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IMF Country Report No. 21/68

SOMALIA

TECHNICAL ASSISTANCE REPORT—BANK SUPERVISION AND REGULATION

March 2021

This Technical Assistance Report paper on Somalia was prepared by a staff team of the International Monetary Fund. It is based on the information available at the time it was completed on September 2020.

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Title Page

TECHNICAL REPORT

SOMALIA

Technical Assistance on Bank Supervision and Regulation

SEPTEMBER 2020

Prepared By

Hironori Suganuma

Authoring Department:

Monetary and Capital Markets Department

Disclaimer

The contents of this report constitute technical advice provided by the staff of the International Monetary Fund (IMF) to the authorities of Central Bank od Somalia (the “TA recipient”) in response to their request for technical assistance. This report (in whole or in part) or summaries thereof may be disclosed by the IMF to IMF Executive Directors and members of their staff, as well as to other agencies or instrumentalities of the TA recipient, and upon their request, to World Bank staff, and other technical assistance providers and donors with legitimate interest, including members of the Steering Committee of PFTAC, unless the TA recipient specifically objects to such disclosure (see Operational Guidelines for the Dissemination of Technical Assistance Information). Publication or Disclosure of this report (in whole or in part) or summaries thereof to parties outside the IMF other than agencies or instrumentalities of the TA recipient, World Bank staff, other technical assistance providers and donors with legitimate interest, including members of the Steering Committee of PFTAC, shall require the explicit consent of the TA recipient and the IMF’s Monetary and Capital Markets Department.

Contents

• Glossary

• Preface

• Executive Summary

• I. Introduction

• II. Banking Sector Overview

• III. Licensing Capacity Development

  • A. Main Findings

  • B. Recommendations

• IV. On and Offsite Inspection

  • A. Main Findings

  • B. Recommendations

• V. Other Initiatives Undertaken by LSD

  • A. Main Findings

  • B. Recommendations

• VI. Islamic Finance

  • A. Main Findings

  • B. Recommendations

• VII. Mobile Money

  • A. Main Findings

  • B. Recommendations

• Tables

• 1. Key Recommendations

• 2. Regulations and guidelines developed by previous technical assistance

Glossary

Preface

The Monetary and Capital Markets (MCM) Department has provided a series of Technical Assistance (TA) under a multi-donor Trust Fund. The Trust Fund for Capacity Development in Macroeconomic Policies and Statistics for Somalia—the Somalia Trust Fund (STF)—was established in February 2015 to support the International Monetary Fund’s capacity development to Somalia in the key areas. The TA provided by the MCM under this STF has been instrumental in establishing a functional central bank, including developing a modern banking supervisory regime. Quarterly missions have been undertaken to build capacity in banking regulation and supervision.

The TA, provided under the STF Phase I, started in May 2015 and was completed with the final mission in April 2020.¹ Based on the Strategic Plan by the Central Bank of Somalia (CBS) and request from the Licensing and Supervision Department (LSD) of the CBS, in Phase I MCM provided peripatetic TA missions that focused on issues of banking regulation and supervision.

This report reviews and assesses progress achieved under the STF Phase I project on banking regulation and supervision and discusses future TA under the STF Phase II (FY2021–FY2024, October 1, 2020–October 30, 2024).

The mission would like to express thanks to officials of the CBS for the level of engagement and cooperation extended during the virtual mission, even though the CBS’s operation was interrupted by the COVID-19 pandemic. The insightful discussions helped the short-term experts (STXs) and MCM staff gain a deep understanding of the development and challenges in the financial sector in Somalia.

We also wish to thank the Arab Fund for Economic and Social Development, Canada, Italy, United Kingdom, United States, and European Commission for their funding of the project under which this TA was delivered.