UNDP and Visa Join Forces to Boost Financial Inclusion in Somalia

The United Nations Development Programme (UNDP) and Visa have entered into a partnership aimed at empowering the nation’s Micro, Small, and Medium Enterprises (MSMEs) and underserved communities. This collaboration is set against a backdrop of ongoing challenges in Somalia, including a fragile economy and limited access to financial services for a substantial segment of the population. The agreement promises to leverage digital financial services to foster economic growth, public service delivery, and sustainable development across the region.

Context of Financial Inclusion in Somalia

Financial inclusion refers to the access and usage of financial services by individuals and businesses, particularly those from disadvantaged backgrounds. In Somalia, where an estimated 73% of the population lives below the poverty line, the need for inclusive financial services is paramount. The economy is heavily reliant on agriculture and remittances from the Somali diaspora, yet MSMEs, which account for approximately 80% of employment and contribute 1.2% of the nation’s GDP, face numerous barriers in accessing finance. These include high-interest rates, a lack of collateral, and insufficient credit history, which often results in exclusion from formal financial systems.

The Somali government has recognized the importance of digital transformation in addressing these issues. With an increasing penetration of mobile technology, there is potential for digital financial services to bridge the gap between the unbanked population and formal financial systems. By collaborating with Visa, a leader in digital payments, UNDP aims to harness this potential to create inclusive financial solutions tailored to the unique needs of Somali MSMEs and individuals.

The Partnership Goals

The partnership between UNDP and Visa outlines several key objectives designed to enhance financial inclusion and improve public service delivery in Somalia:

1. Advancing Digital Financial Services for MSMEs and Citizens

One of the primary goals of the partnership is to advance digital financial services that cater to the needs of Somalia’s MSMEs and underserved communities. This will involve the development of innovative digital payment solutions that allow businesses and individuals to engage in transactions more efficiently and securely. The collaboration seeks to foster an environment where financial services are accessible, affordable, and reliable.

2. Digitalization of Public Services and Government Processes

The partnership also aims to improve public services by digitalizing government systems and processes. By leveraging technology, the initiative intends to streamline government operations, making them more efficient and transparent. This digital transformation is expected to enhance the delivery of public services, thus contributing to improved governance and accountability.

3. Raising Financial Awareness and Literacy

Understanding financial products and services is crucial for individuals and businesses to make informed decisions. As part of the partnership, UNDP and Visa will implement financial literacy programs to educate Somali MSMEs and citizens about available financial services. This initiative is expected to empower individuals with the knowledge needed to navigate the financial landscape, enhancing their ability to access and utilize financial services effectively.

4. Capacity Building for Public and Private Sectors

To ensure the sustainability of financial inclusion efforts, the partnership will focus on capacity building within both the public and private sectors. This includes training and supporting organizations such as the Central Bank of Somalia and the National Identification and Registration Authority (NIRA). By strengthening these institutions, the partnership aims to create a robust framework for financial inclusion that can support long-term economic development.

5. Support for the Somali Digital National ID Project

A significant aspect of the partnership is its alignment with Somalia’s National Digital ID project. By supporting the development and implementation of a digital national identification system, the initiative aims to facilitate access to formal financial services. A reliable identification system is essential for establishing credit histories, which in turn will enable MSMEs to secure financing.

6. Accelerating Sustainable Development Goals (SDGs) Implementation

The partnership seeks to contribute to the achievement of the Sustainable Development Goals (SDGs) in Somalia. By promoting financial inclusion and digital transformation, the collaboration aligns with several SDGs, including those focused on reducing poverty, promoting economic growth, and fostering innovation. The initiative is expected to create opportunities for marginalized communities, enabling them to participate more fully in the economy.

The First Program: Digital Payments Initiative

The first program to be rolled out under the UNDP-Visa partnership focuses on advancing digital payments and financial services, particularly targeting MSMEs, youth, and women entrepreneurs in Somalia. This initiative recognizes the critical role of these groups in driving economic development and aims to empower them through access to digital financial solutions.

Empowering Women and Youth Entrepreneurs

Women and youth are often disproportionately affected by economic challenges in Somalia. By providing them with access to digital financial services, the partnership aims to empower these demographics to start and grow their businesses. Access to formal financing will enable women and youth entrepreneurs to invest in their ventures, create jobs, and contribute to local economies.

Innovative Financing Solutions

The collaboration will also explore innovative financing solutions tailored to the unique needs of Somali MSMEs. This includes developing microloans and other financial products that cater to the specific challenges faced by these businesses. By enhancing access to formal financing, the partnership seeks to alleviate some of the barriers that hinder MSMEs from thriving.

Conclusion: A Catalyst for Change

The partnership between UNDP and Visa marks a significant step towards enhancing financial inclusion in Somalia. By focusing on digital financial services, public service delivery, and capacity building, the initiative has the potential to transform the economic landscape of the country. As Lionel Laurens, UNDP Somalia Resident Representative, noted, this collaboration is expected to catalyze innovative solutions that address the persistent challenges facing Somalia.

The successful implementation of this partnership could serve as a model for other countries facing similar challenges in financial inclusion. By empowering marginalized communities and promoting sustainable economic development, UNDP and Visa are paving the way for a more inclusive and resilient future for Somalia. The impact of this collaboration will not only benefit individuals and MSMEs but will also contribute to the broader goals of peace and stability in the region.

As Somalia continues to navigate its path toward recovery and growth, initiatives like this are crucial in ensuring that no one is left behind in the quest for economic prosperity. The UNDP-Visa partnership is not just about financial transactions; it’s about building a brighter future for Somalia through inclusive growth and digital transformation.