Micro finance and investment banks in Somaliland

The programme has visited five private banks that offer micro finance and investment to
ensure and see how people access the microfinance and investment that banks provide to the
people. In addition, what condition is required to access financial? Therefore, we got from
customer care of banks welcome and they explained their work in detail. However, all banks
offer same way through murabaha (none interest loan approach ) this type of loan is legal in
Islamic countries.

Here you can find the types and options they provide to the people such as:

1. Murabaha (None-interest loan)

2. Musharakah   (Joint venture partnership structure)

3. Mudarabah (Commercial Development contract involving Financier and

manager-Rabb-ul mal and Mudarib)

Meanwhile, murabaha is the only type that banks currently provide and
people can access through below requirement.

What Is Murabaha?

Murabaha, is an Islamic financing structure in which the seller and buyer agree to the cost
and mark-up of an asset. The mark up takes place of interest, which is illegal in Islamic law.
As such, murabaha is not an interest-bearing loan (qardh ribawi) but is an acceptable form
of credit sale under Islamic law.

Understanding Murabaha
In a murabaha contract of sale, a client petitions a bank to purchase an item on their behalf.
Complying with the client's request, the bank establishes a contract setting the cost and
profit for the item, with repayment typically in installments. Because a set fee is charged
rather than riba (interest), this type of loan is legal in Islamic countries. Islamic banks are
prohibited from charging interest on loans according to the religious tenet that money is
only a medium of exchange and has no inherent value; so banks must charge a flat fee for
continuing daily operations. 

Requirements

 Business owner’s/Director’s valid, certified copy of National ID, passport, or any

other ID document approved by the Central Bank of Somaliland.
 A copy of memorandum and Article of Association of the business
 Business permit/license
 Business Physical Address
 Proper declaration and documentation of the customer’s source/volumes of income,
nature of business and purpose of account opening
 Two passport size recent photos of the sole owner and account signatories if they
are different from the owner
 Request letter from the business sole owner requesting to open the said account and
giving clear instruction regarding the account-signing mandate. Financing
 Maintain an active account with Bank
 Proof of residency and income
 Salaried employee, Self-employed professional or Self-employed businessperson
 Minimum age of 21 at the date of application
 A non-refundable $10 application processing fee required
 A guarantor to act as a co-signor

Conclusion
1. Private banks have not provided investment to egg yet
2. Any money larger than 2000 can be consider investment and it need specific
requirement rather than microfinance
3. Individual can only access financial of private banks not group of people
4. Only one type of Murabah can be accessible at this moment.