SIMAD UNIVERSITY

GRADUATE STUDIES
Cover Page
Group Members
1. Mukhtar Hassan Osman
2. Aidarus Mohamud Mohamed
3. Nasteha Omar Nur

Class: MBF04
Course: Banking Management
Lecturer: Dr. Amina Omar Mohamud
Assignment: Proposal (Somali Banks versus International
Banks)
Submission Date: 08 March, 2018
 TABLE OF CONTENTS

TITLE PAGE................................................................................................................................... I
TABLE OF CONTENTS ............................................................................................................... II
Introduction ..................................................................................................................................... 1
Overview of international banking industry (US banks). ................................................................ 3
The regulatory structure of the USA banking industry ................................................................... 3
Currently who supervise the US depository institutions (commercial banks)?............................... 5
Mode of Operation of the US Commercial Banks .......................................................................... 7
Services offered by The US Commercial banks. ............................................................................. 8
JPMorgan Chase .......................................................................................................................... 8
Bank of America .......................................................................................................................... 8
Wells Fargo .................................................................................................................................. 8
Citibank ........................................................................................................................................ 8
The Range of service provided by the most US Commercial banks. ............................................ 10
Credit/Debit Cards and Merchant Services ............................................................................... 10
Other Services ............................................................................................................................ 11
Competition and the collaboration between the US Commercial banks ....................................... 12
Overview of Somali banking industry (Mogadishu) ..................................................................... 13
Regulatory Structure .................................................................................................................. 14
Who regulate and supervise the Somali Commercial Banks currently...................................... 14
The well-known banks in Mogadishu Somalia .......................................................................... 16
Salam Somali bank ................................................................................................................. 16
Dahabshil Bank ...................................................................................................................... 16
International bank of Somalia (IBS) ...................................................................................... 17
Premier Bank: ......................................................................................................................... 17
Amal Bank.............................................................................................................................. 17
Services offered by the Somali banks. ....................................................................................... 18
Mode of operation ...................................................................................................................... 18
Competition and Collaboration among the Somali Banks ............................................................ 18

II
Comparison of Somali banks and US banks ................................................................................. 19
Disadvantages of negative competition Among Somali banks ..................................................... 19
Proposing some key points to do ................................................................................................... 20
Also proposing tricks and methods to be used to increase the financial literacy of the
population. ..................................................................................................................................... 21
Recommendations ......................................................................................................................... 21
REFERENCES .............................................................................................................................. 22

III
Introduction
This assignment is a comparative and persuasive assignment which is intended to reveal the
current working Somali banking industry, by reviewing some angles such as structure and the
service they provide by comparing to some developed counties banking industry to propose if
there is some tips and tricks that the Somali banking industry lacking and need to introduce to
develop their activities and their service they are providing now to their clients, to acquire
additional clients which are now unbanked by persuading the benefits of the banking service
and leveraging their knowledge about the banking industry to cover large coverage and to
bank unbanked people and to reach unreached areas and to benefit idle money under pillows
and lastly develop whole the country by creating more employment resulting from the positive
activities and the mobilization of the idle money.

All above mentioned activities could come, if the existing banks collaborate positively to
develop the financial system of Somalia which is their advantages and the advantage of the
society at large, which on the other hand could be, the implementation of their social
responsibility.

The following are the sub-sections of the assignment:

1 Overview of the US banking industry(leading industry taken as an example)

1.1 Their regulatory structure
1.2 Service they provide
1.3 How they compete and Collaborate
2 Over view of Somali banking industry(commercial banks)
2.1 their regulatory structure
2.2 service they provide
2.3 how they compete and collaborate
3 Comparison of their mode of operation (international and Somalia)
3.1 Disadvantages of negative competition (by indicating how international developed
banks benefited from the collaboration and how the Somali banks lack that
advantage.)
4 Proposing some key points to flow to adopt sound competition and collaboration.

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5 Also proposing some key products and service that could be better to introduce in
order to enlarge their scope and financial capacity.
6 Also proposing tricks and methods to be used to increase the financial literacy of the
population to convince them the usage of banks service.
7 To recommend the adoption of all above suggestions and proposals.

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Overview of international banking industry (US banks)
We present here a brief picture about the banks in the USA; we have chosen the USA banks
since North America is the currently world leading country in economy and technologically
developed and also well financially stable country.

This section contains the following parts.

1) The regulatory structure of the US banking industry

2) The service they provide
3) And their mode of operation
- How they compete
- And how they collaborate.

The regulatory structure of the USA banking industry

Depository institutions like banks are the most needed areas of regulation because of
protecting the rights of the customers.

The customers of the deposit taking institutions are the depositors who deposit their amount in
the bank, mostly in a short term of period. Here, we focus on the commercial banks regulation
because of, to compare with the Somali commercial banks, since Most of the currently
working banks in Somalia are commercial banks.

Therefore, commercial banks can be defined as institutions those take deposits (which means
the balances that may be redeemed upon demand) and make loans. Commercial banks deal
with the general public and routinely provide loans to businesses as well as individuals.
Before we proceed our text, first we need to differentiate the two terms: regulation and
supervision, because of, we are talking about regulation and may some people need the
difference of these two terms that are mostly used when talking one of them.
Regulation is the practice of ensuring that institutions comply with existing laws and the
regulatory interpretations of those laws that comprise regulatory rules.
In contrast, supervision is the ‘on-site examination’ and ‘off-site monitoring’ of regulated
Institutions.

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So it is clear that the supervision doesn’t make any meaning without regulation, because the
supervisor checks whether or not the regulations are followed.
The following paragraphs we demonstrate a brief history and the structure of the US
commercial banks regulation.

According to Allen, F. and D. Gale (2000), Colonial settlers did not care for financial
institutions and therefore were reluctant to give commercial banks federal legal status upon
creation of the United States.

Each state, therefore, created its own financial regulations and supervisory structure. Before
the 1850s, most states restricted banks to a single office, sometimes referred to as a unit bank
system. Without branches, bank growth was significantly constrained.

In 1863, a Federal banking charter was introduced. Generally, however, the Federal
government cannot compel states to change their laws. Thus, the Federal charter creating a
national bank could not address the growth constraints imposed by unit banking, as stated by
Avery, R (1988)

The Federal Reserve System was established in 1913, adding another layer of supervision to
the structure.

The McFadden Act of 1927 clarified branching restrictions relating to National banks,
allowing National banks to open branches in states that allowed such activities. The Federal
Deposit Insurance Corporation was established in 1934, adding yet another layer to bank
supervision.

The Bank Holding Company Act of 1956 organized the US system around holding companies
(regulated by the Federal Reserve Board) rather than universal bank structures related to
financial conglomerates.
According to Allen, F. and A. Santomero (2001): A bank holding company, however, is not a
bank. Thus, while the Federal Reserve Board was given authority over the regulation of such
entities, the SEC shares (via supervisory authority on reporting and on securities entities in the

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holding company) authority over them as it relates to financial reporting and trading of stocks
in all other non-bank companies in the US.
The Gramm-Leach-Bliley Financial Modernization Act (1999) removed restrictions on
business activities of securities underwriting subsidiaries of bank holding companies, further
stimulating the SEC to become more active in bank regulation.
DFA similarly does little to simplify the supervisory overlap and, indeed, has caused further
consternation between the Federal Reserve and SEC regarding oversight and implementation
of the Volcker rule on proprietary trading, as stated by Barth, J., G. Caprio and R. Levine
(1998),)
However, traditional regulatory authorities still supervise banks, not bank holding companies.

Currently who supervise the US depository institutions (commercial

banks)?
In general, US depository institutions choose whether to organize legally under Federal or
state rules.
According to Brander, J. and T. Lewis (1999), commercial banks are licensed to do business
(chartered) by state or Federal authorities at the bank managers’ discretion. The chartering or
licensing is process for establishing the legal entity that is to be the commercial bank. In the
US, a commercial bank is a company that both takes deposits and makes loans.
Only commercial banks can undertake those two activities. While non-banks can make loans
and other non-banks can issue demandable debt, a non-bank that strives to do both or any non
authorized company that attempts to use the term bank in its title will run afoul of regulatory
authority. In the US, as in most countries, the proposed institution will have to be authorized
by the regulatory authority. Most simply, the institution will have to file paperwork naming its
principal officers and directors and sources of capital.
Those individuals cannot have been previously barred from the business of banking by
regulatory authorities and must be otherwise of sound character. In North America charter can
be denied for various additional reasons, including competitive concerns, i.e., too many banks
already in the geographic region or too big a deposit share in the market, or any other
restrictions.
In the US, making a commercial bank has certain caution to choose its supervisor: A proposed
bank can appeal for a national or a state charter.

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 1) If a bank obtains a national charter, it is a National Bank and ‘primarily’ supervised and
regulated by the OCC. Nationally chartered banks are required to become members of the
Federal Reserve System (FRS) and carry Federal Deposit Insurance Corporation (FDIC)
coverage/guarantees.
2) If an institution obtains a state charter (becoming a state bank), it is subject to State laws
and regulations and may be primarily regulated by state authorities, Depending upon
whether it elects FRS membership and FDIC coverage:
a. If it elects FRS membership it must also accept FDIC coverage, and FRS will be the
primary supervisor and regulator.
b. If it does not have FRS membership and elects FDIC coverage, FDIC will be the
primary supervisor and regulator.
c. If it has neither, the state authority is the primary supervisor and regulator.
While supervisors other than primary supervisory can investigate bank activities, they must
ask for access from the primary authority.

The following Chart demonstrates the typical regulation layers of the US banks

FRS
FDIC

BANK BANK OCC

(STATE) (FED)

STATE FEDRAL

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Means = Or Relation Means = must Relation

This color mean they all eventually under federal

Mode of Operation of the US Commercial Banks

Most of American Commercial banks have been always there for their clients around the
world. Serving their clients is their job to always do right by them and consistently strive not
only to meet their needs but also to exceed their expectations and continually make it easy for
clients to do business with them As Jamie Dimon the CEO of JPmorganChase said in an
interview with Associated press.

Continuining his talk said:

“As much as any company on the planet, we are helping individuals, businesses of
all sizes, governments, nonprofits and communities seize the opportunities of our times.
We can do this because of the strong company we have built – global in reach, local in
execution, with an impressive set of products and capabilities and a steadfast commitment to
provide exceptional client service”

The only important one they always care of is their customer, therefore to make their customer
more loyalty they mostly do the following points:

 they listening to their customers and anticipate their needs to provide service
exceeding their expectations and making it easy for them to do business with them
 They always earn trust by always focusing on customers’ best interests; therefore high-
quality customer relationship will grow.
 They give customers a good, fair deal by offering high-quality and low priced
products and services
 They consider the full range of products and services that will fit customer needs and
cross selling when appropriate.
 Never allow short-term profit considerations to get in the way of doing what’s right for
the customer
 Use our size as a strength to execute well at the local level
 Spend time in local markets to understand everything about the customer
 Provide the resources and authority needed for decision making in the field
 Innovate, test and learn – we know some ideas will fail, and that’s okay

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Services offered by The US Commercial banks.
In this section, we will discuss some of the most popular services offered by the US well-
known commercial banks in the USA.

But before that let us introduce you some of the largest banks in the US, below are the top five
largest banks in North America according to their asset According to Amanda Dixon (2018)

1 JPMorgan Chase & Co. $2.53 trillion

2 Bank of America Corp. $2.28 trillion
3 Wells Fargo & Co. $1.95 trillion
4 Citigroup Inc. $1.84 trillion
5 Goldman Sachs Group Inc. $917 billion
JPMorgan Chase
JPMorgan Chase is a corporation of nearly a dozen legacy banks, including J.P. Morgan,
Chase Manhattan, Washington Mutual, Chemical, Manufacturers Hanover, Bank One, First
Chicago and National Bank of Detroit. It is part of the Dow Jones Industrial Average, as a
representative of the success and health of banks across the nation.

Bank of America
Bank of America was the largest bank in the United States, in 2011, with over 286,000
employees in more than 6,000 offices, serving over 57 million individuals and businesses. It
has acquired numerous smaller banks and mortgage companies over its lifetime, including
NationsBank, LaSalle Bank, Countrywide Financial and Merrill Lynch. It also acquired
MBNA in 2005, and is the nation's largest issuer of credit cards.

Wells Fargo
Famous for its stagecoach line and protection of gold during the 1800s, Well Fargo has grown
into one of the largest mortgage providers and banks in North America. It over 70 million
customers and 9,000 locations, as of 2017, and purchased Wachovia Bank in 2008 to add to its
already sizable portfolio.

Citibank
Citibank is made of two businesses: Citigroup and Citi Holdings. Citigroup is a global bank,
which offers services to all types of consumers. Citi Private Bank is a specialized bank that
deals with 30 percent of the world's billionaires, and Citi offers regional and local banking

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worldwide. Citi Holdings provides brokerage, asset management and mortgage services in the
U.S. and consumer finance services in Western Europe, Japan, India, Mexico, Brazil, Thailand
and Hong Kong.

Although there are more than 6000 banks in the United States of American there can be other
rating arrangements made by other groups, but this seemed to us one of the latest one that is
why we took it.

In the following pages we glance at some of the large pool of service that the commercial
banks in the United States offer.

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The Range of service provided by the most US Commercial banks.
The US commercial banks offer various types of personal and business accounts. These
include:
 checking accounts
 money market accounts
 certificates of deposit
 Savings accounts.

The banking customers can get their banking needs branches which operate several hours to
give customers the opportunity to conduct their transactions. In addition, approximately all US
commercial banks have ATMs available 24/7and also they offer online account access, so
everyone who may have internet access can do transactions every minute.

Commercial banks provide loans, as well as lines of credit, for businesses and consumers.
Although savings-and-loan Corporation exists primarily for real estate lending, commercial
banks also offer home and commercial mortgages. Other types of bank loans available include
those intended for:

 equipment leasing
 international services and letter of credit
 Working capital financing.

Credit/Debit Cards and Merchant Services

While you can open a personal or business credit or debit card account with a commercial
bank for example MasterCard or Visa: these institutions also provide credit card services for
merchants1. A banking professional will work with your company to devise the most
appropriate ways to service the business, whether that includes offering in-store, mobile or
web-based ways to accept payments.

1
Merchant services are a category of financial services in the United States that is used by businesses.
Merchant services are authorized financial services that allow a business to accept credit card or bank debit
card transactions using online ordering or point of sales systems.

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Other Services

The other services provided by commercial banks include:

 safe deposit boxes

 foreign currency exchange
 bill payment
 investment advice
 Wire transfers.

A safe deposit box is a metal box, usually housed in a bank vault that customers can rent in
order to keep valuables, legal documents and other prized possessions in a secure location

Wire transfer, bank transfer or credit transfer is a method of electronic funds transfer from
one person or entity to another. A wire transfer can be made from one bank account to another
bank account or through a transfer of cash at a cash office.

Bill payment is a money transfer scheduled on a predetermined date to pay a recurring bill.
Automatic bill payments are routine payments made from a banking, brokerage or mutual
fund account to vendors. Automatic payments can be made from a checking account or credit
card. They are usually set up with the company receiving the payment, though it’s also
possible to schedule automatic payments through a checking account’s online bill pay service.
Automatic bill payments occur over an electronic payment system, such as the Automated
Clearing House (ACH).

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Competition and the collaboration between the US Commercial banks
Theoretically, it is argued that competition and efficiency in the banking industry is based on
the classical industrial organization theory called the Structure-Conduct- Performance (SCP)
paradigm. The theory assumes that, there is a causal relationship running from the structure of
the market to the firm’s pricing behavior, to the firm’s profit and the degree of market power.
The theory predicts a positive relationship between concentration and profits.

Some studies examined the relationship between competition and efficiency of commercial
banks in North America for the period 1990 to 2000. The data were sourced from the annual
reports and statement of accounts of fifteen commercial banks in USA which were
purposively selected for the study. The data collected were analyzed using pooled least square
and dynamic panel generalized method of moment estimation technique with fixed effect. The
results of the analysis showed that there was a positive and significant relationship between
the degree of competition and the level of efficiency of commercial banks in North America
with a t-value of 2.45 and p-value < 0.05. The study concluded that the deregulation
introduced in the banking sector, raised the degree of competition and improved the level of
efficiency of the American commercial banks.

Mean while, with that positive competition that increases the efficiency of the banking
industry, there is also a greater collaboration between these commercial banks, examples of
these collaboration may include:

1) The sharing of ATMs which means that one with bank X master card can insert bank
Y ATM and withdrew the money.
2) The cheque written from bank X can be paid from Bank Y
3) The banks can jointly make new project and share the profit
4) The can share the underwriting of syndicated loans
5) Open accounts in each other.

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Overview of Somali banking industry (Mogadishu)
Approximately, before 1941 the Somali people were using as a currency the Italian notes, who
was ruling in a large area of the Somalia south-central territories and that time there were no
any functioning bank owned by Somalis.
After 1941 the east African shilling was introduced, 30 June in 1960 , the Somali central bank
was established by the decree No.3-1678 which lately was converted into law by law No. 2 ,3
January in 1961.
In 1968 the Somali national bank was recognized by the international monetary fund.
6 March in 1961, Somali shilling was introduced by a decree law as the legal tender, its par
value was agreed with the international monetary fund at 0.124441 grams of fine gold
equivalent to 0.14 U.S. Dollar.
The Somali National bank is a public corporation whose initial capital was 1 million Somali
shilling entirely paid by the state, the policy making body of the national Somali bank was its
board of directors.
Until in 1970s the Somali national bank was exercising the functions and the activities of
central banks and commercial banks, although there were branches of foreign banks such as
branch of banca di Roma, which were lastly nationalized by the law No. 26 of 7 May 1970 by
the Somali military regime headed by Mohamed Siad Barre which recently handed over the
entire country at that time.
Late of 1970s some important reforms were done to the banking system in Somalia like the
establishment of two new banks: Cassa di Risparmio e credito della Somalia (Cash Savings
and Credit of Somalia) and banca Commerciale Somala (Somali Commercial bank).

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Regulatory Structure

CBS
Commercial
Banks

Commercial Commercial
Banks Banks

Rough structure of the relation between central banks and the Commercial banks

Who regulate and supervise the Somali Commercial Banks currently

Currently the licensing and Supervision of the Somali financial system is the responsibility
of Somali central bank. The Federal Reserve System or simply the central bank has several
departments which in charge in different responsibility, therefore the licensing and the
supervision is under the authority of the licensing and the supervision department of the
Central Bank. This department of the central bank has the overall responsibility of
supervising the Somali banking and non-banking financial institutions, under the
provisions of the Banking Regulation Act, 2012. Furthermore, the Department is
guided by the Financial Institutions Act and the Central Bank Act, 2011.

The main objective of the Department is to ensure the overall financial stability in the whole
country through the regulation and supervision of its financial institutions, aligned with the
strategic goals of the Somali Central Bank. According to the website of the central bank, the
Department is well equipped and staffed with a well-experienced and trained team.

In accordance to the Financial Institutions Act and CBS Act, 2012, the CBS is responsible of
licensing, supervision, and regulation of all commercial banks, and money transfers, and other
financial entities. In addition to banks and money transfers, the central bank also has the
responsibility to oversight for other areas in the Somali financial sector and these include
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foreign exchange system, microfinance, insurance, mobile money transfer and credit unions, if
they would be existed.
The objectives of the Licensing & Supervision Department (LSD) Under the authority of the
Central Bank, one of the prime objectives of the LSD, in its oversight function, is to protect
the depositors, remitters, creditors and the financial system. The aim is to ensure the integrity
of the banking industry and the financial system as a whole. The licensing and supervision
Department under the authority of the Central Bank of Somalia, is to promote and maintain
the safety, soundness, and integrity of the banking industry and the financial system as a
whole. Since the passing of the Banking Regulation Act of 2011, the CBS has assumed its
traditional roles and responsibilities of a central bank, including most importantly the
supervision and licensing of banks and NBFIs. The above objectives are achieved through:
1) Receiving and processing applications for banks and Money Remittance
Providers (Hawalas) Licensing by means of the established procedures.
2) Ensuring effective compliance with international standards and norms.
3) Establishing an effective system for on-site and offsite supervision of banks
and Money Remittance Providers.
4) Ensuring timely supervisory action and compliance with financial
institutions and other legislations governing the operations of financial institutions.
5) Promulgating and enforcing of regulations and directives, and finally.
6) Reorganizing or taking-over of troubled financial institutions.

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The well-known banks in Mogadishu Somalia
There are several currently operating Islamic commercial banks in Somalia which are
estimated their assets value in trillions. And still expanding rapidly at growth rate of 10-12%
annually as we quoted from Somali business review by Dr Bashir A.Samad Hared, we list
here only those working Mogadishu Somalia, since there is no any complete publicly
available reports which encompasses the all necessary information about all Somali banks
across the country

1) Salam Somali bank

2) Dahabshil Bank
3) Premier Bank
4) Amal Bank
5) IBS

Salam Somali bank

According their website (http://www.salaamsombank.com) SSB was established in October
2009.they serve all whether it is individual or institutional client, SSB is there to help you as a
partner in your success. It is committed to providing the high level of personalized banking
services. SSB promises to offer customized solutions that meet the unique needs of their
clients through the right combination of traditional banking services and special features for
the Somali community. Ultimately, they strive to make Somalis life style success simple.

Dahabshil Bank

Dahabshil was founded in 1970. It was set up as a new remittance venture to enable Somali
Diaspora to send money to family and friends back in the countries of East Africa. Dahabshiil
has grown to be the largest African money transfer business operating in 126 countries across
the world, 40 of which are in Africa. It remains a business committed to its original values of
trust, reliability, integrity and customer-focus.

In addition to serving individual customers, Dahabshiil offers money transfer and banking
services to businesses and international organizations, including the United Nations, World
Bank, Oxfam and Save the Children.

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They rely on Dahabshiil to provide payment services to their staff, contractors, government
institutions and partner NGOs. The United Nations describes Dahabshiil’s services as ‘the
only safe and efficient option to transfer funds to projects. According to
https://www.dahabshiil.com/), Dahabshil is currently working as a fully fledged Islamic bank
in Mogadishu Somalia and other several important cities in the country.

International bank of Somalia (IBS)

International Bank of Somalia (IBS) as published on their web pages is a registered financial
company and licensed from central bank of Somalia since July 2013. International Bank of
Somalia is fully fledged Islamic bank that undertakes some banking activities such as
microfinance, Qard Hassan loans and engages community finance which is a program that is
contributed community members to help key areas that is very useful to the community.

Premier Bank:
Premier Bank is a privately owned Sharia compliant commercial bank incorporated in
Somalia in 2013 and licensed by the Central Bank of Somalia in 2014. Which is established to
promote the Somali financial needs? As they printed on their electronics site,
(https://www.premierbank.so/about-us/) they said “We all have a role to play in rebuilding
Somalia, Together, we can make a difference.”, This philosophy guides their efforts to help
rebuilding Somalia and encouraging economic and community development.

Amal Bank
Amal Bank is a modern Islamic bank that offers range of financial services in Retail,
Corporate, Institutional, Diaspora and Microfinance Banking. Based in Garowe and
Mogadishu, Somalia. Amal Bank aims to be a leader in the financial services sector in the
Horn of Africa through innovative, customized and shariah compliant financial products and
services. The Bank is fully owned by Amal Group, a diversified global company that operates
in various sectors: Microfinance, Money Transfer, Forex-exchange, Real Estate, Trade and
Energy.

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Services offered by the Somali banks.
Most of the Somali Banks provide to their clients the following limited services:

1) Current accounts
2) Saving accounts
3) Mobile baking
4) ATM
5) Master card
6) SWIFT transfers

Mode of operation
The operation of the Somali banks is different from those of United States in various angles,
while they are same in some areas, for example the intention for the both is to serve the clients
and earn profit, but somehow it seems that the Somali banks currently behave like traditional
profit oriented mechanism only, that the needed customers should come to the bank and they
have to deal with the only limited service they provide, sometimes the customers become
under expectation

Competition and Collaboration among the Somali Banks

The competition is allowed within commercial fields, but that competition should not be a
negative competition which could bring a disaster among market players and the society at
large, It looks like that the competition in Somali commercial banks and the whole business
environment based on the other rivalry competition among the tribes and fighting functions
that one can get any help from the others, although there is no written evidences that
indicating that but everyone observe what is going on the environment.
Obviously, that the Somali banks co working is that one with Dahabshil check can withdrew
from Salam or premier or any other one, also that the Premier ATM cannot used by the Salam
clients as we quoted from some of the MasterCard users rather than to benefit from some well
experienced staffs in one banks together.

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Comparison of Somali banks and US banks
To Compare the Somali Commercial banks and the US commercial banks a big difference
appears there;
- According to the numbers of banks, approximately 6000 banks works in US while
in Somalia 6 only
- According to the assets they have, although we couldn’t get currently the real asset
of the Somali banks, most of the US banks have Trillions and hundreds of millions.
- According to customers: although there is big differences in the number of
population in the two countries but there is big difference in the percentages of
banked population.

Disadvantages of negative competition Among Somali banks

Less of customers, because of the population of Somalia is estimated almost 13million and the
residents of Mogadishu is estimated 3.5 million, almost 27% of the Somali population, in
addition to that some estimations say almost roughly 70% and may be of the Mogadishu
residents are unbaked, almost 1million are currently using banking service directly and other
total banks users in the other regions may be half million, so 1.5million out of 13million is
very little.
This may be significantly increased if there is collaboration among them and customer
orientation programs, because of there may be some places that one of cannot reach but they
can reach collectively according some factors such as launching cost and bearing loses if it
comes.

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Proposing some key points to do

 Banks should listen to their customers and anticipate their needs to provide service
exceeding their expectations and making it easy for them to do business with them.
 They should earn trust by always focusing on customers’ best interests; therefore high-
quality customer relationship will grow.
 They should give customers a good, fair deal by offering high-quality and low priced
products and services.
 They should consider the full range of products and services that will fit customer
needs and cross selling when appropriate.
 They should never allow short-term profit considerations to get in the way of doing
what’s right for the customer.
 They should use size as strength to execute well at the local level.
 They should spend time in local markets to understand everything about the customer.
 They should provide the resources and authority needed for decision making in the
field.
 They should innovate, test and learn – we know some ideas will fail, and that’s okay
 They should allow sharing of ATMs which means that one with bank X master card
can insert bank Y ATM and withdrew the money. Also, the cheque written from bank
X can be paid from Bank Y, the banks can jointly make new project and share the
profit, they could share the underwriting of syndicated loans, open accounts in each
other, and lastly one bank can benefit from the experienced staffs when in trouble.

20
Also proposing tricks and methods to be used to increase the financial
literacy of the population.
To increase the number of the clients that use the bank services there should the following
pints:

1) Continuously orientation programs of informing the population the services of the

banks
2) Individual promotion programs that bank team can teach the banks’ benefits to the
society
3) Tutorials that explaining the usages of the banks’ products
4) Special departments of public awareness.
5) And finally introduce better developed service.

Recommendations
Lastly we highly appreciate and recommend as a researchers:

1- To pretend the developed countries baking industry such as the US banks.

2- To introduce new more services and products
3- To increase the public persuading programs
4- And to take whatever advantages their lacking from those well developed.

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 REFERENCE

Allen, F. and D. Gale (2000), Comparing Financial Systems, Cambridge, MA: MIT Press.

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