The SME Growth in Somaliland | ICPAS

ICPAS National SME Survey 2026Interactive web edition

National SME Survey

The SME Growth in Somaliland

Accounting practices, access to finance and digital transformation.

Published by ICPAS · Hargeisa, Somaliland · May 2026

226

SMEs across five regions

A structured survey of formal and semi-formal businesses, examining the financial systems that support growth.

65.5%expect growth in the next 12 months

66.8%report complete, updated records

77.0%have never applied for a formal loan

98.2%use Zaad mobile money

78.3%have not heard of IFRS for SMEs

Business confidence is running ahead of financial readiness.

Somaliland's SMEs are commercially active, digitally connected and optimistic. Yet many lack the reporting depth, professional support and finance readiness needed to convert activity into sustainable growth.

The enterprise base is resilient. 59.8% report improved performance in the previous year and 65.5% expect growth. Mobile money is already embedded in everyday business operations.

The financial architecture remains shallow. One-third keep no records or incomplete records, only 22.1% maintain full financial statements and 77.0% have never applied for formal finance.

The challenge is not a lack of entrepreneurship. It is the need to build reliable financial systems around SMEs.

66.8%

Complete, updated records

An encouraging base for tax, finance assessment and management reporting.

22.1%

Full financial statements

Transaction records are not yet translating into complete financial reporting.

Three lenses on SME readiness.

Switch between accounting, finance and digital transformation. Some survey questions allowed multiple responses.

AccountingFinanceDigital & AI

Sales activity is recorded more often than financial position.

Many firms can identify sales, but fewer maintain the linked records needed to understand cash, assets, liabilities and working capital.

Sales / revenue register67.3%

Inventory records49.6%

Cash book35.0%

Full financial statements22.1%

Bank reconciliation14.6%

Bank presence has not become credit participation.

The same proportion hold a commercial bank account and have never applied for a formal loan.

Use Zaad98.2%

Commercial bank account77.0%

Never applied for formal loan77.0%

Working capital priority61.1%

Never used Islamic finance54.0%

Digital payments are far ahead of digital accounting.

The next step is to connect transaction data to bookkeeping, tax filing, management reporting and finance applications.

Zaad mobile money98.2%

Excel / Google Sheets31.0%

Desktop accounting software23.0%

Cloud accounting software9.7%

Use AI writing tools27.0%

The gap is depth, consistency and professional capacity.

SME accounting remains heavily owner-dependent, and financial reporting often stops at the income statement.

Accounting signal	Finding	Why it matters
Owner manages accounting	38.1%	Commercial knowledge may be strong, but technical reporting capacity can remain limited.
Internal qualified accountant	20.4%	Professional accountancy has not yet penetrated the SME market at scale.
Profit and loss statement	56.6%	Profit reporting is much more common than position or liquidity reporting.
Balance sheet	14.2%	Assets, liabilities and working capital may not be systematically assessed.
Cash flow statement	15.9%	Profit may be visible while cash pressure remains hidden.
Unaware of IFRS for SMEs	78.3%	The most relevant international reporting framework is largely absent from practice.
Never externally audited	62.4%	Most surveyed SME information has not been independently verified.

29.2%

Basic bookkeeping gap

The most reported accounting skills need.

25.7%

Standards knowledge

The second-ranked skills gap.

16.4%

Software proficiency

Digital adoption requires capable users as well as tools.

A sales register shows activity. It does not, by itself, show liquidity, solvency, unpaid suppliers or owner withdrawals.

Finance exclusion begins before an application is submitted.

The survey points to non-participation, not only rejection. Documentation, product suitability, awareness, cost, collateral and trust all shape finance readiness.

77.0%

Have a bank account

Formal banking presence is relatively high among surveyed SMEs.

77.0%

Never applied for a formal loan

Most businesses do not enter the formal credit process.

Finance barrier	Major barrier	Response direction
High profit rates / finance cost	43.4%	Affordable products aligned with SME margins and cash cycles.
Complex application process	34.5%	Simpler applications and finance-readiness support.
Lack of acceptable collateral	33.2%	Alternative assessment and collateral approaches.
Few Shariah-compliant products	27.0%	Practical Murabaha, Ijarah and partnership products.
Weak financial records	19.5%	Bookkeeping, reporting and documentation assistance.

93.4%

Receive customer payments

Mobile money is core business infrastructure.

73.5%

Pay suppliers

Transaction histories reveal trading activity and cash movement.

66.8%

Pay taxes

Existing digital behaviour can support more traceable systems.

With consent and safeguards, mobile-money histories can complement financial statements in credit assessment. They should not replace proper accounting.

Digitally active does not yet mean digitally integrated.

Connectivity and mobile payments are established for many firms. Financial systems, e-commerce and AI adoption remain uneven.

44.2%

Very reliable internet

A useful base for cloud systems and online services.

26.5%

No digital finance tool

Some firms still require simple manual or spreadsheet entry points.

50.0%

No AI tools used

AI adoption is at an early transition stage.

Skills lead the barriers. 24.3% cite lack of digital skills or training, 23.0% do not see digital tools as necessary and 20.8% cite cost.

Accounting is the leading AI opportunity. Automated bookkeeping is the top perceived benefit (26.1%), while data privacy and security are the top concern (26.1%).

Basic records

Simple, standardised manual templates.

Structured spreadsheets

Controls, reconciliation and management summaries.

Accounting software

Affordable desktop or cloud tools matched to business needs.

Integrated systems

Payments, reporting, tax and responsible AI under human oversight.

AI can support classification, checking, drafting and forecasting. It does not replace standards, ethics or professional judgement.

Build one connected pathway from records to finance.

Open each stakeholder group to review the practical actions proposed by the report.

01ICPAS

Launch tiered learning in basic bookkeeping, financial reporting and IFRS for SMEs.
Create practical templates, regional tax clinics and affordable SME accounting service models.
Train accountants and businesses in safe, supervised AI-assisted bookkeeping and reporting.
Develop mobile-money bookkeeping guidance and responsible data-use principles.

02Government and regulators

Phase in minimum record standards alongside practical education and support.
Publish simple Somali-language tax guidance with sector examples.
Build on mobile tax payments and develop consent-based data-sharing rules.
Strengthen regional support outside Hargeisa.

03Financial institutions

Create formalisation-to-finance pathways linked to bookkeeping support.
Design affordable working-capital products around inventory and trading cycles.
Expand suitable Shariah-compliant products for small firms.
Use consented transaction histories as supplementary evidence, not as a substitute for reporting.

04Development partners

Fund regional accounting clinics, digital bookkeeping pilots and recurring survey evidence.
Connect training to real finance assessment pathways and measurable outcomes.
Support privacy-protected credit innovation and regional inclusion.

0-6 months

Templates, tax clinics and IFRS for SMEs awareness.

6-12 months

Regional accounting pilots, AI training and mobile guidance.

12-24 months

Finance pathways, consent-based scoring and product pilots.

24+ months

Reporting standards, advisory networks and recurring surveys.

A national diagnostic, read within its boundaries.

The 54-question survey was administered face to face in May 2026 across Maroodijeex, Togdheer, Awdal, Saaxil and Sanaag.

226 SMEsFive regions54 questionsMay 2026Cross-sectionalDescriptive and inferential analysis

Analysis. Frequencies, cross-tabulations, chi-square tests, effect sizes, logistic regression and OLS models were used. The results identify associations rather than causal effects.

Coverage. Maroodijeex represents 67.3% of the sample. Small firms, male ownership and urban formal-to-semi-formal businesses dominate the evidence base.

Interpretive caution: informal enterprises and female-owned firms may be under-represented; revenue non-response and self-reporting may affect some measures. Findings should guide policy and future research, not be treated as a census.

How to cite this report

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APA 7

Institute of Certified Public Accountants of Somaliland. (2026). The SME growth in Somaliland: Accounting practices, access to finance, and digital transformation. ICPAS.

Harvard

Institute of Certified Public Accountants of Somaliland (ICPAS) (2026) The SME Growth in Somaliland: Accounting Practices, Access to Finance, and Digital Transformation. Hargeisa: ICPAS.

Chicago

Institute of Certified Public Accountants of Somaliland. The SME Growth in Somaliland: Accounting Practices, Access to Finance, and Digital Transformation. Hargeisa: ICPAS, 2026.

BibTeX

@report{icpas2026sme, title={The SME Growth in Somaliland: Accounting Practices, Access to Finance, and Digital Transformation}, author={{Institute of Certified Public Accountants of Somaliland}}, institution={ICPAS}, address={Hargeisa, Somaliland}, year={2026}, month={May}}

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