The exclusion of the country from correspondent banking networks is undeserved, argues its CB governor
A dollar destined for Somalia often travels further than most. Sent from a donor in New York or a nurse in London, it moves through multiple intermediaries in east African regional hubs before it can be used in Somalia. By the time it reaches a bank in Nairobi or Djibouti, it still cannot move directly into the Somali banking system.
Instead, it is pushed through money transfer operators, each step adding cost, delay and opacity. What finally arrives is diminished not by crime or corruption, but by the machinery of financial intermediation.
This time and value leakage is not inevitable. It is the outcome of a global system that has, in the name of de-risking, in effect excluded Somalia from direct correspondent banking.
No Somali bank today can send or receive US dollars directly; all transactions are routed through foreign institutions such as in Kenya, Djibouti, Turkey or elsewhere in the wider Mena or Apac regions, creating a nested structure that adds cost, delay and complexity.
This hurts not only Somalia, but also the transparency and integrity of the global financial system.
The scale of the distortion is visible in the numbers. Somalia receives around $4.2bn in inflows per year, consisting of $1bn in aid and $3.2bn in remittances. Even at a conservative 5 per cent cost, about $210mn of this figure can be lost each year to intermediary fees, money that could otherwise finance energy, infrastructure or climate resilience.
Trade shows the same pattern. While Somalia imported roughly $9.2bn worth of goods in 2024, less than one-third of these imports were financed through the banking system. The rest flowed through money transfer businesses or informal channels, which are both costlier and less transparent. With direct settlement, a far larger share of trade could be routed through regulated banks and payment systems.
This is, however, not a story of lack of capacity, but of progress overlooked.
Over the past decade, Somalia has rebuilt its financial system law by law, rail by rail, to meet international standards, positioning itself for global connectivity. The country now has 13 domestic commercial banks, one foreign bank, six mobile-money providers and 15 money transfer businesses, all licensed and supervised by the Central Bank of Somalia.
A modern legal framework is in place, covering anti-money laundering and combating the financing of terrorism, targeted financial sanctions, insurance and a full range of regulated financial institutions, with a National Payments Bill forthcoming.
These laws are not symbolic; enforcement matches the rule book. The CBS applies risk-based supervision across licensing, monitoring and inspections, embedding AML/CFT controls into daily operations.
Somalia’s payments system backbone has been rebuilt around transparency and interoperability, consisting of an automated clearing house, real-time gross settlement and instant payments, all operating on ISO 20022 standards, with IBANS, sanctions screening, and a national QR Code. This means Somali banks can now send payment messages in globally intelligible formats, supported by inspection reports, remediation plans and licensing files: exactly the kind of documentation international banks need for streamlined due diligence.
This financial reform aligns with Somalia’s wider National Transformation Plan, which seeks to crowd in investment into infrastructure, energy, agriculture, fisheries and digital services. But investment cannot reach its full potential if it arrives slowly, expensively, and through fragmented channels.
Restoring direct correspondent relationships is therefore the logical next step: it would make the “last mile” a straight line, making it faster, cheaper with clearer audit trails and greater transparency.
The hesitation towards Somalia is driven by legacy perceptions rather than present risks. The country is open for trade, investment, and humanitarian operations. There are no international sanctions on the Somali government or its private sector, only on al-Shabaab. These measures are narrowly targeted and are designed to avoid any impact on legitimate commercial or financial activity, which continues to operate under clear regulatory oversight.
In 2023 alone, the UN lifted the arms embargo on the government, Somalia achieved HIPC debt relief and joined the regional intergovernmental east African Community, and was elected to the UN Security Council in 2025. The country is also in advanced negotiations to accede to the World Trade Organization, another clear signal that reforms are real and progress is recognised. It is time for the international financial sector to reflect this.
For donors, development finance institutions and commercial banks, the policy case is straightforward: excluding compliant Somali banks from correspondent banking does not reduce global financial crime risk; it merely diverts legitimate flows into harder-to-monitor channels. It slows humanitarian disbursements, complicates climate and development finance, and constrains trade.
De-risking undermines the very objectives it was meant to protect. Reconnecting Somalia’s banking system into correspondent banks would bring these flows back into view, through regulated, supervised channels that are compliant with international standards.
Somalia’s reform path has been sequenced deliberately: law, then supervision, then infrastructure. Each layer reinforces the next: standardised payments data improves supervision; supervision that demands remediation lifts market practice; and strong laws sustain accountability. This is a system designed for durability, not for one-off access. What is needed now is engagement commensurate with that progress.
We are not asking for lower standards, but for engagement grounded in verified progress. Somalia has the road map, reforms and readiness. What it needs now is the connection. Banks trusted by DFIs and international non-governmental organisations can become the financial arteries of the Horn of Africa, helping to finance Somalia’s development while shaping one of the world’s most ambitious transformations.
This is not just in Somalia’s interest. It is in the interest of the global banking community to turn today’s leakage into tomorrow’s leverage.
by Abdirahman M. Abdullahi
The writer is governor of the Central Bank of Somalia
