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Banking & Finance Laws



 The Somaliland Central Bank - Xeerka Baanka Dhexe - Law No. 54/2012 has been signed by the President on 12 April 2012 and has come into force on this date.  The Bank is essentially the Bank of Somaliland which was established in October 1994 under a constitutive Law that  followed closely the the 1968 Decree Law relating to the then Somali National Bank.   Article 3 of the 1994 Law (which mirrored Article 3 of the 1968 Law) stated that the principal objectives of the Bank of Somaliland as being:  “… fostering monetary stability, maintaining the internal and external value of the Somali shilling, and promoting credit and exchange conditions conductive to the balanced growth of the economy of the Republic, and within the limits of its powers, it shall contribute to the financial and economic policies of the State”.  In contrast the bank has now all the powers and duties of a Central Bank which are set out in Articles 4 to 6 of the new Law.

The new Law consists of 130 pages

The Bank of Somaliland has being operating since 1994, but Article 3(3) of the Law re-confirms that it shall own all the properties and assets previously owned/held before 1991 by the Somalia Central Bank,  which are situated in the territory of the Republic of Somaliland. The Somali National National Bank was re-named the Central Bank of Somalia under Law No. 21 of 18 February 1975 but operated until 1990 under Decree Law No. 6 of 19 October 1968.  (For other pre 1991 Banking laws - see below)


Somaliland (and Somalia) has not seen non-state owned commercial banking since January 1971 when the miliary dictatorship regime nationalised the few existing commercial banks including the National & Grindlays Bank which was the only main commercial bank operating in Somaliland (referred to then as “the Northern Regions”).  It was only in its last year of rule when the country and economy was collapsing that the dictatorship passed belatedly a  law  allowing “private” commercial banking - Law No. 7 of 26 January 1989.

Now that the Central Bank legislation is in place, the other laws dealing with commercial banks and other financial institutions regulated by the Central Bank will follow shortly.  Under Article 4(4)(g) of the Central Bank Law, it is the function of the Central Bank to undertake the licensing and regulation of banks, foreign exchange dealers, financial services providers, money providers, securities providers, securities exchanges as well as pensions and prudential services  etc.   Article 74 - 75 of the  Law deals with Foreign Exchange Dealers. Banks are dealt with briefly in Article 83 to 88, financial services in Article 90, non-bank securities in Article 92 and pensions/prudential services in Article 94.  Further legislation covering commercial and special banks and other financial institutions shall follow shortly. The Chairman of the Somaliland Central Bank has been quoted by Reuters on 23 April 2012 as saying that there were already  three foreign commercial banks that are keen to operate in Somaliland.


The House of Representatives  approved the Law on Islamic Banks on 19 September 2012 and the  President signed the Law on 3 October 2012 (Decree No. 0270/102012).  Here is a copy (in Somali) of the Somaliland Islamic Banks Law (Law No. 55/2012). The Law consists of 41 Articles and an addendum setting out the Application Form for Licence to set up an Islamic Bank.   More details to follow..

    Comment about the debate relating to the passage of Banking Laws: Some members of the House of Elders have raised recently objections to the fact that the Islamic Banks Law (and previously, the Central Banks Law) have been dealt with exclusively by the House of Representatives under their constitutional power to deal with   “financial” legislation which is set out in Articles 54 and 78(1) of the Constitution. Unlike most countries with presidential systems and bicameral parliaments (congress) with similar powers in legislation, the Somaliland House of Representatives has considerably more legislative powers than the House of Elders. This includes exclusive powers to deal with financial and budgetary legislation which goes straight to the President  for signature and need not be referred to the Elders.  In this respect the situation resembles that of the UK House of Commons (or, only partially, the Indian Lok Sabha - the House of the People) and not that of the United States where the Constitution accords the House of Representatives the privilege of originating all bills for raising revenue, “but the Senate may propose or concur with amendments” as in other bills (Article 1, Section 7) . The House of Commons claim of privilege over financial legislation which goes back to the 17th Century applies to public expenditure and to the revenue of  meeting that expenditure.  In all these countries, it is important that there is a clear definition of the “financial” or “money” or “revenue” bills are and their constitutions/laws often give the relevant House claiming the privilege to certify the bill.  For example, Section 3 of the UK Parliamentary Act 1911 states that any “certificate of the Speaker of the House of Commons given under this Act shall be conclusive for all purposes, and shall not be questioned in any court of law”. 

    As an example a Money Bill in the UK is defined as : “A Money Bill means a Public Bill which in the opinion of the Speaker of the House of Commons contains only provisions dealing with all or any of the following subjects, namely, the imposition, repeal, remission, alteration, or regulation of taxation; the imposition for the payment of debt or other financial purposes of charges on the Consolidated Fund, or on money provided by Parliament, or the variation or repeal of any such charges; supply; the appropriation, receipt, custody, issue or audit of accounts of public money; the raising or guarantee of any loan or the repayment thereof; or subordinate matters incidental to those subjects or any of them. In this subsection the expressions “taxation,” “public money,” and “loan” respectively do not include any taxation, money, or loan raised by local authorities or bodies for local purposes.” Article 101 of the Indian Constitution includes a similar definition but it also adds, under 101(g), that any matters “incidental” to the revenue and expenditures can be a money bill, and “Financial Bills” under the Indian Constitution are not only money bill defined in Article 110(1), but also those that “contain provisions which would, on enactment, involve expenditure from the Consolidated Fund of India” (Article 110(9)).

    In Somaliland, however, Article 55 of the Constitution states that “the House of Representatives may debate and amend the Budget, and approve it by a resolution of the House”.  The Article also states that the House can approve expenditure outside the budget through variation resolutions. There is no role for the House of Elders in all these budgetary matters.  Furthermore the House has exclusive powers to deal with financial matters, some of which, but not all,  are related to the budget and lists them as  “the imposition of taxes, duties and other schemes for raising revenue” as well as that “establishment of a Somaliland Income Fund or other Funds which are earmarked for specific issues” and the “management, collection and disbursement of these Funds” which shall be determined by other laws (see Clauses 1 and 2 of Article 54).  Unlike many other countries, Article 54 goes beyond these public finance matters and gives the House specific powers (in Clauses 3 and 4 of the Article) relating to monetary and economic management, such as: a) The printing of currency, and the issue of bonds, other certificates and securities, and (Cause 3) b) the much wider, regulation of the economic and  financial systems (Clause 4).

    It is the boundaries of this last Clause 54(4) “the regulation of the economic and financial systems” (in Somali, habeynta nidaamyada shaqaale iyo lacageedba” which is the centre of this debate about the banking laws.  The test of any laws falling within this rubic is whether or not they regulate or improve or sent standards for the economic or financial systems. So afar as the Central Bank Law is concerned, Article 11 of the Somaliland Constitution states that the state shall “establish a Central Bank which shall direct the monetary system and the currency of the nation”.  The law relating to the Central Bank therefore  includes provisions setting the unique functions and powers of the Bank which relate to public “financial and monetary” matters. In my view, therefore the constitutive law setting up the Central Bank falls within this rubric of Clause 54(4).   

    As for the Law relating to the Islamic Banks and the bill relating to Commercial banks, the same questions need to be considered. Although I have not yet seen the Commercial banks Bill, the Islamic Banks Law does not apply to any specific bank but is a generic law setting the regulatory regime for this specific financial sector. I was initially of the view that the reference to economic and financial systems should include a  public element as otherwise far too many   private commercial laws affecting the economic and financial systems could come under this rubric. It appears to me however that the public element is whether or not the law is regulating the financial system.  The Islamic Banks Law relates to a private financial system but its primarily aimed at the public regulation of that system by  setting  out clearly how the Central Bank can fulfil that regulatory function.  There are cogent  arguments, that this Law, therefore, also comes within the purview of Clause 54(4).  I suspect that  the Commercial Banks Bill will also set up  the regulatory  regime as its main feature.

    Whether or not this issue becomes a dispute to be referred for adjudication to  the Constitutional Court, it is important that  the House of Representatives adopts a clear policy of certifying bills, before it passes them, as being financial bills and perhaps also inform the House of Elders so that any disputes can be ironed out before the Law is passed and promulgated by the President.  - Editor 12/10/2012


The bill on Somaliland Commercial Banks is currently at the House of Representatives. It is not clear whether or not the Central Bank will process applications for licences of Islamic Banks until the Commercial Banks Law is promulgated.

 More on the progress of the Commercial Banks Bill - to follow.


The Somaliland Money Transfer Businesses Law Law No. 86/2019  came into force on 02 May 2019, but was gazetted on 01 June 2019. Copy of the Gazetted Law - Xeerka Xawaaladaha Somaliland Xeer Lr. 86/2019.

SLLaw copy of the with the arrangements available here. Separate Arrangements of the Law in Somali and English.





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