Mogadishu, Somalia — Somalia’s central bank governor is urging global lenders to restore direct dollar links to the country, warning that years of “de-risking” have turned billions in aid, remittances, and trade payments into slow, expensive, and opaque transfers.
“A dollar destined for Somalia often travels further than most,” says Abdirahman Mohamed Abdullahi, governor of the Central Bank of Somalia.
By the time it leaves a donor in New York or a nurse in London and reaches a Somali family, it has passed through a chain of foreign banks and money transfer firms.
“What finally arrives is diminished not by crime or corruption, but by the machinery of financial intermediation,” he argues.
No Somali bank today can send or receive US dollars directly. Instead, every transaction is routed through correspondent institutions in Kenya, Djibouti, Turkey, and other hubs, creating nested relationships that add cost, delay, and complexity.
Abdullahi says this not only hurts Somalia. It also pushes legitimate money flows out of regulated banks and into harder-to-track channels, weakening transparency across the global system.
Billions squeezed by fees
The scale of the distortion shows up in the numbers. Somalia receives about $4.2 billion in inflows each year, according to the central bank — roughly $1 billion in aid and $3.2 billion in remittances.
Even at a conservative 5 percent average cost, he estimates, some $210 million a year disappears into intermediary fees. “That is money that could otherwise finance energy, infrastructure, or climate resilience,” the governor says.
Trade follows the same pattern. Somalia imported around $9.2 billion worth of goods in 2024, but less than one-third of those imports were financed through the banking system.
The rest moved through money transfer operators or informal networks that are often more expensive and far less transparent.
Abdullahi argues that with direct settlement, a much larger share of trade could be routed through regulated banks and payment systems, where compliance teams and supervisors can actually see what is happening.
“This time and value leakage is not inevitable,” he says. “It is the outcome of a global system that has, in the name of de-risking, in effect excluded Somalia from direct correspondent banking.”
Reforms ‘overlooked’
The governor insists this is no longer a story of a fragile or lawless system, but of reforms that big banks have overlooked. “This is not a story of lack of capacity, but of progress overlooked,” he says.
Over the past decade, Somalia has rebuilt its financial architecture “law by law, rail by rail” to match international standards.
The central bank now licenses and supervises 13 domestic commercial banks, one foreign bank, six mobile money providers, and 15 money transfer businesses. A set of corporate governance guidelines for banks underpins that framework.
A modern legal regime covers anti-money laundering and counter-terrorist financing (AML/CFT), targeted financial sanctions, insurance, and a range of regulated financial institutions, with a National Payments Bill in the pipeline.
“These laws are not symbolic; enforcement matches the rule book,” Abdullahi says.
He stresses that the central bank uses risk-based supervision for licensing, monitoring, and inspections, and requires banks and payment firms to embed AML/CFT controls in their daily operations.
The payments backbone has also been rebuilt around transparency and interoperability.
Somalia now has an automated clearing house, real-time gross settlement, and instant payment systems built on ISO 20022 standards, with IBANs, sanctions screening, and a national QR code — the kind of “National Payment Systems” the bank rolled out in recent years.
That means Somali banks can send payment messages in formats global partners can easily read, backed by inspection reports, remediation plans, and licensing files.
“We have built the kind of documentation international banks need for streamlined due diligence,” Abdullahi says.
Investment bottleneck
Somalia’s authorities designed the reforms to support a wider National Transformation Plan and attract investment in infrastructure, energy, agriculture, fisheries and digital services.
But the governor says investment cannot reach its potential if money still arrives slowly, expensively, and through fragmented corridors that bypass regulated banks.
“Restoring direct correspondent relationships is therefore the logical next step,” he argues. “It would make the ‘last mile’ a straight line, with lower costs, clearer audit trails, and greater transparency.”
Somalia’s correspondent banking links remain thin. Many global lenders still push payments through regional hubs, citing long-standing concerns over conflict, governance, and the threat from Al-Shabaab, which remains under a UN sanctions regime.
Somali officials counter that there are no international sanctions on the federal government or the private sector, only targeted measures on the militant group.
The UN Security Council lifted its decades-old arms embargo on the government in December 2023, while renewing restrictions on Al-Shabaab.
Debt relief and reintegration
Abdullahi’s plea comes after a string of milestones that Somali officials present as proof of a country shifting from pariah to emerging partner.
In December 2023, Somalia reached the completion point of the Heavily Indebted Poor Countries initiative, securing about $4.5 billion in debt relief from the IMF and World Bank and sharply cutting its external debt load.
Paris Club creditors followed in March 2024 by cancelling 99 percent of Somalia’s bilateral arrears in a landmark Paris Club deal, wiping out more than $2 billion in obligations and marking “a significant milestone” in its return to the global financial system.
Regionally, Somalia became the eighth member of the East African Community in March 2024, after ratifying its accession to the bloc. The EAC secretariat hailed Somalia’s EAC membership as a signal of deeper economic and political integration.
On the diplomatic stage, the UN General Assembly elected Somalia to a non-permanent Security Council seat for 2025–26, ending a more than 50-year absence from the body.
Somalia has also rebooted its ambitions to join the World Trade Organization. The WTO’s accession working party on Somalia held its first substantive meeting in February 2025, with members welcoming efforts to align its trade regime with global rules.
Global de-risking squeeze
Somalia’s struggle to restore direct banking ties falls within a wider global retreat from correspondent banking since the 2000s, as large institutions trimmed relationships with smaller or higher-risk markets under tighter AML rules.
In a landmark BIS study, researchers found that the number of correspondent banks fell by about 20 percent between 2011 and 2018, even as cross-border payment values kept rising — a trend that lengthens payment chains and can drive flows into less regulated channels.
A separate FSB action plan warned that the decline in correspondent banking relationships could hurt financial inclusion and raise the cost of cross-border payments, especially in low-income and fragile states.
For Somalia, those pressures collide with a heavy dependence on diaspora money. Remittances have long outstripped official aid, helping families pay for food, water, school fees, and basic healthcare.
World Bank corridor data show that sending money from the United States to Somalia still costs around 5–6 percent on average, above the 3 percent target set under global development goals, according to remittance price trackers.
Abdullahi argues that excluding compliant Somali banks from correspondent banking does not reduce global financial crime risk.
“It merely diverts legitimate flows into harder-to-monitor channels,” he says. “It slows humanitarian disbursements, complicates climate and development finance, and constrains trade.”
Somalia’s reform path, he says, has been deliberately sequenced: law, then supervision, then infrastructure. Each layer reinforces the next, as standardised payments data improve oversight, and tougher supervision pushes banks to lift their controls and market practice.
Cautious lenders
International lenders and compliance teams acknowledge Somalia’s progress but still see real risks.
Al-Shabaab still controls parts of the country, governance indicators trail regional peers, and Somali banks are younger than more established lenders in the region.
For many global firms, the balance between the potential revenue and the cost of enhanced due diligence in a small, high-risk market still looks fragile.
Some prefer to keep nested arrangements through regional hubs rather than reopen direct US-dollar accounts for Somali institutions.
Abdullahi accepts that standards must remain high. “We are not asking for lower standards, but for engagement grounded in verified progress,” he says.
He argues that banks already trusted by development finance institutions and major NGOs can act as “the financial arteries of the Horn of Africa”, financing Somalia’s recovery while giving global lenders a clearer view of money flows through regulated, supervised channels.
That, he says, would turn Somalia’s de-risking squeeze in correspondent banking into an opportunity to bring payments back into the open.
What happens next
For now, Somalia’s push to reconnect its banks sits at the junction of technical compliance, political risk appetite, and commercial calculation in distant boardrooms.
If global banks remain unconvinced, Somalis will keep paying a premium every time they send money home or pay for imports, and donors will continue to move funds through long chains of intermediaries.
If some institutions decide the risk is now manageable, Abdullahi believes the payoff would be felt well beyond Mogadishu. “Somalia has the road map, reforms, and readiness. What it needs now is the connection,” he says.
“This is not just in Somalia’s interest,” he adds. “It is in the interest of the global banking community to turn today’s leakage into tomorrow’s leverage.”