Editor’s Note: Somalia faces one of the world’s lowest formal banking rates, with a small proportion of its population formally banked and a $2 billion credit gap. Local microfinance institutions are, however, stepping in to bridge this divide through tailored financial solutions, empowering rural youth and farmers to grow food, generate income and build resilience.
Somalia is rewriting its economic narrative, and agriculture is central to the story. Long perceived as a fragile market, the country is quietly cultivating a revival rooted in rural enterprise and youthful ambition. Over 70 per cent of the population is under 30 and agriculture employs the majority. Yet, less than 2 per cent of GDP is in formal credit. Smallholder farmers and producers, who are the heart of Somalia’s food system, are largely excluded from finance.
The 2020 UNIDO report estimated that only around 15 per cent of Somalis are formally banked, and lending penetration is estimated at less than 2 per cent of GDP, one of the lowest rates globally. In contrast, the World Bank estimated the gap between credit demand and supply to be approximately $2 billion in 2018. Credit is typically short-term, expensive and collateralised against hard assets that many micro, small and medium enterprises (MSMEs) do not have. These barriers are steeper for women and youth who are the backbone of Somalia’s economic activity.
Transforming financial inclusion in Somalia
In early 2023, a conversation about transforming financial inclusion in Somalia was sparked under the Finance for Inclusive Growth in Somalia (FIG-Somalia) program, funded by the European Union and implemented by AECF (Africa Enterprise Challenge Fund). FIG Somalia aims to enhance livelihoods, create jobs and promote broad-based growth through microfinance institutions (MFIs). A microfinance fair hosted in Mogadishu brought together microfinance institutions, women’s business groups, cooperatives, government representatives, incubation hubs and international NGOs to confront the deep-rooted challenges around access to finance. Beyond raising public awareness about microfinance, the event exposed a critical gap: MFIs were working in silos, limiting their ability to lend responsibly and compete fairly.
From that meeting, the idea of a unified body emerged. The Somalia Microfinance Association (SOMMA) was born, a member-driven, grassroots organisation designed to represent and advocate for microfinance institutions, while strengthening their capacity and efficiency. SOMMA now acts as the umbrella under which Somalia’s MFIs are organised, ensuring a stronger, more coherent voice in local and international forums and driving initiatives to make financial services more accessible for all Somalis.
The impact of microfinance on Somali farmers
The impact has been profound. According to SOMMA data, membership has grown from a handful of founding institutions to 13 active MFIs nationwide. These MFIs now collectively reach tens of thousands of borrowers, injecting much-needed liquidity into markets that banks historically overlooked. Women and youth, representing the majority of microfinance clients, are using their first-ever loans to irrigate farmland, stock inputs, or mechanise small-scale agro-processing.
Hassan Ahmed Amin’s cucumber farm is one of the many results. Two years ago, fresh from Somali National University and struggling with unemployment, Hassan secured a $2,700 loan from Raas MFI, supported by the FIG-Somalia program. He set up a 40x20m greenhouse in Lower Shabelle. Two harvests later, he is selling 40 kilos a day. “Microfinance has secured my future and helped me become a producer in a region hungry for fresh food,” says Hassan. His produce now supplies urban markets where demand for safe, locally grown vegetables is soaring.
Outside Hargeisa, Jimale Osman, a young camel keeper, saw an opportunity in the city’s growing population and rising demand for fresh milk. After hearing about MicroDahab’s credit facilities from a friend, he secured a $4,900 loan and bought 12 camels. Today, he supplies 30 liters of milk to the market daily, raising his income from $300 to $450. The boost allows him to support his family of 11 and has enabled him to hire three full-time workers from the community to help manage the herd.
Moving beyond lending
Somalia’s productive sectors, agriculture, livestock and fisheries, are where microfinance is starting to move the needle. Access to finance helps these enterprises grow their output, reach markets, and hire labour. What is working? De-risking tools that allow MFIs to lend in high-risk rural zones, partnerships with cooperatives and extension services, and mobile tech that lets farmers receive and repay loans even without bank branches. Standard loan products designed for stable markets do not work here; the Somali market demands adaptability, trust and speed.
At the market level, Somali financial institutions are at a crossroads. There is a huge demand among MSMEs for financing, especially in productive sectors like agriculture and livestock. However, to meet this demand sustainably, institutions must move beyond consumer lending and embrace models that trigger wider sectoral growth. This means designing financing tools that build businesses, not just bankroll consumption. It also means greater use of digital technologies, data-driven credit scoring, and strategic partnerships with mobile money operators.
The country is still early in this journey, but microfinance is helping turn subsistence into surplus and short-term hustle into long-term enterprise. In fragile settings like Somalia, where traditional banking is limited and agriculture is central to survival, it is what people do with access to finance that matters.
And increasingly, they are growing food, building local value chains and proving that recovery can take root even in the toughest markets.
