DECLARATION

"This thesis proposal is my original work and has not been presented for a
degree or any other academic award in any university or institution of learning".

Abdilahi Abdirahman Hirsi

i
 APPROVAL SHEET

This dissertation entitled private banks and small business growth prepared and
submitted by Abdilahi Abdirahamn Hirsi in partial fulfillment of the requirements for the
degree of Business and Economic in Accounting and Finance has been examined and
approved by the panel on Oral examination with a grade of PASSED.

Name and signature Of Chairman

Name and Sign. of Supervisor Name and Sign. Of Panelist

Name and Sign. OF Panelist Name and Sign. OF Panelist

Date of Comprehensive Examination

Grade:

Name and Sign of Director of Department

Name and Sign of ASAO

ii
 DEDICATION

I dedicate this work to my family, special to my loving mother, who encouraged me

to pursue my dreams and stand next to me in weaknesses. My sisters and my
brothers who follow my progress step by step.

iii
 ACKNOWLEDGMENT

In the name of Allah, the most merciful the most gracious, I thank to Allah, the
almighty, the sustainer of the world for the way he has guided me and give the ability
and the knowledge to write this thesis.

Second, this thesis has been realized with the facilitation and assistance of generous,
selfless and dedicated individuals whose contribution to my supervisor Mr.
Abdirahman Mohamed Omar
Finally I would like to express special thanks to all my friends and my classmates for
their continuous support and encouragement.

I am extremely grateful to my mother Maryama Yusuf Dahir and all family members
for their deep love and encouragement in accomplishing my goals in the life and their
continuous assistance their help, encouragement and moral support.

iv
 ABSTRACT

The obstacles facing small businesses and economic growth, perhaps the most
important of these obstacles is the lack of sources of funding and sufficient capital to
finance small investment and economic and social development plans. This study is set
to examine the relationship between private banks and small business growth. The
study has the following objectives: To determine the profile of respondents in terms of,
Gender, Marital status, Age, Educational level, Employment situation; To determine the
level of Private Banks in Selected Department of Salaam Bank, Hargeisa, Somaliland, To
identify if there is a significant difference in the Level of small business growth in
Selected Department of salaama bank Hargeisa, Somaliland; To determine if there are
significant relationship between private banks and small business growth. The study
finds out that there is a significant relationship between private banks and small
business growth. This study used descriptive design, using both qualitative and
quantitative, qualitative approaches, Sloven’s formula are used to arrive at a sample
size of 28 respondents the researcher used only systematic sampling and only
QUESTIONNAIRE were used at data collection instruments. quantitative data were
analyzed using frequency and percentage distribution, the mean and standard deviation
and bivariate correlation. the findings indicate that of the respondents representative
of males (78.6%) than females (21.4%), Majority of the persons who are engaged in,
This study agrees with they have been attended school at one time, but the proportion
is higher for males (78%) compared to 66%of the females.

the majority of the respondents are single (57.1%) and between the age of 15 to
25years (53.6%). 53.6%respondents have a master degree, the study showed that
level of Private Banks in salaam was bank high with average mean(µ=2.82), similarly
the level of small business growth is high with average (µ= 3.57), all so the study
exposed a is a significant and positive relationship between private banks and small
business growth(r=.950**p<.01).

v
 LIST OF TABLES

Page

Table 3.1: Sample Size 24

Table 4.1: Demographic 28

Table 4.2: Level of Private Banks 30

Table 4.3: Level of Small Business growth 32

Table 4.4: Relationship between private banks and Small Business growth 34

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 TABLE OF CONTENT

Declaration I

APPROVAL SHEET II

Dedication III

Acknowledgement IV

Abstract V

Table of Content VI

Abbreviations XI

vii
 TABLE OF CONTENT

CHAPTER ONE .................................................................................................. 1

PROBLEM AND ITS SCOPE ............................................................................... 1
1.0 Introduction ........................................................................................................1
1.1 Background of the study ...................................................................................1
1.2 Statement of the problem .................................................................................3
1.3 Objectives........................................................................................................4
1.3.2 Specific Objectives.........................................................................................4
1.4 Research Questions ..........................................................................................4
1.5 Significance of the Study ..................................................................................5
1.6 Scope of the study ...........................................................................................5
1.6.2 Time Scope ......................................................................................................5
1.6.3 Theoretical Scope ..........................................................................................5
1.6.4 Content Scope...............................................................................................5
1.6.5 Conceptual Frame Work .................................................................................6
1.7 Operational Definitions of Key Terms .................................................................6
CHAPTER TWO ....................................................................................................7
REVIEW OF RELATED LITERATURE ...................................................................7
2.1 Concepts, Ideas, Opinions from Authors/Experts ...................................................7
2.1.1 Private banker’s concepts and definitions ...........................................................7
2.1.6 Considerations ............................................................................................ 12
2.3Theoretical perspective .................................................................................... 21
2.4 Related Studies .............................................................................................. 23
CHAPTER THREE .............................................................................................. 24
METHODOLOGY ............................................................................................... 24
3.0 Introduction ................................................................................................... 24
3.2Research Population ........................................................................................ 24
3.2.1 Sample Size ................................................................................................ 24
3.2.2 Sampling Procedure ..................................................................................... 25
3.3 Data Sources ................................................................................................. 25
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3.3.1 Primary Data .................................................................................................. 25
3.3.2 Secondary Data .............................................................................................. 25
3.4 Research Instrument ...................................................................................... 25
3.5 Validity and Reliability of the Instrument.......................................................... 26
3.6 Data Gathering Procedures ............................................................................. 26
3.7 Data Analysis ................................................................................................. 27
3.8 Ethical Considerations..................................................................................... 27
3.9 Limitations of the Study .................................................................................. 27
CHAPTER FOUR ............................................................................................... 28
DATA PRESENTATION, ANALYSIS AND INTERPRETATION OF RESULTS ....... 28
4.0 Introduction ................................................................................................... 28
4.1 Demographic Characteristics of Respondents ................................................... 28
CHAPTER FIVE ................................................................................................ 36
DISCUSSION OF FINDINGS, CONCLUSION AND RECOMMENDATIONS ........ 36
5.0 Introduction ................................................................................................... 36
5.1 Discussion of the Findings............................................................................... 36
5.2 Conclusion ..................................................................................................... 37
5.3 Recommendations .......................................................................................... 38
REFERENCES..................................................................................................... 40

ix
 CHAPTER ONE

PROBLEM AND ITS SCOPE

1.0 Introduction
This chapter gives a brief explain about the background of the study, problem
statement, research objective, significant of the study and scope of the study.

1.1 Background of the study

Private Banks were established in the 17th century, in parallel with the development of
agriculture, managing the assets of the royal family, the landed gentry. The United
States has one of the largest private banking systems in the world, in part due to the
3.1 million HNWIs accounting for 28.6% of the global HNWIs population in 2010,
according to the co-research of Capgemini and Merrill Lynch. Some American banks
that specialize in private banking date back to the 19th century, such as U.S. Trust
(founded in 1853) and Northern Trust (founded in 1889).

The first banks to be established in the Cape was the Lombard Bank. It was a State
bank and opened its doors at Cape Town in 1793, with the view to bringing additional
money into circulation, and thus assisting those who suffered from lack of currency.
This bank was entrusted with the issuing of the Government notes. It closed in 1883,
being forced out of business by the private banks. The first private bank in South Africa
was the Cape of Good Hope Bank which opened in 1837.

The bank of Somaliland (Bank Somaliland) was inaugurated in 1994 together with
appropriate Banking Laws, to insure that Banking Regulations are carried out.

The Bank of Somaliland performs both the functions of Central Bank of the Republic of
Somaliland and the Services of the Commercial Bank. But still has no capacity to control
the Role of private banks.

1
Small businesses have been an integral part of American life and the US economy since
the time of the first colonial settlers. In the 17th and 18th centuries, the public extolled
the pioneer who overcame great hardships to carve a home and a way of life out of the
American wilderness.

The government’s SMME policy initiative was first outlined in a 1995 White Paper and,
since then, various measures have been implemented to assist the development of the
sector. In fact, South Africa has been at the forefront of developing pro-SMME policies
(Rogerson, 2004:765). Ten years after the 1995 White Paper, new issues arose which
lead to the development of a refocused strategy from the Department of Trade and
Industry. These issues include local economic development and black economic
empowerment (Rogers on, 2004:766).However in South Africa, it is estimated that 91%
of the formal business entities are SMEs (Quartey 2010) business is considered to be
medium scale enterprise if it employs 30 to 50. (Edgecombe &Klein, 2005)

Small business growth (Owualah, 1999; Carpenter, 2001; Anyawu, 2003; Lawson,
2007). The reason is that provision of financial services is an important means for
mobilizing resources for more productive use. The extent to which small enterprises
could access fund is the extents to which small firms can save and accumulate own
capital for further investment (Hossain, 1988).

Capgemini and Merrill Lynch(2010)give a comprehensive definition The role of Private

banking is banking, investment and other financial services provided by banks to high-
net-worth individuals(HNWIs) with high levels of income or sizable assets. The first
banks in Venice were focused on managing personal finance for wealthy families.
Private Banks became known as ‘Private’ to stand out from the retail banking & savings
banks aimed at the new class. Trust (founded in 1853) and Northern Trust (founded in
1889).

The National Small Business Act of 1996, defines a ‘small business’ as follows a
separate and distinct business entity, including co-operative enterprises and non
governmental organizations, managed by one owner or more which, including its

2
branches or subsidiaries, if any, is predominantly carried on in any sector or sub sector
of the economy mentioned in column I of the Schedule.

The study Dodd’s (1982) and Nwankwo (1992) Commercial Loan Theory (Its
supporter’s say the bank's liquidity is good as long as its funds are used for short-term
loans).

In these days there although people have neglected to set up banks, the banking
system operates in the country because remittance holders have decided to provide the
bank's services. According to mohamoud Yusuf (2016) Small businesses.

In Somaliland suffered from multiple general problems. Some of these problems are
caused by the problems of the community that embraces these projects, both in
relation to the decline in GDP, The tendency of individuals to save and invest, and the
scarcity of domestic resources.

There are three private banks such as Salaam Bank and premier bank and dahabshiil
bank.

1.2 Statement of the problem

In Hargeisa The role of small businesses are low growth and the rate of expansion and
success is very low, most small business does not success during their growth stage
due to lack of private banks with high level of investment and support financially to
have sufficient capital to run as a successful small business, as indicated Somaliland
ministry of trade and commence that 75percent of small business are failure without
private banks role missing and this Influences their long term sustainability references

(Ministry of trade and investment in Somaliland 2013).

This study examines how the lack of bank credit hinders growth The problems faced by
small enterprises from the view point of banks and financial institutions have been
manifested in the lack of confidence in the project managers, the lack of adequate
guarantees, and lack of experience in the basics of banking, low marketing ability, And

3
the lack of sources of financing The role of private banks for small projects lead to the
project is stopped and incomplete and thus lose the entrepreneur time and a lot of
money, and increase unemployment in society, and lack of economic growth.

1.3 Objectives
1.3.1 General objective

This study was examined the correlation between the role of private banks on small
business growth in Dahabshil Bank Hargeisa, Somaliland.

1.3.2 Specific Objectives

1. To determine the profile of respondents in terms of

1.1. Gender

1.2. Age

1.3. Marital status

1.4. Educational level

1.5. Employment situation

2. To determine the level of Private Banks in Dahabshil Bank, Hargeisa, Somaliland.

3. To determine the level of small business growth in Hargeisa, Somaliland.
4. To correlate the relationship between the role of private banks and small business
growth in Hargeisa, Somaliland.
1.4 Research Questions
This study was seek to answer the following research questions:

1. What are the profile of respondents in terms of

1.1. Gender
1.2. Age
1.3. Marital status
1.4. Educational level

4
 1.5. Employment situation

2.What is the level of Privet banks in Hargeisa , Somaliland?

3. What is the small business growth bank in Hargeisa, Somaliland?
4. What is the relationship between the role of private banks and small business growth
in Hargeisa, Somaliland?
1.5 Significance of the Study
The main area of significance is to know the importance of the role of private banks
economically and socially because the role of private banks not only contribute the
growth of small business but also they take part in social development, including health
and educational centers, also they contribute to survive the people when disasters like
droughts happen. Try to find some financing or investment formulas that contribute to
solving the problems of small enterprises to ensure their survival and continuity
1.6 Scope of the study
1.6.1 Geographical Scope

The study Was conducted in Hargeisa district, Somaliland. The researcher selected this
area because the most the roles of private banks are in Hargeisa, Somaliland.

1.6.2 Time Scope

The study Was conducted in a period of three months.

1.6.3 Theoretical Scope

The study the Shift ability` Theory of Bank Liquidity banks to making short-term
commercial loans to help producers of goods during their business cycles. For example,
apple farmers may require short-term financing until the crop is ready for sale. This
theory postulates that by making short-term commercial transactions that was mature
in a timely manner was keep banks in a ready state to meet the demands of their
depositors.

1.6.4 Content Scope

This study covered the literature of the role of private banks and small business growth.
5
 1.6.5 Conceptual Frame Work

Private Banks Small Business

Growth

 Lack of experience
 Low marketing ability
 Lack of economic growth.
 Lack of adequate guarantees

1.7 Operational Definitions of Key Terms

In this study the following terms are defined operationally as:

Private Banks: is type of financial organization that offers specialized financial advice
and wealth management services to protect, grow and manage the financial wealth of
the wealthy or high net-worth clients of the organization.

Small business: is an independently owned and operated company that is limited in size
and in revenue depending on the industry.

Enterprise: a project or undertaking that is especially difficult, complicated, or

risky
Lend: money temporarily on condition that the amount borrowed be returned, usually w
ith an interest.

Microfinance: is to give low-income people an opportunity to become self-sufficient by

providing a way to save money

6
 CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1 Concepts, Ideas, Opinions from Authors/Experts

2.1.1 Private banker’s concepts and definitions

Graham (2015) defined the role of private banks continue to issue interest
bearing credit to the private sector through the fractional reserve system. A relatively
small amount of that credit is circulated in the form of legal tender, such as coins and
notes (Graham L Paterson, 2015).

At if Main refer to Banks as financial intermediaries are considered an important

element for growth in emerging economies by most yet less is known about the
strengths and weaknesses of different types of bank organization and design. The three
dominant types of banks in emerging markets are government, private domestic, and
foreign. This paper presents new evidence on differences between these three types of
banks across a hundred emerging economies and more than 1,600 banks over a period
of eight years. The differences are important to document and analyze because the
three types of banks differences in important ways in the structure of their incentives,
organization, and regulation. For example, while government banks have poor cash-
flows incentives and suffer from the moral hazard problem of being both the owner and
the regulator; private domestic banks have higher cash-flows incentives, and greater
distance between the regulator and the ownership. Foreign banks on the other hand
while being relatively similar to private domestic banks in terms of incentives and
regulation, differ in their organizational structure. They tend to have a more hierarchical
structure, with the top management often sitting in a distant home country (Atif Mian
July 2003).

7
2.1.2 Types of banks

1. Central Bank

A Central Bank is a financial institution that controls country’s monetary policy,

and usually was several mandates including, but not limited to issuing national
currency, maintaining the value of the currency, ensuring financial system stability and
controlling credit supply.

2. Commercial Bank

A financial institution that provides services, such as accepting deposits, giving

business loans and auto loans, mortgage lending, and basic investment products like
savings accounts and certificates of deposit.

3. Investment Bank

A financial intermediary performs a variety of services. This includes underwriting,

acting as an intermediary between an issuer of securities and the investing public,
facilitating mergers and other corporate reorganizations, and also acting as a broker for
institutional clients.

4. Retail Bank

Retail banking is banking in which banking institutions execute transactions

directly with consumers, rather than corporations or other banks. Services offered
include: savings and transactional accounts, mortgages, personal loans, debit cards,
credit cards, and so forth. . (Atif Mian July 2003).

8
2.1.3 Financial unions:

2.1.3.1 Credit Unions

A credit union is a member-owned financial cooperative, democratically

controlled by its members, and operated for the purpose of promoting thrift, providing
credit at competitive rates, and providing other financial services to its
members O'Sullivan, Arthur; Sheffrin, Steven M. (2003).

2.1.4 Saving and loans associations

Savings and loan associations: You save your money, they loan it out and make
money it. All these financial institutions except central and commercial mostly are
privates. The modern economy is profit maximizing businesses. The simple explanation
is that banks allow for the secure depositing of money for individuals and businesses.
However, when banks receive a substantial amount of deposits, it becomes irrational to
simply let the money sit there. As a result, banks then invest this money and have it
earn interest for the bank and the depositor. Although Islamic banking flow rule against
interest, from this, banks became central actors in the modern economic system
(Mishler, Lon; Cole, Robert E. (1995).

2.1.5 Private Banks and their activities

1. Feature

Using a very simple model, when banks collect deposits, they seek to make this
money "work" for them through investing it by lending it out to others. Since it is
unlikely that a depositor was demand their money all back at once, the bank can
leverage its deposit collection to back larger and larger risks. In other words, they was
use their deposit money to leverage larger loans and investments, thus keeping only a
fraction of their deposits actually on hand. This is called "fractional reserve" banking.

9
2. Significance

The main area of significance of banks in modern financial systems is as

mediators of risk. Banks are for-profit organizations that seek to use depositors’ funds
as backing for long term investment. The brief formula is that banks collect deposits
from individuals, these deposits are used as collateral for raising funds on money
markets, and these funds are then put into long term investments.

3. Function

Banks lend a portion of depositors' money to businesses that the bank believes
was make money, hence making money for their depositors. There is no good reason
for deposit money to merely collect dust in vaults, so it is lent out to those who the
bank has approved in advance as a good credit risk. This means that banks oversee
investments, using depositors' money as backing. Since bank loans are the main source
of funding for businesses, banks actually have a massive role in overseeing investments
globally.

The functions of private banks are of two types.

(A) Primary functions; and

(B) Secondary functions.
Let us discuss details about these functions.
(i) Primary functions
The primary functions of private bank include:
a) Accepting deposits; and
b) Granting loans and advances.
a) Accepting deposits
The most important activity of a private bank is to mobilize deposits from the
public. People who have surplus income and savings find it convenient to deposit the
amounts with banks.

10
Depending upon the nature of deposits, funds deposited with bank. The Islamic system
is sharing for profits and losses. If the rate of sharing profits is higher, public are
motivated to deposit more funds with the bank. There is also safety of funds deposited
with the bank.
b) Grant of loans and advances
The second important function of a bank is to grant loans and advances. Such
loans and advances are given to members of the public and to the business community.
Through Islamic system which are through Muslims. Loans and advances various
according to the purpose and period of loan and also the mode of repayment.
i) Loans
A loan is granted for a specific time period. Generally private banks provide short-term
lending. But term loans, i.e., loans for more than a year may also be granted. The
borrower may be given the entire amount in lump sum or in installments. Loans are
generally granted against the security of certain assets. A loan is normally repaid in
installments. However, it may also be repaid in lump sum.
ii) Advances
An advance is a credit facility provided by the bank to its customers. It differs
from loan in the sense that loans may be granted for longer period, but advances are
normally granted for a short period of time. Further the purpose of granting advances is
to meet the day-to-day requirements of business.
Types of Advances
Banks grant short-term financial assistance by way of cash credit and overdraft.
Let us learn about these.
a) Cash Credit
Cash credit is an arrangement whereby the bank allows the borrower to draw
amount up to a specified limit. The amount is credited to the account of the customer.
The customer can withdraw this amount as and when he requires. Cash Credit is
granted as per terms and conditions agreed with the customers.

11
b) Overdraft
Overdraft is also a credit facility granted by bank. A customer who has a current
account with the bank is allowed to withdraw more than the amount of credit balance in
his account. It is a temporary arrangement. Overdraft facility with a specified limit may
be allowed either on the security of assets, or on personal security, or both.
ii) Secondary functions
In addition to the primary functions of accepting deposits and lending money,
banks perform a number of other functions, which are called secondary functions.
These are as follows.
a) Issuing letters of credit, travelers’ cheques, etc.
b) Undertaking safe custody of valuables, important documents and securities by
providing safe deposit vaults or lockers.
c) Providing customers with facilities of foreign exchange dealings.
d) Transferring money from one account to another; and from one branch to another
branch of the bank through cheque, pay order, demand draft.
e) Standing guarantee on behalf of its customers, for making payment for purchase of
goods, machinery, vehicles etc.
f) Collecting and supplying business information.
g) Providing reports on the credit worthiness of customers.
I) providing consumer finance for individuals by way of loans on easy terms for
purchase of consumer durables like televisions, refrigerators, etc (D.muraleedharan -
2014).

2.1.6 Considerations

When banks lend money to investors, this loan means several things: a) that the bank
actually owns the enterprise (house, business, car, etc.) until the money is paid off; and
b) these investments are all mediated by the bank, which means that banks measure
and approve (or reject) the risks investors take. If too many investments fail, the bank

12
fails, and the depositors' money goes to the entity that takes over the failing or failed
bank.

Banking is the key for the emergence and survival of any financial sector of a country.
More importantly, a financial sector is a key importance for a country to prosper
economically. Let’s analyze some of the key aspects which are affected due to banking:

Formation of capital is very important, especially for all the under developed and the
developing nations. This is because since poverty is a key concern, it is but obvious that
the rate of saving would be extremely low. Here, an effective system of banking for
commercial purposes is of utmost importance to make the current savings available for
the entrepreneurs to invest and produce which would in turn contribute to the growth
of the economy.

For effective monetization of money, opening of banks in different parts of the country
is very important. This is especially true for all the rural and other under developed
areas where everything remains dormant. Mobilization of resources would only be
possible if new branches of banks are opened in these areas. This would also open
doors to the external world which means development in all aspects.

Novelty and innovation are the key aspects for any form of progress to remain
constant. The same is true for economic growth. For this, banks are the key since they
need to finance new and innovative business projects to boom a particular economy.

Banks offer credit facilities which are the driving force for any business project to be put
into action. In Somaliland where in agriculture or livestock is main livelihood for the
major part of the population, investing in such sectors is high importance. So, apart
from trade and commerce, banks are a must to venture into the unknown.

Banks are a source for loans and advance installments of money. They are a source of
money for setting up any new or spreading an existing business establishment.

13
If the country was without banks, major part of the country’s population would be out
of jobs. The financial sector would have never emerged in the first place. It would be
like a human born without a backbone to support the torso. This means a void that
would hinder the growth of an economy. All in all, the very functioning of the country
would come to a standstill if banks cease to exist. However, banks are just one aspect
of a nation’s financial sector, although the most important one.

2.1.7 The Risks of Private Banks

Banks was many risks that must be managed carefully, especially since a bank
uses a large amount of leverage. Without effective management of its risks, it could
very easily become insolvent. If a bank is perceived to be in a financially weak position,
depositors was withdraw their funds, which was exacerbate the bank's financial
condition even more the fear of bank failure was one of the major causes of the 2007 –
2009 credit crisis and of other financial panics in the past. For instance, in 2008, the
Royal Bank of Scotland, then the largest bank in the world, with assets of $2.4 trillion,
was taken down by a loss of a mere $8 billion pounds, which represented 0.3% of its
assets because it was leveraged to the hilt. Although banks share many of the same
risks as other businesses, the major risks that especially affect banks are liquidity risk,
credit default risks, and trading risks.(Wasiam C. Spaulding.1982).

2.1.8 Risk and Bank Loans

The point of taking on risk in the first place is to get a chance for a greater return, and
when banks make loans, they are undertaking several types of risk in the hope of
making a return. Theoretically at least, banks make money when they combine small
savings deposits of individuals and put those funds together into loans, which they loan
out to creditworthy borrowers, making the bank profitable. When a bank makes a loan,
though, there are several ways in which the profit-making model could fall on its face.

14
1. Depositor's Risks

Depositors to banks have their own sets of risks. Most significantly, the depositor
is worried about credit risk--if the bank fails, the depositor wonders if he was able to
get back the money he put in. However, depositors don't really have a comparable
number of risks as bankers, because safeguards are in place. Most banks are unlikely to
refuse to give depositors back their deposits, other risks that depositors worry about
are incidental compared to getting back their deposits.

2. Borrower's Risks

Risks are relative to each person, so it is hardly surprising that the borrower has
his own sets of risks that he cares about. Firstly, the borrower got a loan for a reason,
and if she borrowed logically, she borrowed such that the returns on the investment
that she is going to use the loan for are higher than the loan costs, putting her ahead in
the long run. This means that the borrower has risk: risk that the return on the
investment was too low and the costs of the loan too high, making his endeavor a
financial failure. The borrower faces other risks (credit risk associated with the
investment), but these other forms of risk reflect on the investment, not on the loan.
The biggest risk for a borrower, then, is that something was go wrong with the
investment and he won't be able to pay back the loan.

3. Trading Risk

Generally, greater profits can be made by taking greater risks. A bank's leverage
ratio is limited by law, but it can try to earn greater profits by trading securities. The
risk of trades is measured by standard statistical tools for measuring investment risk:
standard deviations and value at risk. However, many banks use more sophisticated
financial models to gauge risk and to increase their profits.

15
4. Foreign Exchange Risk

International banks trade large amounts of currencies, which introduces foreign

exchange risk, when the value of a currency falls with respect to another. A bank may
hold assets denominated in a foreign currency while holding liabilities in their own
currency. If the exchange rate of the foreign currency falls, the principal repayment was
worth less than when the loan was given, which reduces a bank's profits.

Banks can hedge this risk with forward contracts, futures, or currency derivatives which
were guarantee an exchange rate at some future date or provide a payment to
compensate for losses arising from an adverse move in currency exchange rates. A
bank, with a foreign branch or subsidiary in the country, can also take deposits in the
foreign currency, which was match their assets with their liabilities.

5. Operational Risk

Operational risk arises from faulty business practices or when buildings,

equipment, and other property required to run the business are damaged or destroyed.
Many types of operational risk, such as the destruction of property, however, good
management is required to prevent losses due to faulty business practices.

6. Country Risk
This is the risk that arises due to cross border transactions that are growing
dramatically in the recent years owing to economic liberalization. It comprises of
Transfer Risk arising on account of possibility of losses due to restrictions on external
remittances; Sovereign Risk associated with lending to government of a sovereign
nation or taking government guarantees; Political Risk when political environment or
legislative process of country leads to government taking over the assets of the
financial entity (like nationalization, etc) Cross border risk arising on account of the
borrower being a resident of a country other than the country where the cross border

16
asset is booked; Currency Risk, a possibility that Always banks live with the risks arising
out of human error, financial fraud and natural disasters.

The other part to describe the problems or risks which can face the job of the banks so
this clear classified our point was the significance of private banks in Somaliland and
there are differences ideas from the risks of banks that can cause to lose the capital of
the bank or to lose the peoples’ money (Horcher, Karen A. 2005).

2.1.9 Managing risks of private banks

Banking is nothing but financial inter-mediation between the financial savers on

the one hand and the funds seeking business entrepreneurs on the other hand. As
such, in the process of providing financial services, commercial banks assume various
kinds of risks both financial and non-financial. Therefore, banking practices, which
continue to be deep routed in the philosophy of securities, based lending and
investment policies, need to change the approach and mindset, rather radically, to
manage and mitigate the perceived risks, so as to ultimately improve the quality of the
asset portfolio.
1. Asset Management

The primary key to using asset management to provide liquidity is to keep both
cash and liquid assets. Liquid assets can be sold quickly for what they are worth minus
a transaction cost or bid/ask spread. Hence, liquid assets can be converted into a
means of payment for little cost.

The primary liquidity solution for banks is to have reserves, which are also required by
law. Reserves are the amount of money held either as vault cash or as cash held in the
bank's account, often referred to as funds. It can also include cash that a bank has in
an account at a correspondent bank which is the amount of reserves as a percentage of
the bank's demand deposits. A bank may even keep excess reserves in its Reserve
Account for greater liquidity, although reserves provide liquidity, they earn little or no

17
money. Banks can also sell loans, especially those that are regularly securitized, such as
mortgages, credit card and auto loan receivables.

A bank can also increase liquidity by not renewing loans. Many loans are short-term
loans that are constantly renewed, such as when a bank buys commercial paper from a
business. By not renewing the loan, the bank receives the principal. However, most
banks do not want to use this method because most short-term borrowers are business
customers, and not renewing a loan could alienate the customer, prompting them to
take their business elsewhere.

2. Liability Management

Banks are big users of a debt instrument known as a repurchase agreement which is a
short-term collateralized loan where the borrower exchanges collateral for the loan with
the intent of reversing the transaction at a specified time, along with the payment. Most
loans and the most common collateral are Treasury bills.

This means that private banks have to become increasingly expert in developing
financial solutions that was enable them to deliver risk-adjusted returns to their clients,
while ensuring high levels of transparency and service. In many cases, private banks
take on the role of both wealth managers for their clients - advising on legal and
regulatory matters as well as investments. That means being aware of market changes
and providing access to new and sophisticated instruments that may only have been
available to institutions in the past, such as real estate funds, or fine art.
All of this must be done in the context of much stricter regulation following the recent
financial downturn. The challenge is therefore to develop a wide knowledge of
instruments and to have the confidence to model their future value in a way that was
build wealth for private client (Wasiam c. spaulding.1982).

18
2.2.1 Small Business Concepts

Karen Mills (2015, p xi). States that small business is comprised of what I call Main
Street entrepreneurs. These are the dry cleaners, restaurants, car repair operations,
and local retailers that are part of the fabric of our daily lives. There are about 4 million
of them, and they employ a significant portion of the workforce. Many of these
businesses exist largely to support a family and are not principally focused on
expansion. While these businesses have high churn rates—opening and closing
frequently– they are critical to America’s middle class.

Small –scale enterprises have been widely described by various researchers.

According to Burns (1998), a small –scale enterprise is defined as that enterprise that
employs 1 to 10 people and is managed by its owners or part owners in a personalized
way and not through the medium of a formalized management structure. The owner
has overwhelming influence of the firm and his views determine activities of the
organization.

In support of the above view, Balunywa (1998) says that small scale enterprises are
usually sole proprietorships, which are legally owned by one person, who controls the
business and they have unlimited liability, where it is difficult to separate the owner
from the business.

However, Arteetey (2000) adds that small-scale enterprises are those enterprises that
employ one to twenty (1-20) people largely operating locally, and depend on internal
resources of capital.

They range from manufacturing, retail trade, and construction to commercial services.

Empirical evidence indicates that small scale enterprises find it very difficult to diversify
their risks, have divergent financial constraints, are very vulnerable to losing their
customers and the risk of failure is very high (Murphy 1990).

19
In Uganda small scale enterprises have been separated into broader categories of
micro-enterprises and small enterprises. Micro enterprises are defined as those
employing less than five people, often family members, while small scale enterprises
are those that employ a maximum of 50 people (Kloot.L 1999) however, notes that this
distinction is not fixed as businesses often move from one level to another.

But In a report by Ugadev/Accord (2000), small scale enterprises were defined as

enterprises whose investment in plant and machinery does not exceed $10000 and
whose number of permanent employees is less than 10 people, however, O’mara.C. et
al 1995, In study of medium sized manufacturing firms found that ownership and the
size of the organization had an impact on the performance of the organization. He
found out that as a firm increased in size in terms of stock, sales, level of assets and
more skilled employees, economies of scale in creating a positive impact on
performance and employment of creation.

Research depicts that like any other business, the financial decision is the one of the
most crucial decisions for most small scale enterprises. Dixon J.R (1990), argues that
the financial decision of any business is vital determinant of its performance and directly
affects other decisions of the business like the investment decisions and working capital
decisions as well as employment creation decisions. However, I agree with the findings
of a report by Ugadev/Accord (2000) hence we can conclude that for the purpose of
this research, small scale enterprises are those enterprises employing 1-10 people, as
these are the ones that are trying to reduce fundamentally on unemployment problem
(Karen Mills2015).

2.2.2 Small scale and medium enterprises and education

Education attainment has been identified as one of the essential approaches for
combating poverty. This is of relevance because societies with low education levels are
not likely to attain and maintain high levels of economic growth. Such communities are
also exposed to corruption and political manipulation, as well as violence and civil strike,

20
occurrences that undermine human well-being and economic development, (UBOS
2006).

Majority of the persons who are engaged in, they have been attended school at one
time, but the proportion is higher for males (78%) compared to 66%of the females.
Almost 20% of those engaged in the activities of micro enterprises have never attended
school at all and about 10% are currently attending school, UNHS 2002/03

Further most of the persons (63%) engaged in such enterprises have primary
education level, with some differences by gender and about 19% have never attended
school. Those with secondary education level and above constitute about 18%, and the
proportion being high for males 22% compared to 14% of the females, UNHS 2002/03.
I agree with the findings of UNHS 2002/03, that Majority of the persons who engaged
in Small Scale Enterprises, they attended school at one time and thus means that
education attainment could be one way of solving unemployment, (UBOS 2006).

2.2.3 Small scale and medium enterprises and factors affecting their
activities
The informal sector is growing prominence in Uganda, and about 39% of house
hold in the country own and operate non crop enterprises, UNHS (2003/03. The same
report further puts it that the major enterprises are in the manufacturing, and trends
and services economic sector. These two categories employ about 1.8 million persons
while livestock, poultry, bee keeping and the fish industry employs another 0.5 million
persons. (Arugaba Henry 9).
2.3 Theoretical perspective
The Shift-Ability Theory:
Shift ability theory is developed by M.G Mouton (1918) and published on
his Article named ‘Commercial banking and capital formation. Prior to the
concept of shift-ability, the orthodox theory of banking limited banks to making
short-term commercial loans to help producers of goods during their business
cycles. For example, apple farmers may require short-term financing until the

21
crop is ready for sale. This theory postulates that by making short-term
commercial transactions that was mature in a timely manner was keep banks in
a ready state to meet the demands of their depositors.
Shift-ability
Although banking at the time was not a new concept, what had changed was
that deposits had become the primary liability of banks. In 1830 the capital of
banks was about three times the deposits, but less than one hundred years later
depositors had come to represent approximately 68 percent of the equity in
banks. This increase in the proportion of deposits had many worried about the
possibility of a run on the banks and the inability to get much needed cash.
It was shown that short-term commercial lending oftentimes did not mature or
liquidate at maturity due to changing business cycles. Growing opposition began
to showcase the need for an improved banking system that could avoid forced
liquidation of this short-term paper that came about more or less periodically. It
proposed that banks, rather than relying on the liquidity of these assets in a
crisis, should be able to shift these earning assets to another institution with a
better cash position thereby creating the reserves needed. This ability to shift
assets provides liquidity to otherwise non-liquid assets.
The key piece of legislation that led to this reality was the Banking Act of 1935.
One of its amendments provided that, a federal reserve bank may discount any
commercial, agricultural or industrial paper for liquidity purposes. It also allowed
necessary advances to its member banks secured by "any sound asset that
would otherwise be described as ineligible by the orthodox theory to provide
bank reserves.
Although there was much resistance to this idea and many believed it would be
better to return to pre-war practices, it was Marriner Stoddard Eccles, an author
of the Banking Act of 1935, that continued to push that bank asset liquidity in
times of stress was dependent on the ability of a Central bank to exchange those
assets for currency or credit (Mitchell, W. F .1923).

22
2.4 Related Studies
A research conducted by (Rebel A. Cole November 2012) study also provides
important new evidence on the determinants of business lending. First, we find a strong
and significant positive relation between bank capital adequacy and business lending,
especially lending to small businesses. This new evidence refutes claims by the U.S.
banking industry that higher capital standards would reduce business lending and hurt
the economy. Instead, it shows that higher capital standards would improve the
availability of credit to U.S. firms, especially to small businesses. Second, we find a
strong and significant negative relation between bank size and business lending. This
new evidence suggests that proposals to reduce the size of the largest banks would
likely lead to more business lending. Third, we find a strong and significant negative
relation between bank profitability and business lending. This new evidence is
consistent with moral hazard induced by deposit insurance, which leads unprofitable
banks to increase their risk exposure so as to exploit the subsidy from deposit insurance
(Rebel A. Cole November 2012).

Research Gap

The researcher meet contextual gap; there is no related study about private
banks and small business have been made in Dahabshil bank, Somaliland before.

23
 CHAPTER THREE
METHODOLOGY
3.0 Introduction
This chapter was presents the methodologies of this study specifically discussing
the main construction of study which includes the place where the study to be
conducted, the design being used in constructing the research, sampling design was be
used in getting the population size, the subjects, the tools and treatments was be
utilized in analyzing and interpreting the data was taken and the instrument to be used
in data gathering.

3.1 Research Design

This study was be used descriptive design, which helps to evaluate the
relationship between private banks and small business growth in Dahabshil Company.
The approach was be used in this study were qualitative and quantitative, qualitative
was be used to gain more understand on basic reasons, ideas and opinions, while
quantitative provided insight into the problem, to provide precise quantitative
description and to observe behavior (Treece and Treece, 1973).

3.2 Research Population

The populations of this study was be the employees of Dahabshil Company, and,
the target populations of this study were 30 employees which are the worker of
Dahabshil Company, Hargeisa main office.

3.2.1 Sample Size

The researcher was use Slovene’s formula to come up with the sample size

The sample for this study was determined by using this formula:

𝑁
𝑛=
1 + 𝑁(𝑒 2 )

Where𝑛: the sample size

24
N: the whole population of Dahabshil Company main office = 30

𝑒 = 0.05, level of significance

30
𝑛 = 1+30(0.05)2 = 28

The sample size for this research was be 27.9 employee of Dahabshil Company
Hargeisa main office worker.

3.1Table Sample Size

Valid and Categories Population Sample Sample Size

Managers 10 9
Staff 20 19
Total 30 28
Source of date primary date

3.2.2 Sampling Procedure

In this study, respondents was be sampled using systematic sampling; this
method was use since the issue under investigation is critical and needs people who
have rich knowledge and experience.
3.3 Data Sources
This study was be used both primary and secondary data.
3.3.1 Primary Data
The study was be used primary data from questionnaires.
3.3.2 Secondary Data
The secondary data use was be from books, other researches and related studies.
3.4 Research Instrument
The researcher employed Questionnaires as an instrument of the study. The
Questionnaires should compose of three parts one for the profile characteristics of the
respondents, another for the IV (level of Private Banks), and the third for the DV (small
businesses growth).

25
 The reason of selecting this instrument is that the questionnaires are the most
reliable instrument to get the necessary information from the respondents without fear
or hesitancy. It is also less costly as compared to other instruments. Each respondent
was provided a chance to express his or her ideas, options, views freely in a provided
space without any undue influence of the researcher or his assistants.
3.5 Validity and Reliability of the Instrument
The validity of questionnaire was be measured by using Content validity index, in
validity content concerned with a test’s ability to include or represent all of the content
of a particular construct, was be assessed by overview of the items by trained
individuals taking CVI above 0.70 as accepted for social sciences.
Items on a questionnaire must relate to the construct being measured.

Content Validity Index (CVI) = Number of question declared valid

Total number of questions

Reliability analysis was done to determine the reliability of the questionnaire.

Internal consistency of the items was be measured by using Cranach’s alpha coefficient.
The items of the questionnaire were considered to represent a measure of high internal
consistency if the total alpha values was more than 0.7 (Downing, 2004). According to
the results of this study, all items had high internal consistency of more than 0.7.
3.6 Data Gathering Procedures
1. Before the administration of the questionnaires
1) An introduction letter was obtain from New Generation University for the
researcher to solicit approval to conduct the study from respective company.
2) After approval, the researcher requested for permission to carry out her study
from concerned authorities.
3) The respondents were explained about the study and were requested to sign the
Informed Consent Form.

26
2. During the administration of the questionnaires
1) The respondents were requested to answer completely and not to leave any part
of the questionnaires unanswered.
2) On retrieval, all returned questionnaires were checked if all were answered.
3. After the administration of the questionnaires
The data gathered were collated, encoded into the computer and statistically
treated using the Statistical Package for Social Sciences (SPSS).

3.7 Data Analysis

The frequency and percentage distribution was be used to determine the
demographic characteristics of the respondents. The mean and standard deviations
were applied for the levels of private banks and small business growth. Bivariate
correlation was be used to determine the relationship between private banks and small
business growth.

3.8 Ethical Considerations

Consent: The researcher obtained prior consent of the respondents by making sure
every participant was inform of the study and given free-was to participate or withdraw.
Confidentiality: was taken care of by making sure the name of every participant is not
included in the final report. All participants were considered anonymous.
3.9 Limitations of the Study
The limitations of this study are shortage of time and the losses of the first draft of the
proposal paper and do all the work in very short time, may be not all questionnaires are
returned back neither completely answered nor even retrieved back due to
circumstances on the part of the respondents such as travels, sickness, hospitalization
and refusal/withdrawal to participate. In anticipation to this, the researcher reserved
more respondents by exceeding the minimum sample size. The respondents are also
reminded not to leave any item in the questionnaires unanswered and are closely
followed up as to the date of retrieval.The researcher may be misunderstood SPSS,
which led to the appearance of wrong results, and began to enter the data again.

27
 CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND INTERPRETATION OF RESULTS

4.0 Introduction

This chapter presents the analysis of the data gathered and interpretation there of, it
gives the demographic characteristics of respondents and variables used.

4.1 Demographic Characteristics of Respondents

Objective one was to know the demographic characteristics of the respondent in
selected department of Dahabshil Company in Hargeisa, Somaliland. Table 4.1
determines the demographic characteristics of the respondents. To achieve it, questions
were asked to capture these responses. Frequencies and percentage distribution table
were employed to summarize the demographic characteristics of the respondents.
Table 4.1: Demographic Characteristics of the Respondents
Gender of the Respondents
Gender Frequency Percent

male 22 78.6

female 6 21.4
Total 28 100.0

Table 4.1.1

The study shows 78.6% of the respondents were Female, while the rest 21.4% were
Male, indicating that most the majority of bank employees are dominated by men
compared to women.

28
Age of the Respondents

15-25years 15 53.6

26-35 years 10 35.7

36-45 years 3 10.7

Total 28 100.0

Table 4.1.2

It shown that the majority of 53.6%

were at the age group between 15-25 years. 89.3%of the respondents were at the age
group between 26-35 years.In addition to that,10.7% of the respondents within the
age group of 36-45 years . This may shows that most of the people migrating from the
rural areas are young and middle

Marital status of the Respondents

Single 16 57.1

married 12 42.9

Total 28 100.0
Single 16 57.1

Table 4.1.3

The study exposed that majority, 57.1%, of the respondents were single married
whereas 42.9% were married.

29
 Educational status of the Respondents

Bachelor degree 11 39.3

Master degree 15 53.6

Diploma 2 7.1
Total 28 100.0

Table 4.1.4

The study revealed that majority, 53.6%, of the respondents were holds a Master’s
level, followed by 17.9 % who were educated to bachelor degree while only 7.1% were
educated up to Diploma level.

Working years of the Respondents

Less than 1 year 14 50.0

1-3 years 6 21.4

4-6 years 3 10.7

7-10 years 4 14.3

11 Above 1 3.6

Total 28 100.0

Source: primary data 2019

Table 4.1.5

showed that majority, 50%, of respondent have been working for the bank for less
than 1 year, and followed by 21.4% of respondent who have been working for 1-3
years, while 10.7% of the respondent have been working for the bank 4-6 years, and
followed by 14.3% of respondent who have been working for

30
 7-10 years. In addition to that, respondents who worked for the bank for 11 and
above years where represented by 3.6%.
4.2 The level of private banks and small business growth of Dahabshil
Company, Hargeisa, Somaliland.

Objective two was to evaluate the level of private banks in selected department
of Dahabshil Company in Hargeisa, Somaliland. Table 4.2 gives the summary of the
findings.

Table 4.2: level of Private Banks in Selected Department of Dahabshil

Company, Hargeisa, and Somaliland

N=28

Variable Mean Std. Interpretation

Deviation
A basic expectation of any bank is to provide funds on 3.14 1.079 High
demand
when banks collect deposits, they seek to make this 2.25 1.110 Low
money
"work" for them through investing it by lending it out
to others
Conditions required by private banks are difficult for 2.86 1.145 high
borrowers

Private banks they are fear to lend of small business 2.21 1.134 Low
that’s start-ups because it is high probability of loss
Banks are a source for loans and advance installments 2.82 1.188 High
of money
Do you think private banks can raise the economic 2.82 1.090 high
level of the state
Average (mean) 2.7 High
Source: Primary Data, 2019

31
# Mean Range Response Mode Interpretation
4 3.26 – 4 Strongly Agree Very high
3 2.51 – 3.25 Agree High
2 1.76 – 2.5 Disagree Low
1 1 – 1.75 Strongly Disagree Very low
Likert scale

The study shows that respondents agree with A basic expectation of any bank is to
provide funds on demand with average mean of (µ=3.14, Std =1.079) and interpreted
as high, and they disagreed when banks collect deposits, they seek to make this money
"work" for them through investing it by lending it out to others with average mean of
(µ=2.25, Std=1.110) and interpreted as low, and respondent were Very high with the
Conditions required by private banks are difficult for borrowers (µ=2.86, Stud=1.145)
as Very high, However respondent were Private banks they are fear to lend of small
business that’s start-ups because it is high probability of loss with average mean of
(µ=2.21, Std= 1.134). And interpreted as low and Banks are a source for loans and
advance instalments of money with average mean of (µ=2.82, Std=1.188) and
interpreted as high

On the other hand it shows that the respondents agreed with the company encourage
creativity and personal innovation by giving rewards has a mean of (µ=2.82, Std1.090)
and interpreted as high.

Generally, it showing that private banks had an average mean of (µ=2.7) and
interpreted as high.

32
Table 4.3 The Level of small business growth in Selected Department of
Dahabshil Company, Hargeisa, Somaliland.

Variable Mean Std. Deviation Interpretation

people get involved in small scale

3.29 .763 Very high
businesses is women

There is unemployment in your area 3.32 .723 Very high

Unemployment is mainly caused by the

3.57 .742 Very high
factors Lack of enough enterprises

Small scale enterprise have contributed

3.07 .900 High
to solving unemployment in your area
the self-employment is the one of SMES
towards solving the problem in your 2.89 1.100 High
area
provision of power is the
steps/measures taken by the
3.29 .937 Very high
government to solve unemployment in
your area

Average (mean) 3.2 High

Source: Primary Data, 2019

# Mean Range Response Mode Interpretation
4 3.26 – 4 Strongly Agree Very high
3 2.51 – 3.25 Agree High
2 1.76 – 2.5 Disagree Low
1 1 – 1.75 Strongly Disagree Very low
Likert scale

33
 The study exposed that respondent were strongly agree with the people get
involved in small scale businesses is women with average mean (µ=3.29, Std= .763)
and interpreted as very high, while they strongly agree with There is unemployment in
your area with average mean of (µ=3.32, Std=.723) and interpreted as very high. also
majority of respondent were strongly agree with Unemployment is mainly caused by the
factors Lack of enough enterprises with average mean of (µ= 3.57, Std=.742) and
interpreted as very high, the respondent were agreed Small scale enterprise have
contributed to solving unemployment in your area with average mean of (µ=3.07, Std=
.900) and interpreted as high. Moreover respondent were agree the self-employment is
the one of SMES towards solving the problem in your area with average mean of
(µ=2.89, Std =1.100) and interpreted as high, however they strongly agree with with
provision of power is the steps/measures taken by the government to solve
unemployment in your area with average mean of (µ=3.29, Std= .937) interpreted as
Very high.

Generally, table 4.2 exposed that the level of small business growth in Dahabshil
company Hargeisa had an average mean of (µ=3.2) and interpreted as high.
4.4 The Significant Relationship between private banks and small business
growth

Objective four was to explore the significant relationship between private banks
and small business growth in selected department of Dahabshil Company, Hargeisa,
and Somaliland. Table 4.4 gives the summary of the findings.

34
Table 4.4: The Significant Relationship between private banks and small
business growth
Variables Pearson Value Level of Interpretation Decision on
Correlated significant Ho
private banks
1 .000
Vs Strongly
Significant Rejected
small business relationship
.950** .000
growth
**. Correlation is significant at the 0.01 level
(2-tailed).
The study shows revealed that there is a significant and positive relationship between
private banks and small business growth in selected department of Dahabshil;
company, Hargeisa, Somaliland (r=.950**p<.01). This implies that private banks and
small business growth either positively or negatively.

35
 CHAPTER FIVE

DISCUSSION OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.0 Introduction
This chapter presents the discussion of the study guided by the study objectives.
The discussion was done by exploring the research findings relative to what other
researchers in the fields that pertain to the variables have confirmed. The study was
later concluded and appropriate recommendations accruing from the findings were
made.

5.1 Discussion of the Findings

5.1.1 The demographic characteristic in selected department of Dahabshil
Company.
The sample consisted of 28 employees at the main office of Dahabshil company,
the majority of the respondents representative of males (78.6%) than females (21.4%),
Majority of the persons who are engaged in, This study agrees with they have been
attended school at one time, but the proportion is higher for males (78%) compared to
66%of the females.

the majority of the respondents are single (57.1%) and between the age of 15
to 25years (53.6%). 53.6%respondents have a master degree, I agree with the findings
of UNHS 2002/03, that Majority of the persons who engaged in Small Scale Enterprises,
they attended school at one time and thus means that education attainment could be
one way of solving unemployment, (UBOS 2006). secondary data and The length of
service for the majority of respondents are between less than 1 (50%).

5.1.2 Level of private banks in selected management of Al Dahabshil

Company Hargeisa, Somaliland

In the study, banks were measured by determining the level of growth of small
businesses for some shareholders that small enterprises face difficulties in financing for

36
many reasons such as setting difficult conditions for debtors, and as you do not trust
banks in projects that are begging.

As a result, the analyzing of the questionnaire exposed that Dahabshil Company have a
low level of microfinance.

5.1.3 The Level of small business growth in Selected Department of

Dahabshil Company Hargeisa, Somaliland

The study measures the level of small business growth concentrating on the factors
that impact on small business. The questionnaire obtained from Dahabshil company
exposed that people see that they have difficult to borrowers the business. All so the
study presented is Unemployment is mainly caused by the factors Lack of enough
productivity enterprises.

5.1.4 The Relationship between private banks and small business growth

The study showed a positive relationship between private banks and small business
growth, which means if the level of private banks is high microfinance the level of small
business growth was high and if the level of private banks of microfinance was low the
level of small business was low, this study agrees with, that proposals to reduce the
size of the largest banks would likely lead to more business lending. Third, we find a
strong and significant negative relation between bank profitability and business lending.
This new evidence is consistent with moral hazard induced by deposit insurance, (Rebel
A. Cole November 2012).

5.2 Conclusion
The study revealed that the majority of the respondents were male within age of 15 to
25 and the majorities were first degree holders.

The study discovered a significant and positive relationship between private banks and
small business growth, also the study present a high level of Liquidity is the basis of
trust between the Bank and its clients, both depositors and borrowers, and constitutes

37
a practical test of the Bank's credibility in its commitment to depositors, from keeping
their money safely and responding to them when needed, and to meet the needs of
their borrowers. Without such liquidity, the rights of depositors threaten, as borrowers'
rights threaten, and the existence of the enterprise itself was at risk. Therefore, liquidity
has been given an absolute priority among all the priorities of the Commercial Bank's
management, as a problem that can not be lived with, even for a short period.The
people of Somaliland often have no confidence in depositing and borrowing in
banksThis findings clearly support the theory that researcher recruited in the study,
concept of shift ability, the orthodox theory of banking limited banks to making short-
term commercial loans to help producers of goods during their business cycles. For
example, apple farmers may require short-term financing until the crop is ready for
sale. This theory postulates that by making short-term commercial transactions that
was mature in a timely manner was keep banks in a ready state to meet the demands
of their depositors (Mitchell, W. F .1923).

5.3 Recommendations
The research is recommending that Private banks should give women the
opportunity to work in banks because the study proved that the majority of
employees are male the banks to develop their services and to bring new
equipment, so as to facilitate the clients withdraw their money easily and can find
easily anywhere of the country or in the city.
To expand the job of the banks in the country and connected with other banks in
the world in order to facilitate the business relationship with other countries.
Banks are important to create jobs for the students graduated the universities in the
country in order to bring new ideas to develop the job. The banks now are working
with retired employee and they are not bringing new ideas to develop the services
provide the bank. So, it is important to get new faces.
To design and implement a well structure and reliable managing system.
The last recommendation is the security computer systems of the banks have to
make secure and it has to be defend the hackers. Private Banks should strategize on
how to attract and retain more deposits so as to further improve
38
on their lending performance,Private banks should seek to promote and develop
investment in Somaliland.People do not have enough information about banks since
clients do not have information about banks and its benefits to the community and
to solve this problem by developing awareness seminars presented by the bank to
society.

39
REFERENCES
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2. 6- Morrison AD, W. W. (2007). Investment Banking: Past, Present, and Future.

3. Entrepreneurship, O. S. (2005). Entrepreneurship Outlook:. Paris: page 17.

4. henry, b. (2011). he impact of small scale and medium enterprises on employment

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