Banks, finance and the budget
Islamic finance, microfinance and Takaful insurance in Somalia
Somali banks work under Islamic rules: instead of charging interest they sell goods at an agreed mark-up, lease, or share profit. In 2025 Somalia passed its first insurance law, for Islamic (Takaful) insurance, and a law that lets the Central Bank regulate microfinance. The first seven microfinance firms were licensed in November 2025 and the first four Takaful insurers in January 2026.
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):
- 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).
How much the banks lend
From the Central Bank of Somalia, Annual Report 2025:
- 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.
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).
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):
- KIMS Microfinance Institution
- Bushra Microfinance Ltd
- Maal Microfinance Ltd
- Midnimo Microfinance
- RAAS Microfinance
- Asal Microfinance
- 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).
By November 2026 the Central Bank's register listed 24 licensed microfinance institutions (Central Bank of Somalia, microfinance register). See Who is licensed.
Many Somali women already save and borrow through their own rotating groups (ayuuto or hagbad). See Women in Somalia's 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).
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; SONNA, 27 January 2026):
- First Somali Takaful Insurance Ltd
- Amanah Insurance Ltd
- Baraka Takaful Insurance Ltd
- Salmaster Insurance
By November 2026 the register listed 8 Takaful operators (Central Bank of Somalia, Takaful register). See 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).
- Sukuk (Islamic bonds) are planned for the new national stock exchange. See 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). The press release also spells the fourth insurer "Salmaster", while the national news agency writes "Salmastar" (SONNA).
Sources
- Central Bank of Somalia, Guideline on Financial Reporting for Islamic Commercial Banks · centralbank.gov.so
- Central Bank of Somalia, Annual Report 2025 · centralbank.gov.so
- Central Bank of Somalia, press release, 9 November 2025 · centralbank.gov.so
- Central Bank of Somalia, microfinance register · centralbank.gov.so
- Central Bank of Somalia, press release, 27 January 2026 · centralbank.gov.so
- SONNA, 27 January 2026 · sonna.so
- Central Bank of Somalia, Takaful register · centralbank.gov.so
- Hiiraan Online, March 2025 · hiiraan.com
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Keep reading
- Somalia's economy at a glanceSomalia's economy in numbers: GDP, growth, spending, trade, money from abroad, the budget and debt, with sources from the Central Bank and IMF.
- Banks in SomaliaSomalia's banks in numbers: who is licensed, how much they hold and lend, Islamic banking, microfinance, and how the system was rebuilt after 1991.
- The Central Bank of Somalia (Bankiga Dhexe ee Soomaaliya), 1960 to todayThe history, governors, powers and current work of the Central Bank of Somalia, from the Somali National Bank of 1960 to the 2012 Act, the 2013 resignations and the planned return of the shilling.
- Somalia's main banks and stock exchanges: Salaam, IBS, Premier, Dahabshil and the NSESProfiles of Somalia's main private banks, when each opened, who owns them and what they offer, plus the Somali Stock Exchange of 2015 and the National Securities Exchange of 2025.
- Who is licensed: Somalia's banks, money transfer firms, microfinance and insurersThe official lists of licensed banks, money transfer businesses, microfinance firms and Islamic insurers in Somalia, from the Central Bank's registers.
- The Somali shilling and the dollarThe story of the Somali shilling from 1960 to today: why the economy runs on dollars, the street exchange rate, the plan for new notes, and the Somaliland shilling.