Issuing banking licences to foreign banks is a misguided Somalia government policy

[Deeq A.]

Conflict of interest: President Mohamud has deposited Somalia assets in a Turkish bank.

Mogadishu (Commentary) — Somalia government policy The decision to grant banking licenses to Banque Misr and Ziraat Katilim is being touted by President Hassan Sheikh Mohamud as an economic warfare against Al-shabaab. This is another misguided policy of seeking solution from foreign countries. It only deepens reliance on foreign handlers while making the Somali federal government a puppet regime.

Al-Shabaab coffers benefit from disillusionment with corrupt political elites whose primary goal is to enrich their relatives and core group of supporters.

The Somali financial services companies, which had cut their teeth in the money transfer industry, have the capacity to improve their rudimentary banking services. President Mohamed’s reasoning that foreign banks can cut the economic lifeblood of Al-shabaab — its ability to levy tax and collect Zakat surreptitiously — ignores the judicial services and depth of its symbiotic relationship with government and the civil society.

Al-shabaab courts rule on property disputes in Mogadishu, collect tax from businesses, have their own accountants and assessors. Al-shabaab exploits unresolved political issues in Southern Somalia.

The Central Bank publicising the banking licences for two foreign banks.

The argument that foreign banks will deprive Al-shabaab of tax collection or ability to levy corporate tax is fanciful.
Somalia could learn lessons from Ethiopia’s banking policy.

According to the economics Nobel Laureate Joseph Stiglitz, during 1990s the late Ethiopian Prime Minister Meles Zenawi refused to open up the local markets for foreign banks. Stiglitz commended Zenawi for a decision that prevented Ethiopian banks from being outcompeted by well-capitalised American banks. Abiy Ahmed is reaping the fruits of the banking policy devised nearly three decades ago.

Awash Bank recently paid 30 million Br in capital gains tax , according to Addis Fortune. Several commercial banks in Ethiopia are selling equity “to the public and their shareholders”.

It would be pointless to use the international legitimacy of the federal government to push questionable policies in a country that is still dependent on foreign peacekeepers. The decision to grant banking licences to foreign banks is highly suspicious. President Mohamed deposited in a Turkish bank some of the money retrieved by an American Law firm tasked with identifying foreign banks where the pre-1991 Somalia government had accounts. The whole point of the federal government of Somalia seems to be creating opportunities to sign dubious resource and banking agreements for the benefit of politicians who sign agreements. Banking licences for Banque Misr and Ziraat Katilim is the latest episode of a corrupt dispensation serving foreign interests.

Ali S. Aweys is a former employee of the Central Bank of Somalia.

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