Entrepreneurship in Somalia

In a paper about Somalia, Tatiana Nenova writes that "...the private sector has demonstrated its much-vaunted capability to make do. To cope with the absence of the rule of law, private enterprises have been using foreign jurisdictions or institutions to help with some tasks, operating within networks of trust to strengthen property rights, and simplifying transactions until they require neither. Somalia’s private sector experience suggests that it may be easier than is commonly thought for basic systems of finance and some infrastructure services to function where government is extremely weak or absent..." A discussion analysing this assertion had a number of conclusions in their introductory remarks Ian Bannon and Tim Harford stated that "...Entrepreneurs in Somalia have used three tactics to operate in an institutional vacuum. First, they have “imported institutions,” for example by using banking systems in nearby countries. Second, they have used clans and other local networks of trust to help with contract enforcement, payment and transmission of funds. Third, they have simplified transactions to a point where other tactics are not needed. How can these tactics be reinforced or defended? Are there others that can be supported? There are inherent limits to what the private sector can achieve without the support of a capable state to enforce property rights and provide basic public goods. But there is also a risk that a failed state will be replaced by a predatory one. How can fledgling states be encouraged to support, rather than predate on, entrepreneurs?
Entrepreneurs often need to bridge religious, ethnic or tribal boundaries to get things done. Can entrepreneurship be harnessed for peace and reconciliation?..."
Via PSD Blog