Briefing Paper

Farah Abdulsamed
  • Despite the collapse of the formal economy and of central government in Somalia, a remarkably resilient 'parallel' economy has emerged. Based on traditional clan relationships, a lack of bureaucracy and well-established channels for remittance payments from the diaspora, this model has travelled with Somali émigrés to Kenya.

  • However, the success of Somali business has caused tension with other communities in Kenya, leading to widespread, but overblown, accusations of links to piracy and criminal activity.

  • Some businesses that began in the informal sector are making the transition to formal enterprise. Kenyan authorities should seek to encourage this with an enabling regulatory environment. Success will bring increased tax revenue and allow regulation to prevent subversive activities.

  • The Somali community's success belies the highly risky nature of the parallel market. Within the informal sector, there are few safeguards for either investors or consumers, and many businesses have suffered catastrophic losses because of this.

  • Somali trade centred on the Nairobi suburb of Eastleigh has flourished, providing goods and services to local and regional consumers at prices well below the market average. Its impact - felt far beyond Kenya and Somalia to the Gulf states and Central Africa - demonstrates the ability of some businesses to thrive despite conflict in Somalia.