Somaliland: Challenges Faced by Small and Medium Sized Enterprises


Charcoal traders in Hargeisa

Somalilandsun – The Small and Medium Sized Enterprises -SME Sector in Somaliland is the biggest income and employment generator for many people and the largest business sector. Small and medium sized entterprises that trade in clothes, food, agricultural products, consumables, gold, beverages, fruits,etc are visible in every city’s main street across the towns and cities of Somaliland. Those traders support families who may find difficult to get alternative sources income.

In addition, as a result of the 1990’s civil war, many families lost their bread winner (father), which in turn has forced the mother to strive for sustaining the household income.

Since female education is minimal in Somaliland, the second breed winner (the mother) turned into small business set up such as diary milk retailing, fruits and vegetables, meat, clothing, khat, small shops, where as those who have inherited some assets or have received some support from their diaspora relatives entered into gold retailing and small scale trading (Dubia-Wajale Somaliland) in turn supporting their families and close family members.

Hence, it is very clear that SMEs are the backbone of Somaliland nation’s economy and deserve to attain appropriate technical, financial, legal, and political support from the top.
Although the private sector in general, and specifically the SME sector plays a lion’s share in the development of Somaliland’s economy and contributes significantly to household income, it is increasingly facing many obstacles including:

1. The unavailability of entrepreneurship courses and one-stop business set up information centers, which causes new entrenprenuers making unnecessary mistakes such as starting small partnerships with oral agreements and without sufficient and adequate pre-feasibility, which later results the quick dissolution of the businesses.

2. The unavailability of commercial banking system and effective and efficient micro-finance institutions in Somaliland,which further puts a strain on those businesses who face shortage of liquidity and those who are inspiring to set up their own start ups.

3. Lack of basic book-keeping, sales, marketing, business planning, further complicates the problems SME sector in Somaliland is facing.
4. Non-existence of periodic workshops in Somaliland such as business health checking, entrenuership and business management training is another plight facing by Somaliland SMEs .

5. Lack of sufficient commercial legal framework and commercial arbitration mechanism,this is one of the biggest obstacles in SME growth and success.

6. Lack of linkages with international and regional businesses which erodes the chance of sharing with them best business practices and business opportunity identification.
7. Female entrepreneurs who are more than their male counterparts in the SME sector face the same female inherent stereotypes and cultural bottlenecks while they are in business.

8. Recently prevalent attitude among university graduates in Somaliland, who seek only to work with an employer rather than taking the risk of establishing their own start ups. This employer dependence syndrome creates to university graduates dismay and loss of hope since there are few employers and employment generating projects in the country.

Money changes hands after a purchase deal at the Hargeisa livestock market in SomalilandFurther this makes university youth graduates an easy pray for the terrorists such as Alshabaab, people smugglers to European countries, and Mafia cartels such as the piracy cartel. This youth unemployment sometimes results youth turning into undersible addictions and subsequent health hazards such as HIV Aids.
9. Lack of non-government bodies specializing in private sector development draws a picture of non-national importance to the donor and UN agencies.

10. Non-existence of professional bodies with a international standing such as certified public accountants, commericial lawyers, business tax experts further isolates the SMEs sector in Somaliland as no mans land.
11. Lack of SMEs associations, lobby bodies, and special parliamentary committees, further dilutes the collective bargaining power of this sector.

Mohammed Dahir Ahmed12. Insufficient attention by the civil society groups, mainly the print media, radio, tv, and news websites as far as the importance of the SME sector is concerned is another hurdle facing the SMEs sector here in Somaliland.

By: Mohammed Dahir Ahmed