateral damage by the banks in the event someone doesn't pay up their loans.

Even that isn't enough. You can only lend in proportion to how much people deposit in accounts. And you don't need me to tell you people don't save in Somalia. There isn't enough deposits in banks atm to fund financing of large amount of homes. Further, to encourage savings of large amounts, deposits need to be secured by the federal government up to a limit like most countries. No sane person would keep large sums in an Amal bank currently with no safety guarantee. Most would rather keep it in cash (and do).

 

[cow]

do you have evidence they are charging 100% plus ? Or are you making it up ?

because that would be riba and I don’t think they practice it

double figure percentage is not 100% plus that would be triple figure percentage.

 

[Sultan keenadiid]

double figure percentage is not 100% plus that would be triple figure percentage.

i think the term you are looking for is "double digit" not double figure , so next time use the term/s double digit rather than double figure

anyway, do you have evidence they are charging riba/interest?