The African Development Bank Group has approved a $6.6m grant to support the Federal Government of Somalia (FGS) in strengthening state capacity to build its financial architecture in order to promote inclusive and equitable growth.
The Somalia Financial Sector Development Project will focus on improving the capacity of financial institutions, including the Central Bank of Somalia, Somalia Development and Reconstruction Bank, and the Financial Reporting Center (FRC), to formulate efficient credit delivery, and to implement anti-money laundering and counter-terrorism financing measures. It will also enhance financial sector expertise through targeted training and assistance.
The reforms seek to build a competitive and globally connected financial sector in Somalia, enhancing stability, trust, and financial inclusion, and attracting private investment.
Somalia has long grappled with security threats from armed groups that depend on illicit financing. Strengthening its financial institutions is therefore crucial for its stability and that of the wider horn of Africa region. Integration into the global financial system has been hindered by insecurity as well as institutional barriers. The absence of intermediary and correspondent banking services has further isolated the country from international financial networks, limiting critical remittance inflows.
Strengthening the country's Anti-Money Laundering/Countering Financing of Terrorism (AML/CFT) response, and bringing it in line with international standards will enable the integration of Somalia into the global financial architecture.
"This is a timely intervention that will enhance governance, accountability, skills, and technology development while fostering private sector growth through regulatory improvements and financial sector development," said Ahmed Attout, the Bank Group's Director of Financial Sector Development. "This will also build robust national financial systems that offer increased long-term finance availability, reduced intermediation costs, and improved financial infrastructure."
