• Somalia’s Central Bank mandates microfinance institutions to obtain licenses by December 6, 2025, under new financial regulations.

• The licensing rules require clear governance, minimum capital, limited service scope, and regular reporting to boost transparency and public trust.

• This reform is part of a broader effort to regulate financial sectors, including Islamic insurance, aligning Somalia with international standards.

Somalia’s Central Bank announced on July 15, that microfinance institutions must secure operating licenses to continue business. The institutions must apply within six months of the new rule enforced on June 6 giving them until December 6 to comply.

The licensing directive forms part of the revised Financial Institutions Act passed in May, backed by regulations approved by the Central Bank’s Board of Directors.

To qualify for a license, institutions must establish clear governance, meet capital adequacy thresholds, restrict their services to authorized activities, and regularly submit activity reports to the Central Bank. The regulator expects this framework to increase sector transparency, strengthen public confidence, and ease financing access for compliant firms.

Toward a Broader Financial Sector Regulation

This microfinance reform fits into the Central Bank’s larger agenda to better supervise Somalia’s financial system. The bank also demands licenses for Islamic insurance firms (takaful) within the same six-month window.

These reforms target long-unregulated financial sectors, aiming to bring Somalia’s system closer to international norms while respecting its unique market traits.

On July 3,  the Central Bank held a workshop to explain the new rules to microfinance providers and to support them through the transition period.

A Sector Still Fragile but Emerging

While Somalia’s microfinance sector remains young and fragile, it grows swiftly. The Central Bank notes that more than 70% of Somalis lack access to traditional banks. This gap creates strong demand for microfinance and similar services.

In April 2024, Central Bank Governor Abdirahman Mohamed Abdullahi highlighted Somalia’s financial landscape, which includes 13 local banks, one foreign branch, 14 money transfer operators, and four mobile money providers. Mobile money serves as the main access point to finance, with over 75% of adults using digital wallets.

Governor Abdullahi cited a 2020 UNIDO report showing less than 15% of Somalis hold formal bank accounts, with just 7% of women banked. Even fewer regularly use their accounts.

Chamberline Moko