Thriving Somali economy emerges in ‘Little Mogadishu’ in Kenya

Posted on 21/03/2011

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Despite the collapse of the formal economy and of central government in Somalia, a remarkably resilient ‘parallel’ economy has emerged. Once a predominantly Asian residential estate, Eastleigh has become the centre of Somali entrepreneurship in Kenya and is popularly referred to as ‘Little Mogadishu’. Eastleigh is at the centre of a network of trade that connects the Arabian Peninsula, Somalia, Kenya and East and Central Africa, with the Somali business community as the common thread.

Somali Investment in Kenya charts the rise of Somali entrepreneurship in Kenya in the context of economic breakdown in Somalia, its impact on the Kenyan economy and the advantages and challenges.

Two factors characterize Somali business activities in Kenya. First, they operate largely outside the formal economy of the country. Secondly, they rely heavily, but not exclusively, on clan or kinship networks of trust in their business dealings.

Somali entrepreneurs have introduced new concepts of business in Nairobi. Instead of going to a bank, preparing a business plan and asking for a loan, as in the past, these entrepreneurs now prepare a business plan, sell shares and implement the project. Somali-owned businesses have also created jobs for local unskilled workers.

Growing Somali investment in Nairobi has also attracted banks and other service-providers, demonstrating that urban refugees are not necessarily a burden on the state and can be an economic asset.

Although business rivalry often leads to overblown accusations that Somali businesses are funded from the proceeds of piracy or criminality, there are some genuine national security concerns about activities within the Somali communities in Kenya. The long, open border between the two countries provides easy access for the supporters of extremist groups such as Al-Shabaab and Hizbul Islam to recruit and raise funds in Kenya.

Eastleigh, Nairobi, Kenya and East Africa have benefited from the entrepreneurial activities of Somali business people. These activities have developed despite, or even because of, the collapse of Somalia. The experience h as not been without problems. Governments in the region and internationally should think about ways of protecting investors and bringing more of these activities in the formal economy.

Source: Chatham House

By: Farah Abdulsamed 10.03.2011

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