Propelling An Economic Ecosystem in Somalia

After decades of protracted conflict, political fracture, and climate-related hardships, Somalia has significant barriers to private sector growth, from absent physical and financial infrastructure to recurring climate-driven shocks, high production costs, and transportation constraints in insecure zones.

As a result, Somalia has one of the lowest gross domestic products in the world, and unemployment hovers at 75 percent.

Despite Somalis’ persistent entrepreneurial spirit, new businesses are often hamstrung by the lack of components such as cold chain storage, water for irrigation, or reliable transportation. Firms have struggled to produce at a scale that reduce costs, improves quality, and meets demand.

At the same time, the policy and regulatory frameworks that govern and support businesses have been weakened by years of political instability and violence and by a financial infrastructure that lacks formal banking and accessible loans.

The Somalia Growth, Enterprise, Employment and Livelihoods (GEEL) project, funded by the United States Agency for International Development (USAID), worked through Somalia’s private sector to build a robust economic engine that boosted employment, increased incomes, and contributed to stability.

Since 2016, GEEL’s market-driven approach has leveraged over $33.5 million in private capital investments and created more than 7,400 full-time jobs and an estimated 15,700 secondary and part-time jobs, while signaling to the world that Somalia is open for business.

GEEL is notable for being among the first economic development projects in Somalia, a nation that has long relied on humanitarian aid. Its success has proven that Somalia is ready for the investments that will solidify its place in global markets.

GEEL’s approach to development and private sector partnership is unique; the project works through private sector partners in various fields including agriculture, livestock, fisheries, and energy. Investments and technical support are tied to partner businesses’ own contributions to their enterprises and the larger value chains they are part of. This incentivizes partners to make strategic choices that benefit the bottom line while also contributing to a healthier, more inclusive, and more resilient economy.

Pivotal to economic growth is access to the finance that makes production and job creation possible. GEEL has transformed Somalia’s investment landscape by attracting the country’s first international private investments and designing new, inclusive financing models. GEEL has made important strides in improving loan quality, and has built the capacity of Somali banks, microfinance institutions, and government institutions responsible for ideals like equity, innovation, and sustainable resource use.

USAID’s breadth of impact on target value chains through GEEL has been remarkable. GEEL has leveraged $18 million in investments in agricultural value chains and has supported more than 9,800 small-scale food and dairy farmers with trainings and technical assistance. By introducing new technologies and climate-targeted techniques, GEEL helped farmers boost their production by 32 percent, and increase their domestic sales by 50 percent.

For example, GEEL worked with dairy farmers to make their cows more productive and helped nearby smallholder farmers boost the nutritional value of their fodder. It then linked the two types of businesses, creating a stable, protected supply chain and a new income stream for dozens of rural households.

By linking entrepreneurs to represent Somalia for the first time in almost 30 years at international trade expositions in the United Arab Emirates, Turkey, and China, the project helped the Somali firms realize a nearly 300 percent increase in export sales—and showed the world that Somalia’s products have the high quality required to compete in a global market.

GEEL’s market-driven approach has also spurred business growth among more than 14,500 microenterprises, many of which are owned by youth, women, and internally displaced persons (IDPs). The project engaged more than 8,500 women and youth with training, investment, or business development services which can help lead to better employment opportunities.

And to ensure that financing for businesses was inclusive, GEEL created innovative loan packages to reduce barriers to loan access for women and other groups who are often sidelined from finance opportunities.

While GEEL works through the private sector to enable broad economic growth, it also works to build resilience among vulnerable farmers. In the Bay and Bakool areas of South West State, agricultural production depends on rainfed farming, and is therefore especially vulnerable to climate-related shocks like drought and erratic rainfall. Farmers also suffer from weak agricultural production due to poor-quality inputs like seeds and fertilizers, outdated skills, and limited infrastructure.

Since 2019, GEEL has applied its market systems development approach to help build climate resilience with a focus on long-term food security. The project harmonized its activities with existing humanitarian efforts and worked through private sector partners like seed producers, distributors, and exporters to strengthen production, storage, and access to finance for 6,000 smallholder farmers. Preliminary data show a 300 percent increase in yield and a 70 percent reduction in post-harvest loss.

Further up the value chain, GEEL linked more than 1,000 smallholder farmers to grain milling companies that purchased their harvests for a fair, negotiated price. These market-oriented activities support food security among farmers and their households.  

GEEL ensured even the most vulnerable farmers have access to high-quality seeds and training by engaging two commercial seed suppliers in the area to implement a seed voucher system and establish distribution shops in vulnerable areas. And GEEL worked with a local telecommunications company to develop a digital farming tool that delivered timely, seasonal messages on best practices to farmers, reinforcing new knowledge.

When the GEEL project concludes later this year, its six-year focus on private sector self-reliance will help ensure that businesses and productive value chains have the resources, technologies, and market relationships they need to create additional growth and continue an upward spiral of resilience.