By Said Abdirizak Ali - Senior corporate manager of NGOs & Climate Resilience at IBS Bank, Somalia. Certified Islamic Banking Practitioner (CIBP), IoBM-CIBF.
“Somalia’s future depends not only on aid, but on turning private investment into jobs, productive capacity, resilience, and inclusive growth.” Said Abdirizak Ali
For decades, Somalia’s economic story has been closely associated with conflict, humanitarian crises, displacement, drought, and dependence on international assistance. But another story is emerging—one of entrepreneurs building businesses, investors entering new sectors, financial institutions expanding services, and communities searching for sustainable economic opportunities.
The question facing Somalia today is no longer simply how to recover from fragility. It is how to transform the country’s economic potential into productive investment, decent jobs, and long-term resilience. That transformation will depend heavily on the private sector.
The Jobs Challenge#
Somalia faces a serious employment gap. The World Bank states that nearly 500,000 people enter the labor force each year, while only around 80,000 jobs are created. At the same time, the private sector is estimated to account for about 85 percent of jobs in the country.
These figures highlight a fundamental reality: Somalia cannot address its employment challenge through public-sector expansion or humanitarian programs alone. The country needs businesses that invest, expand, hire workers, develop supply chains, and compete in regional and international markets.
Private investment can play that role. But investment should not be understood simply as capital entering the country. The real objective should be productive investment—investment that creates jobs, increases productivity, develops local industries, improves services, expands exports, and builds resilience.
From Consumption to Production#
Somalia’s private sector has demonstrated remarkable resilience. Businesses have continued operating despite insecurity, limited infrastructure, weak institutions, and restricted access to finance. However, much private-sector activity remains concentrated in commerce and consumption-driven services.
The World Bank has identified limited investment in productive and tradable sectors as a major constraint to Somalia’s structural transformation. This presents both a challenge and an opportunity.
Somalia needs to move beyond a business model centered primarily on importing and selling goods toward one that increasingly produces, processes, and exports. Agriculture can become more productive through irrigation, mechanization, storage, processing, and value-chain finance.
Livestock can generate greater value through veterinary services, modern slaughter facilities, cold chains, and export infrastructure. Fisheries can create jobs through investment in cold storage, processing, logistics, and sustainable fishing.
Renewable energy offers another major opportunity. Expanding affordable and reliable electricity can reduce business costs while supporting manufacturing, agriculture, digital services, and small enterprises. Recent development initiatives have already identified renewable energy and improved electricity access as important drivers of private-sector growth.
Finance Is the Bridge Between Opportunity and Investment#
One of Somalia’s biggest obstacles is not a shortage of entrepreneurial ambition. It is access to appropriate and affordable finance.
Many small and medium-sized enterprises (SMEs) struggle to obtain long-term capital because they lack sufficient collateral, formal financial records, or the credit history required by traditional lending models. This is where financial institutions, development finance institutions, donors, and investors can work together.
Blended finance can help reduce the risks associated with investing in fragile markets. Donor funding, guarantees, technical assistance, concessional capital, and commercial finance can be combined to make projects more attractive to private investors.
Islamic finance can also provide important opportunities. Instruments such as Murabaha, Ijarah, Musharakah, Mudarabah, and Salam can be tailored to different business and productive-sector needs.
The goal should not be to replace commercial finance with grants. Instead, grants and concessional resources should help businesses become investment-ready and enable commercial capital to reach sectors that would otherwise remain underserved.
De-Risking Investment in a Fragile Environment#
Investors naturally consider risk before committing capital. Somalia’s challenges—including security concerns, infrastructure gaps, regulatory uncertainty, limited market information, and climate shocks—can increase the cost of investment.
The answer is not to pretend these risks do not exist. The answer is to develop mechanisms that manage and share them.
Credit guarantees, political-risk insurance, first-loss facilities, blended finance, public-private partnerships, and stronger regulatory institutions can help reduce barriers to investment.
International experience demonstrates that public development resources can be used strategically to crowd in private capital. The World Bank’s IDA Private Sector Window, for example, uses risk-sharing mechanisms to mobilize private investment in fragile and low-income markets. For Somalia, similar approaches can help move capital toward sectors with strong development and employment potential.
Young People Need Investment, Not Only Training#
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Somalia’s young population represents one of its greatest economic opportunities—but only if young people can participate meaningfully in the economy. Training programs are important, but skills alone cannot create jobs when businesses lack the capital to expand.
A stronger approach would connect skills development with entrepreneurship, access to finance, market opportunities, digital services, and private-sector investment.
Young people should not only be viewed as future employees. They should also be viewed as entrepreneurs, innovators, investors, producers, and employers.
The same principle applies to women. Expanding women’s access to finance and markets can strengthen household incomes, business growth, and economic inclusion. Recent reforms supported by development partners have specifically sought to improve access to finance for women who lack formal bank accounts.
Turning Climate Vulnerability into Investment Opportunity#
Climate change is one of Somalia’s greatest economic risks. Droughts, floods, water shortages, and environmental degradation can destroy livelihoods and increase poverty. But climate resilience can also become an investment opportunity.
Solar-powered irrigation, renewable energy, water infrastructure, climate-smart agriculture, drought-resistant production, livestock services, sustainable fisheries, and climate-resilient infrastructure can generate both economic and environmental benefits.
Instead of repeatedly financing recovery after climate shocks, Somalia can increasingly invest in systems that reduce vulnerability before those shocks occur. This requires stronger climate-finance pipelines and greater collaboration between government, financial institutions, development partners, and private investors.
The Role of Government#
Private investment cannot succeed in isolation. The government’s role is to create an environment in which responsible investment can take place.
This includes strengthening laws and regulations, improving transparency, protecting property rights, developing infrastructure, expanding reliable electricity, improving public-private dialogue, and ensuring predictable investment rules.
Recent reforms supported by the World Bank emphasize stronger institutions, sustainable public finances, renewable energy, financial inclusion, fisheries, broadband connectivity, and private-sector development.
The government’s role, therefore, is not to replace the private sector, but to create the conditions under which the private sector can invest and grow.
A New Investment Mindset#
Somalia is already beginning to present itself differently to investors. In 2026, the government announced a pipeline of 100 investment projects across areas including energy, infrastructure, and the blue economy, with the aim of attracting domestic and international capital.
The next step is to turn investment opportunities into bankable projects.
Investors need reliable information, clear regulations, credible financial models, transparent procurement processes, risk-management mechanisms, and institutions capable of supporting projects from concept to implementation.
This is where Somalia’s development partners, financial institutions, investment-promotion agencies, and private sector can make a significant difference.
From Aid Recipient to Investment Destination#
Humanitarian assistance will remain necessary for Somalia’s most vulnerable communities, particularly during emergencies. But aid should increasingly be complemented by investment that creates productive capacity and sustainable livelihoods.
The objective should be a development model where humanitarian resources help stabilize communities, development finance helps prepare projects, and private capital helps scale viable businesses. That is how Somalia can gradually move from relief to resilience, from resilience to investment, and from investment to sustainable growth.
The country’s future will not be determined solely by the amount of aid it receives. It will increasingly depend on its ability to mobilize capital, develop businesses, create jobs, strengthen institutions, and turn its natural and human resources into productive economic assets.
Somalia’s fragility is real. But so is its opportunity. The challenge now is to build the financial systems, institutions, infrastructure, and partnerships capable of turning that opportunity into investment—and turning investment into jobs, resilience, and inclusive growth.
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Said Abdirizak Ali is a senior corporate manager of NGOs & Climate Resilience at IBS Bank, Somalia. Certified Islamic Banking Practitioner (CIBP), IoBM-CIBF.
The views expressed in this article are those of the author and do not necessarily reflect the editorial position of Dawan Africa.