Somalia: Bank credit to the private sector

The latest value from 1989 is 14.84 percent, an increase from 10.31 percent in 1988. In comparison, the world average is 31.55 percent, based on data from 125 countries. Historically, the average for Somalia from 1960 to 1989 is 7.03 percent. The minimum value, 1.96 percent, was reached in 1960 while the maximum of 25.41 percent was recorded in 1974. See the global rankings for that indicator or use the country comparator to compare trends over time.

Bank credit in Somalia and other countries is defined as the credit extended by the banking institutions to the private sector only: both firms and households. It does not include lending to the government.

Credit is essential for the economy to function well. It funds new investments and allows people to purchase houses, cars, and other items. Of course, excessive lending and borrowing usually end up in financial crises but, in principle, credit availability is good for economic development.

If the banking credit to the private sector is about 70 percent of GDP and more, then the country has a relatively well developed financial system. The amount of credit can even exceed 200 percent of GDP in some very advanced economies. In some poor countries, the credit could be less than 15 percent of GDP. In these countries, firms and households essentially do not have access to credit for investment and various purchases.

Definition: Domestic credit to private sector by banks refers to financial resources provided to the private sector by other depository corporations (deposit taking corporations except central banks), such as through loans, purchases of nonequity securities, and trade credits and other accounts receivable, that establish a claim for repayment. For some countries these claims include credit to public enterprises.