Hussein Ali Mohamed Abdirahman

Islamic banks in Somalia

Islamic economic
 Historical bank in Somalia

On 15 November 1920, the Banca Italia opened a branch in Mogadishu. This was the first
banking institution in Italian Somaliland.[2][3] Then in 1938 Banco di Napoli established a
branch in Mogadishu. (Banco di Napoli replaced Cassa di Risparmio di Torino, which had
opened an office in Mogadishu in 1932).
In 1952, National Bank of India (NBI), which later merged with Grindlays Bank to
form National and Grindlays Bank, established branches in Berbera and Hargeisa in British
Somaliland. NBI was the first bank in British Somaliland and was the banker to the colonial
government until the State of Somaliland (the former British Somaliland) joined the Trust
Territory of Somalia (the former Italian Somaliland) to form the Somali Republic in 1960. After
the union, National and Grindlays opened a branch in Mogadishu.
In 1940, there were five local bank branches in Italian Somaliland. Banca d'Italia had three: in
Mogadishu, Kismayo and Merca. Banco di Roma had two branches; one in Mogadishu and
another in Merca. Banco di Napoli had one in Mogadishu. Both Banco di Roma and Banco di
Napoli also had branches in other parts of the region, in Eritrea and Ethiopia.
On 1 July 1960, the newly independent Republic of Somalia established the Banca Nazionale
Somala (National Bank of Somalia) to take over the activities of the Cassa per la Circolazione
Monetaria della Somali and the Mogadishu branch of Banca d'Italia. The new bank combined
central banking activities with commercial banking activities.
In 1968, the Somali Republic's civilian government merged the Somali Credit Bank (Credito
Somalo) with the Banca Nazionale Somala. The earlier trusteeship administration had
established the Somali Credit Bank in 1954 in the Trust Territory of Somalia.
After the bloodless coup d'état of 1969 that saw Mohamed Siad Barre's ascension to power, the
government in 1971 nationalized the four foreign banks. The government combined Banco di
Roma, Banco di Napoli, and National and Grindlays Bank to form the Somali Commercial Bank.
The government also established the Somali Savings and Credit Bank to take over the
commercial branches of Banca Nazionale Somala and Banque de Port Said, leaving the Banca
Nazionale Somala with only central banking functions. The Somali Savings and Credit Bank had
branches
in Baidoa, Beledweyne, Berbera, Bosaso, Burco, Galkacyo, Qardho, Hargeisa and Kismayo, and
for a while in Djibouti. The Somali Savings and Credit Bank had been established with the
technical assistance and aid provided by the Associazione Bancaria Italiana[4] in the context of
an overall cooperation policy of the European savings banks.[5]
On 8 February 1975, the government renamed the Banca Nazionale Somala to the Central Bank
of Somalia (Bankiga Dhexe ee Soomaaliya). It also merged the Somali Commercial Bank and
Somali Savings and Credit Bank (Cassa di Risparmio e Credito della Somalia) to form the
Commercial and Savings Bank of Somalia, which was at the time the only bank in the country.
In 1990 the Commercial and Savings Bank of Somalia discontinued operations. At some point
the Central Bank of Somalia too ceased functioning.
In 2009, the Transitional Federal Government re-opened the Central Bank of Somalia in
Mogadishu as part of its campaign to restore national institutions.[6] The Bank had an additional
branch in Baidoa that was already operational with personnel in place.[7]
In September 2013, Yussur A.F. Abrar was named the new Governor of the Central Bank of
Somalia. A former Vice-President at Citigroup and Vice-President of Credit Risk Management at
the American International Group, she was the first woman to have been appointed to the
position.[8] In November 2013, Bashir Isse was appointed on an interim basis as Somalia's
Central Bank Governor, following the resignation of his predecessor Abrar earlier in the month.
[9] In April 2014, the federal Cabinet approved Isse as the new permanent Central Bank
Governor. Maryan Abdullahi Yusuf was also named his new Deputy Governor

Main banks in Somalia

his is a list of commercial banks in Somalia[1]

1. Al Barakaat Bank
2. Amal Bank
3. Commercial and Savings Bank of Somalia
4. Trust African Bank
5. First Somali Bank
6. International Bank of Somalia[2]
7. National Bank of Somalia
8. Premier Bank[3]
9. Salaam Somali Bank[4]
10. Somali Commercial Bank
11. Universal Bank of Somalia
12. Dara-Salaam Bank
13. Daryeel Bank Limited[5]
14. Somali Bank Limited[5]
15. My Bank Limited[5]
16. Agro Africa Bank[5]
17. Amana Bank[5]
Role bank of development

The banking system plays an important role in the modern economic world. Banks
collect the savings of the individuals and lend them out to business- people and
manufacturers. Bank loans facilitate commerce.

Manufacturers borrow from banks the money needed for the purchase of raw materials
and to meet other requirements such as working capital. It is safe to keep money in
banks. Interest is also earned thereby. Thus, the desire to save is stimulated and the
volume of savings increases. The savings can be utilised to produce new capital assets.

Thus, the banks play an important role in the creation of new capital (or capital
formation) in a country and thus help the growth process.

Banks arrange for the sale of shares and debentures. Thus, business houses and
manufacturers can get fixed capital with the aid of banks. There are banks known as
industrial banks, which assist the formation of new companies and new industrial
enterprises and give long-term loans to manufacturers.

The banking system can create money. When business expands, more money is needed
for exchange transactions. The legal tender money of a country cannot usually be
expanded quickly. Bank money can be increased quickly and used when there is need of
more money. In a developing economy (like that of India) banks play an important part
as supplier of money.

The banking system facilitates internal and international trade. A large part of trade is
done on credit. Banks provide references and guarantees, on behalf of their customers,
on the basis of which sellers can supply goods on credit. This is particularly important in
international trade when the parties reside in different countries and are very often
unknown to one another.

Trade is also assisted by the grant of loans by discounting bills of exchange and in other
ways. Foreign exchange transactions (the exchange of one currency for another) are also
done through banks.

Finally, banks act as advisers, counsellors and agents of business and industrial
organisations. They help the development of trade and industry.
There are special types of banks which provide facilities to different kinds of economic
activities. Now-a-days in every country there is a central bank which controls the
activities of all other banks, endeavours to keep the price level steady, and controls the
rates of foreign exchange.

The following points highlight the top eight roles of

commercial banks in a developing country.
Role # 1. Mobilising Savings for Capital Formation:
People in developing countries have low incomes but the banks induce them to save by
introducing variety of deposit schemes to suit the needs to individual depositors.

Role # 2. Existence of a Large Non-monetized Sector:

A developing economy is characterized by the existence of a large non-monetized sector,
particularly, in the backward and inaccessible areas of the country. The existence of this
non-monetized sector is a hindrance in the economic development of the country. The
banks by opening branches in rural and backward areas can promote the process of
monetization in the economy.

Role # 3. Financing Industrial Sector:

Commercial Banks provide short-term and medium- term loans in the industry. In
India, they undertake financing of small scale industries and also provide hire-purchase
finance. These banks not only provide finance for industry but also help in developing
the capital market which is underdeveloped in such countries.

Role # 4. They Help in Monetary Policy:

The Commercial Banks help the economic development of a country by following the
monetary policy of the Central Bank. The Central Bank is dependent upon those
Commercial Banks for the success of the monetary management in keeping with
requirements of a developing economy.

Role # 5. Commercial Banks Help in Financing Internal and External Trade:

The banks provide loans to wholesalers and retailers to stock goods in which they deal.
They also help in the movement of goods from one place to another by providing all
types of facilities such as discounting and accepting bills of exchange, providing
overdraft facilities, issuing drafts etc. They help by giving finance both exports and
imports of developing countries.
Role # 6. Provision for Long-term Finance for the Improvement of
Agriculture:
Normally, commercial banks grant short-term loans to the trade and industries in
developed countries. But in developing countries new businesses and improvement in
agriculture need long-term loans for proper development. Therefore, the commercial
banks should change their policies in favour of granting long-term loans to trade and
industries.

Role # 7. They Help in Financing various Consumers’ Activities:

People in developing countries do not possess sufficient financial resources to buy
costlier goods like house, scooter, refrigerator etc. They help by giving loans to purchase
these items which raises the standard of living of the people in developing countries

Role # 8. Need for Sound Banking System:

For the improvement of the banking system in a developing country the
following points need special stress:
(i) In developing countries, there should be proper facility of cheap remittance facilities
to enable the movement of funds from one place to another, so as to meet the
requirements of trade and industry.

(ii) It should always be remembered that in developing countries loans should be given
for productive purposes only and not for consumption and speculative purposes.

(iii) It will be better and encouraging if long-term credit is given to agriculture and small
scale industries.

(iv) The use of cheques, drafts etc. is popularized among the people.

If the above written facts are taken into consideration commercial banks can play a
useful role in promoting the economic development in developing countries.
Zakat distribution
As one of the Five Pillars of Islam, zakat is a religious duty for all Muslims who meet the necessary
criteria of wealth.  It is a mandatory charitable contribution, often considered to be a tax.  The payment
and disputes on zakat have played a major role in the history of Islam, notably during the Ridda wars.
Zakat is based on the value of all of one's possessions.[12][13] It is customarily 2.5% (or 1/40)  of a
Muslim's total savings and wealth above a minimum amount known as nisab,  but Islamic scholars differ
on how much nisab is and other aspects of zakat.[15] According to Islamic doctrine, the collected
amount should be paid to the poor and the needy, Zakat collectors, those recently converted to Islam,
those to be freed from slavery, those in debt, in the cause of Allah and to benefit the stranded traveller.
Today, in most Muslim-majority countries, zakat contributions are voluntary, while
in Libya, Malaysia, Pakistan, Saudi Arabia, Sudan, and Yemen, zakat is mandated and collected by the
state.
Shias, unlike Sunnis, traditionally regarded zakat as a private and voluntary action, and they give zakat
to imam-sponsored rather than state-sponsored collectors.

Collection
Today, in most Muslim countries, zakat is at the discretion of Muslims over how and whether to pay,
typically enforced by peer pressure, fear of God, and an individual's personal feelings.[16] Among the
Sunni Muslims, The Zakat committees are established, linked to a religious cause or local mosque, which
collect zakat.  Among the Shia Muslims, deputies on behalf of Imams collect the zakat.[78]
In six of the 47 Muslim-majority countries—Libya, Malaysia, Pakistan, Saudi Arabia, Sudan and Yemen—
zakat is obligatory and collected by the state.  In Jordan, Bahrain, Kuwait, Lebanon, and Bangladesh, the
zakat is regulated by the state, but contributions are voluntary.
The states where zakat is compulsory differ in their definition of the base for zakat computation.  Zakat
is generally levied on livestock (except in Pakistan) and agricultural produce, although the types of
taxable livestock and produce differ from country to country.  Zakat is imposed on cash and precious
metals in four countries with different methods of assessment.  Income is subject to zakat in Saudi
Arabia and Malaysia, while only Sudan imposes zakat on "wealth that yields income". In Pakistan,
property is exempt from the zakat calculation basis, and the compulsory zakat is primarily collected from
the agriculture sector.
Under compulsory systems of zakat tax collection, such as Malaysia and Pakistan, evasion is very
common and the alms tax is regressive.[16] A considerable number of Muslims accept their duty to pay
zakat, but deny that the state has a right to levy it, and they may pay zakat voluntarily while evading
official collection. In discretion-based systems of collection, studies suggest zakat is collected from and
paid only by a fraction of Muslim population who can pay.
In the United Kingdom, which has a Muslim minority, more than three out of ten Muslims gave to
charity (Zakat being described as "the Muslim practice of charitable donations"), according to a 2013
poll of 4000 people.  According to the self-reported poll, British Muslims, on average, gave US$567 to
charity in 2013, compared to $412 for Jews, $308 for Protestants, $272 for Catholics and $177
for atheists.

Distribution
The primary sources of sharia also do not specify to whom the zakat should be paid – to zakat
collectors claiming to represent one class of zakat beneficiary (for example, poor), collectors who
 were representing religious bodies, or collectors representing the Islamic state. This has caused
significant conflicts and allegations of zakat abuse within the Islamic community, both historically and in
modern times.
Fi Sabillillah is the most prominent asnaf in Southeast Asian Muslim societies, where it broadly
construed to include funding missionary work, Quranic schools and anything else that serves the Islamic
community (ummah) in general.

Zakat is required of Muslims only. For non-Muslims living in an Islamic state, sharia was historically seen
as mandating jizya (poll tax). Other forms of taxation on Muslims or non-Muslims, that have been used
in Islamic history, include kharaj (land tax), khums (tax on booty and loot seized from non-Muslims,
sudden wealth), ushur (tax at state border, sea port, and each city border on goods movement,
customs), kari (house tax) and chari (sometimes called maara, pasture tax).
There are differences in the interpretation and scope of zakat and other related taxes in various sects of
Islam. For example, khums is interpreted differently by Sunnis and Shi'ites, with Shia expected to pay
one fifth of their excess income after expenses as khums, and Sunni don't. At least a tenth part of zakat
and khums every year, among Shi'ites, after its collection by Imam and his religious deputies under its
doctrine of niyaba, goes as income for its hierarchical system of Shia clergy.  Among Ismaili sub-sect of
Shias, the mandatory taxes which includes zakat, is called dasond, and 20% of the collected amount is
set aside as income for the Imams. Some branches of Shia Islam treat the right to lead as Imam and right
to receive 20% of collected zakat and other alms as a hereditary right of its clergy.
Sadaqah is another related term for charity, usually construed as a discretionary counterpart to zakat.

The benefits of Zakat, apart from helping the poor, are as follows:

 Obeying God

 Helping a person acknowledge that everything comes from God on loan and that we
do not really own anything ourselves

 And since we cannot take anything with us when we die we need not cling to it

 Acknowledging that whether we are rich or poor is God's choice

 So we should help those he has chosen to make poor

 Learning self-discipline

 Freeing oneself from the love of possessions and greed

 Freeing oneself from the love of money

 Freeing oneself from love of oneself

 Behaving honestly
The 2.5% rate only applies to cash, gold and silver, and commercial items. There are other
rates for farm and mining produce, and for animals