June 16, 2022—When Yuusuf Shire, a small trader of electronics and home appliances in Somalia's capital Mogadishu, ventured into business five years ago, he says nothing prepared him for the lengthy and cumbersome process of applying for a business license. It took him three weeks to register his business; renewing the license every year was no better. But all that hassle is now behind Shire and hundreds of thousands of other Somali business owners.
The government of Somalia, with support from the International Finance Corporation and the World Bank, officially launched an online business registration and licensing system in March 2022, after an initial 12-month pilot to test the system.
The new online system has made it easier and faster for entrepreneurs to register new businesses and get licenses to operate, helping to fuel the growth of new businesses, especially micro, small and medium-sized enterprises (MSMEs).
"We spent so much time commuting to the ministry offices and queuing to submit documents,” Shire said. “This online system has saved us time. I can access my business documents in soft copy and share with banks and business partners hassle-free.”
The waiting period for business registration is down to four days on average from more than two months previously. Likewise, steps to register a business are now down to three on the online system from the nine steps the previous system required.
This is making it easier for informal businesses to formalize, according to Somalia's Deputy Minister for Commerce and Industry, Abdulkadir Sharif Shekuna Maye.
"We developed the online system to reduce lengthy registration and licensing procedures and save businesses time and operational costs. This is particularly true for informal and smaller businesses seeking to formalize their operations but not having substantial resources," Minister Maye said.
Between 2021 and April 2022, around 1,089 businesses registered on the new online system during the pilot phase, and the number continues to grow after the official launch in March 2022. Somalia targets registering about 5,000 businesses by December 2025, of which it aims to have 30% be women-led.
Business registration reforms can enhance business formation, job growth and productivity, as well as reduce informality and gender disparity in entrepreneurship, according to a World Bank Group guide: Reforming
Business Registration Toolkit.
“Business registration reform is one of the first critical steps toward fostering private sector-led growth. Simplifying the business registration process and making it faster and cheaper will bring benefits to the whole Somali economy,” said Kristina Svensson, World Bank Country Manager for Somalia.
System efficiency studies by the Ministry of Commerce and Industry reveal that reserving a company name in Somalia now takes 25.3 hours, down from the previous 34.4 hours. Getting a business license is now down to about 16 hours, compared to 45.6 hours previously.
"The Somalia business registration reform is significant for firms and investors because it enhances credibility of firms, creates a platform for addressing duplicate registrations, and reduces the need to travel back and forth to obtain the service," said Amena Arif, IFC Country Manager for Somalia.
Local businesses are not the only beneficiaries of the online system. It’s a boon for global investors, too.
Kube Energy, a Norwegian renewable energy services company that provides cost-effective and reliable solar mini-grid solutions in fragile and hard-to-reach areas, is among international investors who have benefited from the new system.
“We wanted to expand our venture to Baidoa in Somalia and were doing a lot of study and research to try and understand Somalia’s regulatory framework on energy and how to register a company,” said Kristen Petillon, Kube Energy business development director.
As fate would have it, Petillon’s research led him to Mohamed Dubo’s LinkedIn profile, the director of the Investment Promotion Office (SOMINVEST), who introduced him to his team and the online system. Kube Energy became one of the pilot companies using the online system.
“The experience was better than establishing a company in some European countries,” said Petillon.
The World Bank supported this project through the Somalia Capacity
Advancement, Livelihoods and Entrepreneurship Digital Uplift Project
(SCALED-UP). IDA and the Multi-Partnership Fund jointly funded the project with support from Denmark, European Union, Finland, Germany, Italy, Norway, State & Peacebuilding Fund, Sweden, Switzerland, the United Kingdom, and the USA. The program was also supported by IFC's Somalia
Investment Climate Reform Project II (SICRP2), with funding from the government of Denmark, the European Union, and the United Kingdom's Foreign Commonwealth Development Office.
Published June 2022