# Islamic finance, microfinance and Takaful insurance in Somalia > How Islamic banking works in Somalia, which microfinance and Takaful insurance firms are licensed, and what the 2025 laws changed, from Central Bank records. Source page: https://calankii.com/en/economy/islamic-finance-microfinance-and-takaful/ Last checked: 2026-11-12 Publisher: Calankii (https://calankii.com) ## The short version Islam forbids interest (riba), so Somali banks do not lend money at interest. They finance customers through contracts that follow Islamic law. Until 2025 there was no law for insurance or for small lenders. Two laws passed that year changed this, and the Central Bank of Somalia has now licensed the first microfinance firms and the first Islamic insurers. ## How Islamic banking works here The Central Bank's reporting rules for "Islamic commercial banks" list the main contracts banks use ([Central Bank of Somalia, Guideline on Financial Reporting for Islamic Commercial Banks](https://centralbank.gov.so/wp-content/uploads/2025/06/Guideline-on-Financial-Reporting-for-Islamic-Commercial-Banks-in-Somalia.pdf)): - **Murabaha**, a "cost plus sale": the bank buys goods and sells them to the customer for an agreed higher price, paid over time. - **Ijarah**, a lease: the bank owns an asset and rents it to the customer. - **Mudarabah** and **Musharakah**, partnerships: the bank and the customer share profit (and in a Musharakah, losses). - **Qard**, an interest-free loan, including **Qard Hassan**, a good-will loan. The Central Bank has also issued a **Shariah Governance Framework** (2020) for banks, so each bank's products are checked against Islamic law ([Central Bank of Somalia, Annual Report 2025](https://centralbank.gov.so/wp-content/uploads/2026/08/Annual-Report_2025.pdf)). ## How much the banks lend From the [Central Bank of Somalia, Annual Report 2025](https://centralbank.gov.so/wp-content/uploads/2026/08/Annual-Report_2025.pdf): - Total bank financing reached **$540 million** in 2025, up 14 percent from $473 million. - The two biggest uses were **trade financing ($205 million)** and **real estate ($139 million)**. - Credit to the private sector was only about **4.7 percent of GDP** in 2025, up from 2.2 percent in 2021. Total bank assets were about 20 percent of GDP. For the banks themselves, see [Banks in Somalia](/en/economy/banks/). ## Microfinance: small loans for small traders In May 2025 Parliament passed a revised **Financial Institutions Law**, which for the first time gave the Central Bank power to license and supervise microfinance ([Central Bank of Somalia, Annual Report 2025](https://centralbank.gov.so/wp-content/uploads/2026/08/Annual-Report_2025.pdf)). On **9 November 2025** the Central Bank's board licensed the first seven **non-deposit-taking microfinance institutions**, meaning firms that lend but do not take savings ([Central Bank of Somalia, press release, 9 November 2025](https://centralbank.gov.so/wp-content/uploads/2025/11/Central-Bank-of-Somalia-Grants-First-Licences-to-Microfinance-Institutions.pdf)): 1. [KIMS](/en/businesses/kaah-express-and-kims/) Microfinance Institution 2. Bushra Microfinance Ltd 3. Maal Microfinance Ltd 4. Midnimo Microfinance 5. RAAS Microfinance 6. Asal Microfinance 7. Haldoor Microfinance The Central Bank said many households, small firms, women-owned businesses and young people's start-ups rely on "informal finance, family networks, or short-term trade credit", and that licensed firms should offer them "Sharia-compliant, small-ticket, and flexible" products. Other microfinance firms had to apply by **6 December 2025** or face legal action ([Central Bank of Somalia, 9 November 2025](https://centralbank.gov.so/wp-content/uploads/2025/11/Central-Bank-of-Somalia-Grants-First-Licences-to-Microfinance-Institutions.pdf)). By November 2026 the Central Bank's register listed **24** licensed microfinance institutions ([Central Bank of Somalia, microfinance register](https://centralbank.gov.so/licensed-microfinance-institutions/)). See [Who is licensed](/en/economy/licensed-banks-and-money-companies/). Many Somali women already save and borrow through their own rotating groups (ayuuto or hagbad). See [Women in Somalia's economy](/en/economy/women-in-the-economy/). ## Takaful: Islamic insurance Takaful is insurance in which members put money into a shared fund that pays out when one of them suffers a loss, run under Islamic rules. Somalia's **Islamic Insurance (Takaful) Law** was enacted in **May 2025**, the country's first insurance law ([Central Bank of Somalia, press release, 27 January 2026](https://centralbank.gov.so/wp-content/uploads/2026/01/Central-Bank-of-Somalia-CBS-Grants-First-Licenses-to.pdf)). On **24 January 2026** the Central Bank's board licensed the first four insurers, the first in Somalia's history to get full permission to operate ([Central Bank of Somalia, 27 January 2026](https://centralbank.gov.so/wp-content/uploads/2026/01/Central-Bank-of-Somalia-CBS-Grants-First-Licenses-to.pdf); [SONNA, 27 January 2026](https://sonna.so/en/central-bank-of-somalia-issues-first-ever-takaful-licenses-to-four-firms-historic-move-to-regulate-insurance-sector/)): 1. First Somali Takaful Insurance Ltd 2. Amanah Insurance Ltd 3. Baraka Takaful Insurance Ltd 4. Salmaster Insurance By November 2026 the register listed **8** Takaful operators ([Central Bank of Somalia, Takaful register](https://centralbank.gov.so/licensed-takaful-operators/)). See [Somali Takaful companies](/en/businesses/somali-takaful-companies/). ## What else is planned - A **Credit Information System** and a **Collateral Registry**, to be run by the Central Bank with help from the International Finance Corporation under an agreement signed in September 2025. They are meant to make it easier for lenders to judge risk and for borrowers to use property as security ([Central Bank of Somalia, Annual Report 2025](https://centralbank.gov.so/wp-content/uploads/2026/08/Annual-Report_2025.pdf)). - **Sukuk** (Islamic bonds) are planned for the new national stock exchange. See [Investing in Somalia](/en/economy/investing-in-somalia/). ## Sources disagree Reports differ on the month the Takaful law was enacted. The Central Bank's own press release says **May 2025**. The lower house of Parliament approved the insurance bill in March 2025 ([Hiiraan Online, March 2025](https://hiiraan.com/news4/2025/Mar/200654/somali_parliament_approves_insurance_and_financial_institutions_bills.aspx)). The press release also spells the fourth insurer "Salmaster", while the national news agency writes "Salmastar" ([SONNA](https://sonna.so/en/central-bank-of-somalia-issues-first-ever-takaful-licenses-to-four-firms-historic-move-to-regulate-insurance-sector/)). --- I want to help with this: email hello@calankii.com. Fix this page: email hello@calankii.com with the page link and your source.