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Somalia Months Away From Having New Currency

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WASHINGTON — The Somali Minister of Finance says the International Monetary Fund (IMF) is taking the lead in helping Somalia with a grant to print new currency before the end of this year.

Abdirahman Duale Beileh says the IMF will work with the Somali government.

“IMF is ready, from wherever they going to get that money, to help us,” he said. “There are other sources, but we are going to go through IMF.”

In an exclusive interview with VOA Somali, Beileh said the Somali government needs $100 million, half of which will go directly toward printing the new money, and the other half to keep the value of the currency when it circulates.

“The cost of printing the money is about $50 million, and I think there is also about same amount, same quantity will be necessary to deposit and keep it as a reserve to monitor the movements of supply and demand to keep the value,” he said.

He said the cost was the only outstanding issue before printing the money. Strengthening governance issues, accountability issues, skills available in the central bank, the rules and regulations, the monetary systems, the policies, all of these prerequisites have been concluded, Beileh said.

“We are now discussing the timing,” he said.

The Somali central bank has not properly functioned since 1991. The country’s old currency has almost disappeared or is worn out and was replaced by U.S. dollars, or privately printed notes, most of which are worthless fakes.

Coins, paper money

The government plans to issue both coins and paper money. The only banknote that is still used is the 1,000 Somali Shilling, which buys a cup of tea or a packet of chewing gum. Beileh said this will be the starting number for the new money.

The “1,000 Somali shilling will be the smallest denomination of coin. The biggest bank note of the new currency will be either 10,000 shilling or 20,000 shilling … there is still discussion on this and is yet to be finalized,” he said.

Reliable sources tell VOA Somali that the government plans to print several billion shillings, but Beileh refused to specify the amount.

“I’m not privy to the numbers but it will be adequate for the economy of Somalia,” he said.

Beileh said the target has always been to print the money toward the end of the year. The money will be released to the market during the second quarter of next year, he said.

Big challenges

One of the biggest challenges will be implementing the mechanism for replacing the old currency and more importantly what to do with the counterfeit money that has been in the markets for many years.

“That really will be the test,” Beileh said. “The counterfeit will be difficult to give good money against bad. It came by exchange of their own funds or their own goods and services but on the other side we need to control that counterfeit money, there will be some decisions that needs to be made as to how much of this bad money should get good money, a lot of talk has to go into that.”

He said the positive thing is that the amount of counterfeit money circulating may not be a lot.

“It’s not a lot when you look at the whole economy, I think it’s around may be 10 percent or 20 percent of the total money circulating.”

Poverty profile

Meanwhile the World Bank has released a new report about poverty in Somalia. The survey finds poverty in Somalia is widespread, with every second Somali living in poverty. The survey was conducted last year and is representative of 4.9 million Somali. Somalis are estimated to be 12 million. The areas it does not cover are nomadic people and inaccessible zones because of the conflict.

Utz Pape is a poverty economist for the World Bank. He told VOA Somali that the survey was the first comprehensive snapshot of the welfare conditions of the Somali population.

“What reports finds and states very clearly is that every second Somali lives in poverty, and by poverty we mean living below $1.90 per day, that is the 2011 power purchasing parity estimate,” Pape said. “This means large part of the population is poor, but we also see there are very large disparity between different groups and geographical areas. Household that were displaced tend to be much poorer than everybody else. But also we see a divide between rural household, which tend to be poorer than urban household.”

The report says poverty is high among the internally displaced people with 7 out of 10 poor. It says more than 1.1 million Somalis, or roughly 9 percent of the population, are considered to be internally displaced.

Pape says there are other non-monetary poverty indicators in Somalia, such as lack of access to infrastructure, clean water, poor sanitation facilities, lack of electricity and limited access to roads. Limited access to education and health and the other indicators is also highlighted in the report.

The World Bank says only 58 percent of Somalis have access to an improved source of water and 10 percent to an improved sanitation, compared with an average of 69 percent and 25 percent in low-income sub-Saharan countries.

Asked about what could be done in Somalia to reduce poverty, Pape said “resilience.”

“Resilience is important to avoid deepening poverty and to avoid additional household falling into poverty,” he said.

Remittances and entry points for different policies and programs, such as social safety net programs or other programs that build up resilience in poor households, access to education and access to health care can improve the conditions, Pape said.

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How to Turn $200,000 Into a $670 Million Business

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Seven years ago, Ismail Ahmed set out to build a startup that could send cash electronically from the U.K. to Africa. He had $200,000 and a lot of experience in the money transfer business in his native Somalia.

Today, London-based WorldRemit Ltd. sends money to 148 nations and has just raised $40 million in a deal led by LeapFrog Investments, an investment firm in London, the company said in a statement on Thursday.

The Series C funding round values the fintech firm at more than $670 million, according to a person familiar with the transaction, who asked not to be identified because the matter is private. WorldRemit’s longtime backers, Accel Partners and Technology Crossover Ventures, invested in the deal.

WorldRemit, which specializes in sending money via mobile phones, will use the cash to try to grow its customer accounts globally to 10 million from 2 million by 2020. The company is making a big push in transfers between the U.S., Asia, and Latin America.
“The U.S. will grow our revenues as much as 40 percent over the next few years,” Ahmed, WorldRemit’s chief executive officer, said in an interview.

But the company faces stiff competition from The Western Union Co., the longtime powerhouse in the $444 billion global remittance business, as well as other fintech firms such as Remitly Inc., a Seattle-based company that raised $115 million in a private fundraising deal in October.

WorldRemit is on course to record 60 million pounds ($81 million) in net revenue this year, a 46 percent jump from 2016, according to Ahmed. The company is looking at a potential initial public offering in two to three years, he said.

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New market means increased economic opportunities for one Somali town

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In Somalia’s Puntland region, Bossaso’s local market provides a source of income for local traders. For women, however, the market is especially important.

After years of conflict, many households are reliant on money generated by women to survive. In some households, women contribute more than 70 percent to their families’ income.

And the majority of women in Somalia earn money from informal sectors – including working in local markets.

Unfortunately for traders in Bossaso, selling their goods in the city’s main market was no longer an option. In 2012, a fire severely damaged Bossaso Market – a place many women traders depended on for their livelihoods.

With funding from the Government of Japan, UNOPS oversaw the construction of a new market with improved facilities to support women entrepreneurs in Bossaso.

“We’re grateful for the support of the Government of Japan and UNOPS, who worked closely with us to implement the project,” said Engineer Yazin Mire, Bossaso’s mayor. “Many businesses will benefit from this market, which will help several different communities, including Yemeni refugees and returnees who fled from the conflict in Yemen.”

Giving women a say in their future

Before the construction of the new Bossaso Market began, information was collected from female traders during an extensive consultation process. This allowed them to be actively involved in the design and planning of the new site, ensuring their needs were taken into account from the beginning. In all, nearly 2,000 market traders, both male and female, participated in the data collection process. That data was used to define the scope of the construction of the new market.

An extensive community needs assessment was also conducted to encourage a sense of community ownership of the project, as well as to contribute to the long-term sustainability of the new market.

Training for the future

The new Bossaso Market will enable traders, particularly women, to become economically self-sufficient. In addition to the new market, local entrepreneurs also received training – carried out by the Japan Center for Conflict Prevention – aimed at teaching them new skills to help their businesses thrive. More than 200 traders – nearly 90 percent of them women – either received business skills training or business start-up kits.

“The Government of Japan is delighted with the success of this project, which contributed to stabilization of the region through the empowerment of women, in collaboration with the Japan Center for Conflict Prevention,” said the Embassy of Japan. “The Government of Japan is confident that those who got vocational training will play an important role in leading the local economy and society.”

Asiya Ali Farah owns a kiosk in Bossaso. She participated in a training session on microfinancing. “One day, I hope I will become a lender,” Asiya said. “So that I can give loans to Somali women who need help starting up small businesses to feed their families.”

“Microfinancing is not new in Somalia, but there are not many female traders with access to it yet,” explained Japan Center for Conflict Prevention Secretary General Yukiko Ishii. “The training was intended to help participants access emerging, locally available microfinancing schemes to boost their small business.”

The new skills learned as part of the training sessions will help market traders generate a higher income. This in turn can help increase economic development in the region – and encourage stability.

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Somalia’s Premier Bank becomes the first to offer letters of credit

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In Somalia, the government is trying to improve its financial capacity and capabilities. It wants to convince other countries that it’s a safe place to invest. One lender has taken a major step forward in this process. Premier Bank has become the first to offer its clients access to a letter of credit. The crucial document will go a long way to boosting trust between traders and suppliers.

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