Business and Economics Journal

Regulatory Compliance and Supervisory System of Islamic Banks in Mogadishu Somalia

Abstract

Hamdi Jama Warsame* and Fatima Abdullahi Suleiman

This research concentrates on the current regulatory and supervisory environment for Islamic banks in Somalia, including their compliance with and ability to effectively oversee that framework. The transition to conventional banking in Somalia is fraught with difficulties. Existing banking regulations are inadequate. The goal of this study was to investigate the regulatory and supervisory background of Islamic banking in Somalia in order to provide recommendations for how to best accommodate this banking system. There is an emphasis on depth of experience and personal insight in this study. We also used interviews to gather data from customers of the Premier, Dahabshil, Amal, and Salama banks. What's more, the research uncovered that Islamic banking presents its own unique set of dangers. Credit risks, which impact P&L transactions, and market risks, which have an impact on sales-based deals, are the two most prominent examples. The research also showed that Islamic banking presents numerous difficulties for the country's banking regulation and supervision systems. Ultimately, regulating banks helps to calm the economy by keeping depositors' money secure and preventing banking systemic failures. This means its significance to Islamic banking cannot be overstated. Since Islamic banking functions on different rational foundations than traditional banking, the study concludes that new regulatory and supervisory laws are needed.