Somali Business Review Vol 9 Issue 1 (January

SOMALISOMALI BUSINESSBUSINESS

A PUBLICATION OF VOLUME 9, ISSUE 1, SIMAD UNIVERSITY JANUARY-MARCH 2016 REVIEWREVIEW NURTURING TALENTS FOR A GREATER SOMALIA

Tel: (+2525) 699-924646 Fax: +2521 85851 Mailing Address: P.O Box 630 Mogadishu, Somalia Email: [email protected] Web:simad.edu.so SOMALI BUSINESS REVIEW | VOLUME 9, ISSUE 1, JANUARY-MARCH 2016 EDITORIAL There had been a growing number of services in the Somali business industries, especially banking industry. Since the collapse of the central government, Somalia had informal banks that provide only deposit and remittance services. For the last six years, a formal banking industry emerged with huge investment and financing potential. Most of het operations of the emerging formal banks are based on the principles of Islamic Banking System. Yet, there are a lot of good opportunities under many in Islamic Banking industry. Along getting these done, the future of Somali banking industry will unfold. In addition, the country is in the process of restructuring its financial system and rebuilding its economic infrastructure. Another growing segment in the service industry is that of food industry. New restaurants and cafes offering foods ranging from Somali foods, Turkey foods, and other different foods with a high hushed, gentle locations conducive for ingestion are recently appearing in places including Maka Al Mukarama street, Banadir, Zobe areas and others. Restaurant managers in Somalia have to push creativity and innovation in ways that are geared towards freshness, uniqueness and indulgence, bigger and bolder flavors, and service elements, hichw are interactive and convenient within the consumer lifestyle. In this issue covers articles that address business opportunities that exist in Somalia like ICT Opportunities which are probably needed by educational institutions such as universities, colleges, high schools, urban and rural communities in order to keep their records accurate. Since there’s a growing and contributions in the banking industry, this issue mainly focused on banking industry. Also, technology has radically changed the lives of the individuals, institutions and the way people are conducting marketing to their business. More about this is addressed here.

TABLE OF CONTENTS EDITORIAL TEAM

Privatization in Somalia ...... Pg 2 Chief Editor The (Old) Stereotypes of Nasra Ahmed Mohamed Accounting Profession is Over...... Pg 4 Production Manager ICT Business Opportunities in Somalia...... Pg 6 Abdikarim Muhudiin Operation Editor Email Marketing Strategy for Small Businesses...... Pg 8 Mohamed Muse Hassan

Islamic Banking Industry in Lul Farah Abdullahi Somalia: Good Opportunities Editorial Board under Many...... Pg 11 Dr. Mohamed Ibrahim Online Digital Library System: Dr. Bashir Abdisamed Hared A Total Reading Convenience ...... Pg 13 Dr. Amina Omar Mohamud The opening of new restaurants Design and Layout & Printing is booming...... Pg 15 Somprint Ltd. Somali Banking Industry: Mogadishu, Somalia From Idealism to Realism...... Pg 16 +252 1 850555 | +252 617217770 The Contribution of [email protected] | www.somprint.so Islamic Banks to Economic Development of Somalia:...... Pg 17

PUBLICATION OF SIMAD UNIVERSITY • 2016 1 SOMALI BUSINESS REVIEW | VOLUME 9, ISSUE 1, JANUARY-MARCH 2016 Privatization in Somalia ABDIRIZAK MOHAMED AHMED

Introduction productivity, privatization may improve Privatization means the transfer of the efficiency, provide fiscal relief, encourage ownership of state property into the hands of wider ownership, and increase the availability private investors. The government ceases to of credit for the private sector. be the owner of the entity or business. Privatization is considered to bring more Key Deliverables for Privatization efficiency and objectivity to the company,• To market the economy as being globally something that a government company is not competitive. concerned about. One of the main points for • To increase productivity and reduce the privatization of publicly owned operations inefficiency of state-owned enterprises. is the estimated increases in efficiency that can • Private enterprises tend to equip the result from private ownership. enterprises in a better condition than that of public enterprises. Privatization, a method of reallocating assets • Private sector will constantly seek new and functions from the public sector to the services in order to give citizen’s private sector, appears to be a factor that could competitive edge, while government is play a serious role in the quest for growth. In noted as slowly. recent history, privatization has been adopted • Private sector utilizes the practice of by many different political systems and has capital renewal, where private firms spread to every region of the world. The ensure they are kept abreast for the latest process of privatization can be an effective technologies or production process. way to bring about fundamental structural • Privatization attracts foreign direct change by formalizing and establishing investment; countries with strong property rights, which directly create strongprivatization programs typically individual incentives. experience a rapid increase in FDI inflows. It also has indirect effect by attracting A free market economy largely depends on additional investment through signaling well-defined property rights in which people effects. make individual decisions in their own interests. The importance of property rights is Privatization in Somali captured by economist Hernando De Soto as Somali communities had let to deal with a he states, “Modern market economies period of statelessness for longer than any generate growth because widespread, formal other society in the contemporary world. It property rights permit massive, low-cost might seem reasonable to view Somalia as exchange, thus fostering specialization country left out the loop of new global markets, and greater productivity”(1996). technologies, politics, and culture. Somalia is Along with creating strong now struggling to accommodate peace, and incentives that induce security. The government has many functions

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port. that they are grappling on it, so it cannot be Then the Turkish company Albayrak moved in, held responsible or produce efficiently for signed a 20- year contract with the government every function. Therefore, the governments and set about creating order at the port. “A lot should privatize some of its publicly owned has changed since we took over the assets to private investors, since themanagement,” observes the company’s performance of state-owned enterprises have immediate former general manager, Mustafa1975 been far from satisfactory which brings Adali. economic inefficiency; and inability to innovate During this year, and costly delays. Also Somalia’s Federal government has given a a firm from Italy Turkish firm a long-term contract to run and known as Impregilo Currently, there are two basic economic upgrade the Mogadishu international airport. completed sources that have been in low performance for Turkish construction Albayrak Group and the building the past years.But currently, the government Somali government officials signed a 20 - ofyear Mogadishu privatized and transferred its ownership to a agreement to upgrade and run the operation port and at Turkish company called, Albeyrak. Mogadishu of the airport by the firm. And such kind of that moment, port and Mogadishu International airport are upgrading is part of privatization. Now, The Mogadishu port the two economic sources in Mogadishu. In Albayrak Group Company is charged with was known as a 1975, a firm from Italy known as Impregilobringing in new technology to modernize the working port. completed the building of Mogadishu port at cargo hub to international standards and its first time and that moment, Mogadishu portreliable services. were known as a working port. At the end of 2014, a Turkish firm was transferred to the Conclusion operations of Mogadishu port in order to made Privatization is not a blanket solution for the renovation about it. It was renovated at a cost problems of poorly performing country like $10 Million as the manager of Albeyrak, Somalia, it cannot in and of itself make up Mustafa Levant Adali, said. totally, lack of competition for week capital markets or absence of an appropriate Nearly two years ago, Mogadishu ocean Port regulatory frame work, but when a medium of was a government port. It worked, though not regulatory capacity is present, privatization to its full capacity. Individuals and companies yields some substances benefit. moved cargo through it. There were no proper structures for monitoring port activity, no The future of Somali for privatization is so proper revenue collection structures, no important, the infrastructure of Somalia will proper cargo handling equipment, and most of high and growth so we need some privet all, no will to turn the port into a revenue companies those who take parte the crating venture. Not surprisingly, the development for prosper. government received no revenue from the

PUBLICATION OF SIMAD UNIVERSITY • 2016 3 SOMALI BUSINESS REVIEW | VOLUME 9, ISSUE 1, JANUARY-MARCH 2016

The (Old) Stereotypes of Accounting Profession is Over

MOWLIID AHMED HASSAN eliminated factor of the stereotypes in section 3.And section 4 concludes the article. 1.0 Introduction Professionals caretheir images and try to improve how they are perceived and 1.2 Does the Negative Stereotypes Over? A accounting professionals are not different. proof As many studies indicate the old image of Studies relating to the image of the accountants accounting is that; accountants are bean and accounting profession have been mainly counters, number-oriented and mundanediscussed in international journals and professionals. In the last decades these conferences. To demonstrate that the negative above mentioned negative stereotypes stereotypes of accounting profession is over wasdramatically decreasing due to the change the following paragraphs are the highlights of of collective factors that influenced the some studies conducted in the last couple of accounting career such as environmental and decades: technological advancements. The objective of this articleis to explain that the AICPA(2000), accountants are widely old-negative image of accounting perceived as being focused on math, tax profession is over and also calculators and detail oriented, while some to identify factors that others perceive that accountant are dreamers, outweighed the stereotypes. dull, antisocial, bean counters, selfish, Therefore, in section 2, methodological and structured.Brass (2004) will be discussed the believes that accountants are responsible accounting for these stereotypes and misconceptions, stereotypes. because they never tried to improve their Followed images. by, the By glancing the contemporary studies, accountants and accounting profession are viewed as more positive and rewarding profession. In more recently,Mbawuni (2015) studied students’ feelings and perceptions of accounting profession in developing countries and found that the traditional negative view of accounting profession does not exist today, anymore, in the minds of graduate and undergraduate student. Likewise, Germanoul et al.,2009 ( ) found that both Malaysian and British students view accounting positively. In summary, recent studies about the image of accounting

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profession are more positive compared to the stereotype of accounting is mundane the old ones. So this is an indication that the professiondoesn’t exist. negative stereotypes of the profession is over. 4. Accountants’ value is highly understood by 2.3 Factors And Forces Eliminated The the people. Studies found that in the 1970s and 90% Negative Stereotypes of The Profession the 1980s the accountant was believed as a of those It’s very important to understand the factors responsible and rational person. Furthermore, interviewed said that outweighed the negative stereotypes the accountant was believed to be as atrained their roles have of accountants and accounting profession. action man in the 1990s. However, in a recent expanded over Therefore, the following paragraphslabel the accountant seemed as a more self- the past few years summarizefactors eliminated the negative indulgent person. These trends observed into the outside stereotypes of the profession: reflect changes in wider social practice from of traditional low-civilized to highly-civilized (Baldvinsdottir, accounting and 1. The changing role of accountant is one Burns & Nørreklit,2010 ). finance. of the main factors that eliminated the stereotypes. Robert Half management 5. Accounting is aboundary-lesscareer, unlike resources interviewed 270 Canadian CFOs, other professions. Governments, businesses, and he found that more than 90 percent non-for-profit entities, hotels, hospitals and of those interviewed said their roles have banks hardly need professional accountants expanded over the past few years into the alike, while other fields have rare opportunities outside of traditional accounting and finance.compared to the accounting career. Therefore, “The reality is that the world accountantsaccounting is needed by almost in every work in is different from traditionally. They’re industry. “It appeals to people who are looking much more involved in decision making. They for a career. They know accountants will are linked in to strategy,” said TashiaBatstone, always be in demand whether the markets are Chartered Professional Accountants of up or down,” said Jeffrey Power, accounting Canada vice-president of education. department’ chair at Saint Mary’s University in Halifax. Furthermore, a study conducted 2. Changing business practices expanded the by ACCA in 2006 found that in Malaysia alone accountants’ roles and responsibilities from there is an expectation to require more than record keepers to business strategists. Lusher65,000 professional accountants by 2020, (2012) believes that accounting professionals more than three times the number that is provide proper guidance to help organizations available now (2006). Malaysia is not the accomplish their financial plans, strategic goals, only country who is suffering this shortage; and environmental accountability.In 2002, but it is a universal. Even United States of after the scandals of major US accountingAmericahasn’t big spared from that epidemic level firms, Sarbanes-Oxley Act was establishedof scarcity (Saemann& Crooker, 1999). which put strict auditing and reporting requirements on public companies. Therefore,1.4 Summary and Conclusions accounting professionals experienced new era Contemporary studies relating to the image of of auditing and fraud detection mission. accountants and accounting profession seems to be more positive compared to the old.This 3. Technological advancements simplified the proofs that the negative stereotypes of the accounting’s harsh tasks, such as manual book accounting profession doesn’t exist anymore. keeping is not used today anymore, instead, In the last decades the negative stereotypes of excel or spreadsheet is simply clicked on the the accounting profession were dramatically finger tips. In addition, today accountants eliminated by many factors including: the are familiar with different software and changing role of accountants, technological hardware products that perform the complex advancements, changing business practices tasks of accounting (like nine cycle) in a and accountant’s value is highly understood. shortcut manner without losing energy. So,

PUBLICATION OF SIMAD UNIVERSITY • 2016 5 SOMALI BUSINESS REVIEW | VOLUME 9, ISSUE 1, JANUARY-MARCH 2016 ICT Business Opportunities in Somalia

ALI OLOW JIM ‘ALE SABRIYE

Abstract: ICT (information and communications technology - or technologies) is an umbrella term that includes any communication device or application, encompassing: radio, television, cellular phones, computer and network hardware and software, satellite systems and so on, as well as the various services and applications associated with them, such as videoconferencing and distance learning.

This sector has proven to be a strong driver of Gross domestic product (GDP) growth in nations across the world. From developing countries, to developed nations, the ICT sector has contributed to the success of nation’s economies, the advancement of its people’s skills and capabilities and positioning the nation as a place for global firms to more efficiently do business. The review discussesInternet and Network Services make up the the foundations for establishing a viable and remaining part of the market. The core sustainable Information and Communication strengths of Somalia ICT sector is the people; Technology (ICT) industry and the each year, various institutions produce a huge $194 opportunities it offers against the challenges number of IT graduates, therefore may Somalia face in their concerted efforts to entrepreneurs and foreign investors may The estimated participate fully in the information society and invest ICT center and benefit from ITs’ s skills amount in millions knowledge economy. and knowledge as well. that Private investors have Introduction Current ICT sectors put into Somalia’s ICT-information and communication Somalia is currently in the midst of a telecommunications technology- which is a generic term referring telecommunications boom driven by private sector over the last to technologies that are used for collecting, investors, who have created a mass market ten years. storing, editing and passing on (communicating) with the cheapest calling rates in Africa. information in various forms, have the potential Private investors have put an estimated $194 to transform business and government in the million into Somalia’s telecommunications world, driving entrepreneurship, innovation sector over the last ten years. The telephone and economic growth. ICT industry in Somalia companies that provide much of the service is relatively new in comparison to other across the war-torn country include: Golis business sectors; its local enterprises operating Telecom Somalia,Hormuud,NationLinkTeleco in hardware, software and internet service m,Somali Telecom Group,Galkom,Global providers (ISP) segments. With the advantage Internet Company,Somtel,Netco,Somafone,Te of earlier initiation, the hardware segment lcomPuntland andTelenet International. dominates the market while the relatively late The telecommunications systems are also entrant, software segments becomes next and improving banking ability for many Somalis;it

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designed a money transfer service for its development registered customers. Information and communications technology On another hand, the internet connections are (ICT) represents an enormous opportunity to mainly done via Dial-Up, but GPRS, ADSL and introduce significant and lasting positive LRE (Long range Ethernet exist). Wireless and change across the developing world, but is Satellite services also exist in Somalia. Most of accompanied by significant challenges and the companies are additionally beginning to possible threats include: provide VOIP services. By adding that, there1. A weak central government; area few ICT centers which provide basic 2. A geographically and politically software solutions, web and application fragmented media environment; development, network building and IT short3. A strong private telecommunications course trainings. All of these sectors are not sector that benefit from a lack of enough to the country’s’ needs upon regulation; technology and ICT services. Conclusion Opportunities ICTs are enablers for economic growth In Somalia, the ICT opportunities exist without because of their crosscutting nature thus any doubt; for example: educational affecting all sectors. Adoption and proper institutions such as universities, colleges,utilization of ICTs will lead, among others, to secondary and primary schools may require increased yields and quality production of systems to keep student’s records as well as goods and services. ICT industry can be employee. Urban and rural communities need resourced, properly managed and an access to the internet easily. Without mainstreamed into a significant contributor to internet and research publishing journals, theGDP. researcher’s outcomes will be inaccessible. Hospital management systems are not In order to take advantage from the existing available in most of health centers and opportunities in the market especially, the hospitals. There are no digitized public opportunities in the ICT sector, the libraries, cultural centers, museums, postrecommendation is to invest a fully integrated offices andarchives in the country.MostICT ofcenter which encompassesthe basic ICT world’s populations have not access to local divisions like: Software development, database television andradio services.Shopping centers analysis and design, web design and and malls need commercial systems. These development, Network solutions, Hardware ICT opportunities and many others are still maintenance and troubleshooting, multimedia waiting business entrepreneurs. and graphical design as well as ICT consultants and training center. Key challenges in implementing ICT for

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Email Marketing Strategy for Small Businesses

YAHYE ABUKAR AHMED section illustrates the strategies to optimize 1. INTRODUCTION email marketing campaign. Finally, how to The heart of every business successes depends create effective email marketing. on its marketing that affects sales and productivity. Most aspects of a business 2.lie inTHE IMPORTANCE OF EMAIL successful marketing. Today the revolution of MARKETING information technology (IT) and As shown - The Radicati Group which is the communications has changed the way people market research firm - there are over 2.5 billion conducting marketing to their business. Email email users worldwide and this number is marketing is broadcasting commercial expected to grow over 2.8 billion by year-end messages through electronic mail (Email) to a 2018. According to Pavlov et al. (2008), email group of people using it. marketing campaigns produce approximately twice the return on investment of the other E-mail is one of the most popular Internet main forms of online marketing such as web applications and has become a useful banners and online directory adverts. In marketing tool. It can be used to recent send years, ads, market research has shown that solicit sales, donations, request business, emailbuild marketing is still a more useful and loyalty, trust and brand awareness amongtrusted medium for marketers than traditional potential customers. Unlike many otherdigital marketing. Email marketing is a great marketing opportunities, when properlyway to reach your customers where they are implemented, email marketing can providewithout spending a lot of money. your business with various ways to target specific customers. Email marketing is important for building relationships and loyalty with prospects, leads, The first section of this article will focus oncurrent the customers, and even past customers importance of email marketing, that willbecause it gives you a chance to communicate highlight significant advantages compared todirectly to them through their inbox, at a time most other marketing methods, the secondthat is convenient for them. Be friendly and

8 PUBLICATION OF SIMAD UNIVERSITY • 2016 personable. You are not invading their space if you have chosen your message and your recipient wisely.

3. EMAIL MARKETING STRATEGIES The strategy of Email marketing is considered to be the key important part of overall marketing strategy and business plan. It can give a chance to market your products and services through the use of the email channel, in order to make a profit that will allow business to reach their goals. An effective email marketing strategy takes into consideration what your target customers are, their preferences and benefits they are looking for as well as your products services and industry and which email marketing messages are most effective. sends and receives emails a. Create an Acquisition Strategy every day using an Successful email marketing starts with app like Gmail or prioritization of targeted audience and its Outlook. Those tools work growth. To analyze the places where customers great for sending one-off messages to are already engaging with your business helps individuals and groups, But for larger groups markets to decide the targeted audience. The and scheduled sends, you can›t use app like more you know about your audience, the Gmail and Outlook. The following sections will easier it will be to provide valuable content illustrate how to sign up and create email within your communications. Then, determine marketing server provider. 2.5B how to improve those experiences and drive The estimated interactive engagement with new tools and 4. HOW TO CREATE AN EFFECTIVE EMAIL number of email techniques. For example, always optimize MARKETING? users worldwide. acquisition forms for mobile. If a customer is Creating email marketing might seem difficult The number is using on a tablet or Smartphone and can’t and exhausted for small business. When you expected to grow afford to fill out your form easily and quickly,open your inbox, all you see are promotions to over 2.8B by the you’re sure to lose the acquisition strategy. from eBay, Amazon, and Google. In this section end of 2018. we will focus on how to create effective and b. Build Email Marketing Strategy for Offers easy email marketing. the following steps The basic idea of creating an effective offer in guides : the emails is to decide what kind of a business you run and how to make offers in your emails. a. Selecting an Email Marketing Provider In order to do this you need to urge people to Selecting the right Email Service Provider get information about what they really want. (ESP) is the first step you can launch a Giving them a discount or promotion for a successful email marketing campaign. We product they’re interested in, because of this,strongly recommend that you talk to and try pushes consumers to your website for email different providers and choose the one that subscription. A good offer behaves like helpful, you consider to be effective and friendly. in so when you promote a product via email, do itorder to sign up for an email marketing service as a friend who wants to help the consumer. provider, you need to subscribe MailChimp, AWeber, Mad Mimi or Constant Contact c. Use Newsletter Marketing Service companies. These companies make it easy to Strategy create beautiful, mobile-optimized emails and Newsletter marketing involves sending out manage email lists, integrate forms and sign- information about the recent activities ups on your website. Many of these ESPs offer through email to interested parties. When you a free trial or free based on list size so you can set up an email newsletter, you’re offering your decide which one is right for you. audience a way to subscribe to get emails from you that contain informal news or broadcasts b. Email marketing list that you send out. Normally, business probably Selecting who you want on your list and

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receive your marketing email. You can add a You must to put enough content in to get list of recipients you have already inserted into your message across and make sure it’s your account. The best way to grow an email relevant, consistent and useful for your list is to offer incentive for people to sign up. customers. Examples: offering a month for free accessing to exclusive content or provide a free online d. Track impact of your email marketing course to new subscribers or free eBook. Email tracking is a cost-effective way to see every individual who opens your email and c. Design and develop email marketing rate the quality return visitors to your site. You Contents want to know how many people open your Here is about what will you write in your emails email, and how many people click the links. to create a strong email marketing contents, This will help you determine what works and and there two different approaches to design what doesn’t when you’re ready to send the it. Standard-style approach which is simple in next message. The first step to tracking the appearance and form, the other approach is success of your email campaign is setting up considered to flash based content using Campaign Tracking. When people come to HyperText Markup Language (HTML) or your website from other sites like Twitter and special design software to craft bold styles Facebook, it’s easy for Google Analytics to that can be eye-catching and attractive. Both know where they came from and tag the traffic approaches needs to focus the following steps appropriately (as social traffic, for instance).

• Email Marketing should be Easy to Read: in 5. CONCLUSION order to make your email attractive use This article highlighted the importance of white space which means don›t pack the email marketing and its strategy. it illustrates email with graphics and text; the size of how to build marketing strategy. Email the font should also be large, colored and marketing strategy helps you market easy to read. business›s products and services with the use • E-mail subject line: The subject line in the of the email channel. e-mail is the first point of contact and acts as a trigger to encourage the message Email marketing strategy focuses how we are recipient to open the e-mail. There are two going to achieve our goal. Email marketing can main components in the subject line: build trusting relationships with the recipients. e-mail sender and the subject matter. The This is going to build business›s customer sender name, is the inbox field that tells loyalty Email allows you to target and segment your recipient who sent the messages. your messages on individual level. Some marketers use a company name, others a brand, publication or person›sAs the researcher showed email recipients name, while others simply use an emailopen email based on subject line alone, address. Email sender forms the therefore, before sending email marketing we foundation of your recipients› trusthave andto focus the subject line. People who buy email relationship with you. Here is the products marketed through email spend 138% point your recipient to recognize whether more than people that do not receive email to ignore, delete or open your messages. offers. Unlike many other marketing The subject matter is considered to be one opportunities, when properly implemented, of the hardest parts of email marketing. email marketing can provide your business Set your subscribers’ expectations and with various ways to target specific customers. clearly state what’s inside the email the finally section in this article was discussed example use the word “FREE”, about an how to create an effective email exclamation point! and make your subjectmarketing that provides extremely user- line as a question, and target the questionfriendly and easy-to-use with premade at the types of problems your customers templates. need to answers. • Length of e-mail : The length of e-mails marketing ranged from 1 to 5 pages and the average length is 2 pages . The best emails will be under 750 words total, and that›s a great deal of text. The longer the e-mail the weaker it gets at the bottom.

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Islamic Banking Industry in Somalia: Good Opportunities under Many DR. BASHIR A.SAMAD HARED

Challenges seized by the “fittest” business patrons The hope to recover from the war ravages hopefully through either foreigners or foreign- emerged from the corner in the last few years,affiliated investors. investors, both local and foreign, started pondering and presaging the issue of what and Universally, the Islamic finance industry has how to take hold of such rare opportunities expanded rapidly over the past decade and is that is out of sight of manySomalis who usually growing at the rate of 10-12% annually, and mistreattheir economic possessions and currently with estimated assets of $2 trillion, affluence. which has led to many countries, Muslims and non-Muslims, to develop exceptional It is not the mistake of the investors to hunt regulations for this emerging industry. their interest, but it is a normal rule of life thatSomalia’s case is also similar. Islamic business according to the Darwinian Theory “the world industry is growing immensely but without is always possessed by the fittest”, with thesupporting environment. extinction of others, and because of that, the underutilized economic resources, of course in Although up to present, the license is given to the less developed nations, belongs, by hook six Islamic Banks and two Takaful Insurance or by crook, to the fittest; mostly developedcompanies, however, the industry is working in nations, who can use it properly and a shadowy and volatile business situation that deservedly. On that logic, the untouched lacks all types of defensive regulations, economic opportunities; Somalia’s free-for-all infrastructure and human capital platform. business markets, are at the seizure of the The regulatory foundations of financial fittest who are “fit” to fill the gap. In similarinstitutions industry represent number ONE way, the Islamic business industry is being challenge. For instance, since the start of the

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first Islamic bank in 2010, the issue of financial related to international banking. On top of institutions regulations was under discussion, that, the Branch manager of CAC announced and up to the present, there is no Financial in Bosasothat the bank is going to deliver Institutions Law passed by the Parliament or enormous services to its clients as well as issued by the Central Bank to regulate Islamic redefining banking standards in the region Financial institutions Industry. through transformative banking solutions. $2T The estimated value Currently, Somalia has developed Financial He added also, that they are going in the near of assets in trillions Institution Law No. 130/2012, which future to open other Branches across Somalia. of the Islamic providesthe general guidelines of financial It is a very dangerous action to open the doors finance industry in institutions operations, both Islamic and for the giant conventional financial institutions Somalia. It has conventional. This situation leaves to open their branches in Somalia as our expanded rapidly the financial industry to immature Islamic finance and is growing at accommodate and to be institutions would not be able the rate of 10-12% open for conventional to survive against such annually. financial institutions; well-established i.e. Riba-based institutions and what banks and is more dangerous is insurance the absence of companies, regulatory which might institutions in the lead a country. regulatory Certainly, this confusion in situation renders the country. As this promising a result, in the industry to be recent days, aborted in its birth there were some place. investors who were willing to The other apparent launch conventional challenge is that the financial institutions in national leaders may not different regions. comprehend the importance of the concept of “Business Islamicity” in For instance, since last year, there were strong Somalia, a 100% Muslim nation, who attempts in Somaliland to get the license for understands what is permitted in business and the first conventional bank in Hargeisa. Thiswhat is not. attempt has created a legal debate and religious conflict among Somaliland legal/This is a legal chaos and no one cares about the sharia institutions. However, even though suchfeelings of the people in the future as well as attempts did not succeed till now, but the there economic system of the country. I am sure are no strong legal foundations to hinder those had it been a referendum in Somalia, majority, (secular) investors from their ambitions to if not all, would voted against conventional occupy the field. In a worse case, Puntlandbanking system. But who cares about the state has licensed the first conventional bankpeople and their point of view. Equally, had it to open its branch in Bosaso in the last January,been there a clear Islamic Financial Institutions without having the license from the Central Act, national leaderscould not dare to such Bank of Somalia. actions that might hurt the nation’s constant principles.However, nowthe ball is in the court Puntland president commended the opening of the Somali Shariah scholars, who are of CAC international bank branch in Bosaso supposed to stand for defending the and commented that:“opening of CAC foundations of the Ummah and to spread the International Bank is a step forward towards awareness of the society towards Islamic financial solutions and bolster our economy”. banking industry and its importance for the The President noted that international banking future development of the nation’s economic will boost the local economy and ease issues system.

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Online Digital Library System: A Total Reading Convenience

HAWO ABDIRASHID , ABDIRIZAK Online digital library system is a system used HASSAN, ABDIRAHMAN ADAN, AND to work as online by facilitating the library ISMAIL MOHAMED resources to the students, lecturers and other researchers in order to get advantage from it. Introduction So, it enables them to easily access the library Do you buy on the internet? You have excuses resources without coming to the center of the because e-commerce is not practiced here in library office. The fundamental reason for Somalia. But do you use internet to read? building digital libraries is a belief that they will perhaps you are not accustomed to open a provide better delivery of information than book on the internet and start reading it and was possible in the past. Furthermore public normally you cannot read the book one time. libraries should provide the public with access You open it another day and resume your to books and periodicals, because of their main reading from where you have stopped. This is a task. smart and convenient way of reading. Don›t be fool to think of computers only. You can also Our project will be produced as a Digital use your smartphone or iPAD and similar Library System (DLS) to the library of Simad handhelds. This type of reading happens when University, Mogadishu – Somalia, in order to library resources are digitized and presented manage the whole information about the in organized way ; usually referred to a digital documents that Visitors (Researchers) will library. need including text, audio, or video. So, our project enables users to get through internet A digital library is a collection of documents in connection using PC or PDA and search for organized electronic form, available on the their requirements in the Server that is Internet or on electronic media such as CD- containing the database of our Library Data. ROM (compact-disk read-only memory) disks. This project will utilize dynamic web content

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traditional library. A traditional library must spend large sums of money paying for staff, book maintains, rent, and additional books. Digital libraries do away with these fees.

The Importance of Online Digital Library System This System will have more significance importance, because it will assist the Somali Librarians, particularly the Library of Simad University, Library Staffs and Students who will visit the library through online. It can store huge data including millions of texts such books, Journals papers, videos and others. In addition to that, it will assist sharing data among the users.

This System will definitely serve the technology like PHP at the front and MySQL as community who cannot reach the library’s database, and this system will be used and office center for the reason of their work by benefited most of the students in the visiting the web via internet connection Universities and Librarians also. without coming to it. So, it saves more of their 24 time and the system can further improved by Online Digital Library System those who will do future researches in the The number of Online Digital Library System is a focused same area hours a day that collection of digital objects that can include digital libraries can text, visual material, audio material, video Although, SIMAD possesses good library, be accessed. material, stored as electronic media formats maybe one of the best libraries in Mogadishu, (as opposed to print, micro form, or other at the same time, there is no Online Library media), along with means for organizing, System being used currently in SIMAD, an storing, and retrieving the files and media issue that can be burden on those who love to contained in the library collection. Digital read continuously irrespective of location. The libraries can vary immensely in size and scope,idea here is that traditional library systems and can be maintained by individuals,have the restriction of location. The students, organizations, or affiliated with establishedLecturers and others Researchers must come physical library buildings or institutions, to or the building of the library to study what they with academic institutions. The electronic need, and they might not find adequate books content may be stored locally, or accessedto their researches due to limited books in the remotely via computer networks. library. Even if a student borrows a book, others cannot get that book due to limited Solutions of Digital Library System copies in the library. We have solved by the following limitations:- • No physical boundary: The user of a digital Conclusion library need not to go to the library Online digital library system is a crucial system physically, people from all over the worldand fast growing segment in the education could gain access to the same information,field and it is, undoubtedly, needed by a as long as an Internet connection is country like Somalia where gabs do exist and available. awaits technological solutions. Online digital • Round the clock availability: Digital library system is available in anywhere at any libraries can be accessed at any time,time needed 24 by the user through connection, hours a day and 365 days of the year. and this can be an effective way to spread the • Multiple accesses: The same resources knowledge to the parts of the world and take can be used at the same time by a number advantage from there. Therefore, such this of users. system is the required system and it has a good • Cost - The cost of maintaining a digital contribution to improving education in all library is much lower than that of a kinds .

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the customer demand but operators must do their best to even hire from the abroad if necessary and use this talented people for preparing a nice food.

Even though the sector has many entrepreneurs interesting to invest, succeeding as a restaurant services supplier or operator today is truly a hard to get and to reach that point requires being a creative to stand out from the crowd. Restaurant operators in Somalia have to push creativity and innovation in ways that are geared towards freshness, uniqueness and indulgence, bigger and bolder flavours, and service elements, which are interactive and convenient within the consumer lifestyle.

The Opening of The Diasporas are one of the main memory generated of starting the restaurants. Also they have customers people who came back to New Restaurants the country and those who used to stay showing willingness to spend larger proportions of disposable incomes on eating is Booming out, in order to respond these customers’ demand the industry is forced to become NASRA AHMED MOHAMED ‘innovation-rich’ and trying to come up with new concepts. Newer bars and cafes offering combination of the ambience and food ranging from Somali foods,quality of food that a full-service We all know that the most important thing Turkey foods, and other differentrestaurant offers, with the speed about a restaurant—the thing that stands out foods is making an appearance in and delivery of quick service and Shapes a guest›s experience—is the food. places like Maka Al Mukarama outlet. Restaurants are Not only that, but we can name other elements street, Banadir, Zobe areas and challenging to offer high-quality that are crucial to the guest›s restaurant more. It seems that there are food and service at a keen price experience, including staff, service, location, higher delivery services with point. Going to the restaurants ambience and decor, menu, and overall delicious foods. What comes out seems to be one thing that people execution, so to keep the restaurants from of the kitchen are somewhat are doing so much in those days, failure, the owner-manager must look well for different from what is used to be when they have meeting, and the internal factors, as well as the external going back to the previous years. want to have tea and talk together, factors. It incredibly looks «modern» meal, in sometimes they conduct the the kind you would possibly family dinner together in a Finally, nowadays restaurants are growing encounter in a credible restaurant. faster and people are going out to eat, with a contemporary Somali restaurant comfortable place, this has caused the in Mogadishu. The country is recovering for its investors to start in investing this service unrest, long lasted civil wars that industry, the most important thing for the Opening restaurants is becoming caused an increase of the restaurant owners is to ensure they have a one of the fastest growing population’s needs, the customers’qualified chef which is not easy to get in segments in the service industry. demands have raised thus the Somalia because there are no institutes neither We are eating out more often, and operators need to step up and to universities offering the cooking classes, even the people are spending a lot in be more innovative and productive though there are some local people who try to the commercial restaurants, and in their efforts to keep their teach people how to cook but not with a thanks to our increasing desire for customers. To be innovative, it standardized is way. For that reason, the quality, value for money, needed a talented chefs who investors opening restaurants are forced to consistency and social possess the right skills and employ international chefs who can cook experiences. People interested in attitudes to deliver what today’s professional manner for a nice dish and some a comfortable environment to eat customers demand. It is not easy of them use Somali chefs trained on abroad lunch and dinner, quick service is finding someone with the and that they can give training to their fellow growing too because the necessary skills and passion to fill cooks.

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Somali Banking Industry: From Idealism to Realism

DR MOHAMED IBRHIM NOR As usual for an infant industry, formal banks in Somalia emphasized on financing side while INTRODUCTION using bank capital for almost all of their An active banking industry is crucial for today›s financing transactions. Putting emphasis on contemporary economy. Banks facilitate both financing side of the bank equation without investment and financing needs throughconsidering the other side of the equation intermediation framework. Intermediation is a (investment side) poses a huge threat to the process by which banks provide investment and sustainability of Somali banking industry. At financing needs without bringing the surplus and the beginning, the service delivery of the banks deficit units together. Traditionally, people used was very limited due to several key issues that to look for their financial needs directly without are discussed in this paper. In this article, two intermediation. However, due to the huge main issues are discussed. transaction costs involved in the traditional method, people preferred to look for theirTERM AND COST OF FINANCING financial needs indirectly via a thirdThe part first issue was the duration of the contract. intermediation. Commercial banks manage Due to the risk-averse mentality of the owners billions of transactions worldwide. A thriving of the emerging formal banks in Somali, the banking industry is not only important for the duration of the contracts was a maximum of household consumers but also for business one year. This was a huge challenge to the development. operations of the banks because household financing needs require a sufficient period of In the context of Somalia, the banking industrytime for successful debt repayment. Household had been growing in terms of service providers financing needs such as vehicle financing and and clients. Since the collapse of the central home financing are basic needs for almost government, Somalia had informal banks thatevery household but households can purchase provide only deposit and remittance services. For neither a home nor a vehicle if they cannot the last six years, a formal banking industry make the contractual monthly repayment. The emerged with huge investment and financing second issue was the cost of financing or the potential. Most of the operations of the emerging mark-up. Though there are various Islamic formal banks are based on the principles of Mode of Financing, Credit Murabahah is the Islamic Banking System as they claim. mostly used mode of financing by Islamic banks

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10% The mark-up that some of the banks are charging in Somalia. This is down from 20%.

in Somalia. At the beginning, banks started to banks have started to provide financing put very high cost of financing, which was as facilities with low cost of financing and longer high as 30%.Due to the trade mentality of the term of financing. Instead of charging a 20% owners, banks put high cost of financing. mark-up per annum, some of the banks are Practically, banks strive to satisfy their now charging less than 10% mark-up per year. shareholders, who look for high profit margins. On the other hand, the term of financing has Somali banks’ high cost of financing has pushed also been increased due to strong competition a lot of household consumers back and this among the Islamic Banks in Somalia. Banks discouraged a lot of poor and low-income used to refuse financing applications that households to apply for financing. require longer term of financing.

These two issues were critical for households Unlike past practices, banks are now providing and business community. High cost of financing financing services with three year repayment coupled with limited contract duration created period. This kind of financing encourages poor both opportunity and threat in the context of and low-income households to achieve their Somali banking industry.It has created an financing needs. Moreover, the banking opportunity for the establishment of new industry can increase their clients by increasing Islamic banks but poses a threat to the the access, affordability and outreach of their sustainability of the existing banks. Due to products. these two problems, bank operations are only limited to very specific products such CONCLUDING as REMARKS vehicle financing.These issues did not onlyThe future of Somali banking industry is block the ability of the banks to sell the unfolding as the country is in the process of available products but also to create new restructuring its financial system and products and provide the financial needsrebuilding of its economic infrastructure. Though the people in an innovative way. there might be poor performance in the banking industry due to strong and tough After almost four years, there are currently competition, Somali banking industry can more than four Islamic banks in Mogadishu, prosper in the long term. To achieve the the capital city, alone. There is huge market anticipated results, the banking industry with huge competition. Though most of the should be innovative in terms of financial banks still think traditionally, some of theinstruments and service delivery.

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The Contribution of Islamic Banks to Economic Development of Somalia:

LAYLA ABDULLAHI OSMAN ,MOHAMED decades of conflict. In January 1991, all state HASSAN MOHAAMED AND MOHAMED institutions that provided services and AMIN HASSAN GEDOW, MOGADISHU- regulated the economy collapsed, including SOMALIA the Central Bank of Somalia and the entire banking system.

INTRODUCTION Overall financial sector development Banking is the most important sector of the dependent on a sound legal and regulatory modern day economy (Ahmed, 2011). It framework and the ability of central banks to provides an opportunity to the households provide the necessary support and supervisory with surplus capital to select the best mix of functions. Thus, without a clear legal investments in terms of return, tenors security. framework enforced by a functional regulator, Moreover, it provides an opportunity to there is little scope for attracting private businesses and governments to finance their sector investors to set up banks and other activities through obtaining surplus funds. financial institutions in Somalia (Istanbul conference on Somalia 21 – 23 May 2010). Over the past decade the Islamic banking However the last decades there were a private sector has grown steadily and rapidly Islamic banks functioning in Somalia, although worldwide, the Multinational banks witnessedthey cannot cover the actual need of Islamic that expansion that Islamic banks want through banking system in the country. but with the in the Middle East, Asia Pacific, European and increasing number ofIslamic banks in Somalia African market. Unfortunately, Somalia’s and the increasing demand of our society financial system has been decimated by two Shari’ah compliance banks may create that the

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Islamic banks to play vital role to the economic creating wealth through the mobilization of development in Somalia. Thus, this study human, financial, capital, physical and natural attempts to investigate the contributions of resources to generate marketable goods and Islamic banks to the economic development of services”. In view of differences, the above Somalia. definitions agree that the economic development is improvement of human well- ISLAMIC BANKING being. 1991 The Islamic banking system emerged in the The year in January 1970s. Islamic Banking is interest free banking ISLAMIC BANKS INSTRUMENTS FOR that all state governed by the principles of Islamic Shari’ah. CONTRIBUTING OF ECONOMIC institutions that Islamic banking has established to replace the DEVELOPMENT provided services interest based banking in Muslim countries Islam encourages the earning of profit as profit and regulated the and has grown rapidly over the last two symbolizes successful business dealing and economy collapsed, decades both in Muslim and non-Muslimcreation of new wealth. Interest on the other including the countries (Ahmed,2004). hand is a cost that is in place regardless of the Central Bank of outcome of business operations. If business Somalia and the Islamic banking is a growing sector with its losses are experienced, there may not be realentire banking diversity in different segments and spectrum. wealth creation. Social justice requires that system. It caters to religious Muslims in Muslim’s lenders and borrowers share both profit and societies as well as in countries where Muslims loss in an equitable manner and that the are in minority. In addition, it is a broad method of accumulating and distributing standard, non-Muslim individuals and wealth in the economy is air and represents communities that seek true productivity (Iqbal, 1997).There are Ethical financial solutions have also been several modes of finance used by Islamic attracted to Islamic banking. It is clear from banking, which are discussed below banking practice that Islamic banking is equally popular in all communities (Warde, 2000). An MURABAHA Islamic bank is an intermediary and trustee of A kind of “cost-plus” transaction in which the other people’s money with the difference that bank buys the asset then immediately sells it to it shares profit and loss with its depositors the customer at a pre-agreed higher price (Dar &Presley, 2000). payable by installments. This facility is often used in the way that mainstream banking customers might seek a mortgage when buying ECONOMIC DEVELOPMENT property. McKinnon (1973) defines economic development as the reduction of the great The most preferred method of financing for dispersion in social rates of return on existing many Islamic banks due to the simplicity of the and new investments under domestic model. Murabaha has no direct effect upon entrepreneurial control. poverty reduction, but indirectly it provides a good tool for an efficient deferred sale, According to Schumpeter (1983), defined providing business men the asset of its choice economic development is a fundamental and providing banks profit for the effort and change in the structure of an economy, risksuch that as it tool. Murabaha has little effect on a change in the share of industry and the reduction of unemployment; there is no agriculture in the GDP in favor of industry,clear study on the effect of Murabaha on moving people from villages and rural areas to inflation. (Diamond, 1984). live in cities and changing consumption patterns. While, Shahran, (2013),economicMUSHARAKA development defined as balanced According and to Omar (1986), Musharakah is a sustained improvement in the material and partnership, normally of limited duration, non-material well-being of men, andformed to carry out a specific project. development as multidimensional process Participation in a Musharaka can either be in a which involves improvement of human well- new project, or by providing additional funds being through advancement, reorganization, for an existing one. Profits are divided on a and reorientation of entire economic and pre-determined basis, and any losses shared in social systems in accordance with norms and proportion to the capital contribution. In this values in Islam. According to the American case, the bank enters into partnership with a economic development council (1984), client in whom both share the equity capital- “Economic development is the process ofand maybe even the management

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-of a project or deal, and both share in the IJARAH (LEASING) profits or losses according to their equity Ijarah is a Form of Shari’ah law-compliant shareholding. Musharaka encourages involving the rights over the use of an asset partnerships, also created jobs for many under which the bank buys the asset then s people in society, promotes enterprise and leases it to the customer over a fixed period1970 in partnership ventures, creating jobs in the return for après-agreed monthly price. The time that country, and promotes business enterprise Provisions can be made for the customer to Islamic banking culture in society and growth of skilled people. buy the asset at the end of the agreed period. system emerged in Musharaka has a potent effect on controlling Thought needs to be given to issues such as the Somalia. Islamic inflation and spread of baseless credit, provision of insurance, as the asset is Banking is interest promoting joint ventures without potent effectively owned by the bank during the lease free banking investigations and research ensures business period (Tang, D. 2006). governed by the successes, not speculations. principles of Islamic ISTISNA Shari’ah. MUDARABAH Istisna is another form of forward sales A form of investment partnership between a contract, is a longer-term financing mechanism bank and a business that shares the risk and under which a price is agreed before the asset losses/profits between both parties at pre- described in the agreement is actually built. agreed levels, A Mudarabah transaction, Sellers can then either create the asset bringing some of the benefits of a businessthemselves or subcontract, with buyers also loan to Shariah-compliant business customers, having the option of paying the entire sum due effectively requires the bank to take a stake in either in advance or as installments during the the business, with clients investing their time manufacturing process. and expertise in running the enterprise. Mudarabah is a very potent tool for removingIstisna is especially useful in the housing sector, interest from the society by providing an boosting the construction demand, creating interest free tool for skill utilization and it can employment and wealth to society without especially help in mobilizing resources of the harmful effects of interest. It has also good society by employing them as a manager, while effects on the reduction of unemployment by banks will provide the finance and also bearboosting construction and house building the chances of profit and loss, which is absentactivities in society. Istisna has a little effect on in interest based financing for venture capital. inflation control(Ahmed , 2002).

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SALAM • Lack of linkages with training institutes A kind of forward sales contract which requires and Shariah supervisory bodies; and the buyer to pay in advance for goods that are • Lack of management’s commitment in tobe supplied later, Salam is very useful in strictly following the Shariah guidelines. reducing agricultural sector poverty easily, by enabling the banks and farmers to contract DISCUSSIONS with each other of the crops and to get financeOverall study shows that Islamic banks in at an appropriate time, instead of usuriousSomalia contribute more to economic loans, which ultimately deteriorates through development. Also, the study evaluated the the compounding of interest. Salam also has benefits faced by Islamic banks and found that great potential in reducing rural sector Islamic banks benefited from society and repay unemployment and reduces trend towards back to them through investing and lending urbanization, by enabling farmers andthem. Furthermore, the previous researchers agriculturists to work. Salam engages them at agreed that Islamic banks have great villages and towns, thus decreasing the contribution on economicdevelopment. unemployment burden. According to Ahmed (2005), Islamic banking has a positive impact on economic growth. This generates agricultural and rural sector Some economists even believe, because of the development and eventually more income for elimination of interest (riba), working according these poor people. Salam has a great effect on to Profit and Loss Sharing (PLS) and its reducing inflation, where food stuff has similarity to universal banks, reached its peak prices, the main way it cuts inflation is through ensuring increased Islamic banking has a more important role than aggregate supply and reduce food product conventional banking systems in this regard. deterioration by use of pesticide and fertilizers Economic developments defined as balanced at appropriate times, boosting the yield of land and sustained improvement in the material and farms to much extent (Wilsom, 1978). andnon-material well-being of men. And development as multidimensional process which involves improvement of human well- BENEFITS AND OBSTACLES OF ISLAMIC being through advancement, reorganization, BANKING and reorientation of entire economic and In the modern era Islamic banking is growing social systems in accordance with norms and very fast due to its optimistic impact on every values in Islam and have their great impact on individual, industry and the economy as a the economic development, (Shahran 2013). whole. As Islamic banking is not only covering the credit worthiness and the ability to pay the RECOMMENDATIONs loans and the profits as and when it is due, it This section presents recommendations that also increases the worth of the project which is researchers have suggested after completing directly proportionate to the profit of the this research, the following points are our project. recommendations: Ultimately, projects grow at a rapid speed and 1. Islamic banks in Somalia should pay business are getting bigger and bigger attention to do more in local economy. (Shahzad, 2012). Many obstacles are realized2. Islamic banks should encourage and in the implementation of Islamic banking in support business entrepreneurs by different countries. For instance, Sarker (1999) lending them money to invest their a few interesting factors are: creativity and innovation. • Insufficient legal protection; 3. Islamic banks should make investment • Lack of unified Shariah rulings; opportunities. • Shortage of supportive and link 4. Islamic banks in Somalia should spread institutions; their products and service in the whole • Shortage of skilled and trained manpower country, and in Islamic Shariah banking. 5. Islamic banks should support low income • Lack of Shariah manual or guidelines; groups. • Lack of linkages with other Islamic banks and Islamic NGOs for extending micro credit;

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