Borrowing from relatives in Somalia: hagbad, qard hasan and remittances
In Somalia, lending between individuals rests on family and clan solidarity, the rotating savings circles known as hagbad or ayuuto and money sent by the diaspora; no crowdlending platform is licensed by the Central Bank of Somalia.
Hagbad, the savings circle at the heart of Somali saving
In a hagbad, each member pays a fixed sum every week or every month, and the pot goes to each of them in turn. The system makes it possible to obtain a large sum without interest, based purely on trust.
Ayuuto, a common name among market traders
The term ayuuto often refers to the same practice, widespread among women traders in Mogadishu markets such as Bakara or Hamar Weyne. Contributions are now frequently paid through EVC Plus rather than in cash.
Qard hasan, the benevolent loan between Somali relatives
An interest-free loan between family members corresponds to the qard hasan valued by Islamic tradition. It pays for weddings, medical care, travel or opening a shop, with repayment that is often flexible and has no written schedule.
The diaspora, a first-rank lender
Somalis settled in the United Kingdom, the United States, Canada or Sweden send more than one billion dollars every year. Part of this money is lent rather than given, notably to start a business or buy a vehicle.
Money transfer companies, the channel for funds
Dahabshiil, Amal Express, Taaj and Iftin are among the operators used to move the money. The CBS has licensed seventeen money transfer companies, which are nevertheless not authorised to provide any kind of financing.
Why put the agreement in writing
A document signed before witnesses or a notary sets out the amount, the repayment date and the currency, almost always the dollar. If a disagreement arises, it makes mediation by clan elders or a court case easier.
Elders and the settlement of money disputes
In many communities, money disputes are first brought before the elders under customary law, known as xeer. This mediation is faster than the courts, but it depends on the balance of power between the families involved.
When the savings circle is no longer enough
For a need beyond what the family can cover, Islamic microcredit in Somalia offers financing supervised by the CBS. Licensed institutions often require a joint-liability group inspired by the same trust mechanisms.
Helping a relative who is out of work
High youth unemployment leads many families to support a relative with no income. The page on financing without a job in Somalia also presents the social programmes and safety nets that currently exist.
Fake lending offers on social media
Facebook, TikTok or Telegram accounts claim to lend money from the diaspora or the Gulf states. They demand opening fees through mobile money and then vanish: no serious lender asks for payment upfront.
The contrast with Kenyan lending platforms
In Kenya, digital lending apps and credit companies are supervised by the central bank. Peer-to-peer lending in Kenya shows a far more formal market, whereas Somalia still relies largely on personal networks.
New CBS rules on SACCOs
In 2026 the CBS issued a regulation on savings and credit cooperatives. It could give a legal framework to savings groups that are informal today, provided they apply for a licence and follow the governance rules.
Setting up a family loan or hagbad safely
- Clearly agree the amount, the currency, usually the dollar, and the repayment date or frequency.
- Draw up a simple document signed by the lender, the borrower and two trusted witnesses.
- For a hagbad, list the members, the order in which they receive the pot and the rule if someone drops out.
- Make payments through EVC Plus, eDahab or bank transfer so that every payment leaves a record.
- Decide in advance on the remedy in case of dispute: elders' mediation, a notary or the competent court.
Real costs of a private loan in Somalia
| Item | Usual situation | What can change |
|---|---|---|
| Interest | None, in line with qard hasan | Written agreement between the parties |
| International transfer fees | Commission of the transfer company | Operator, sending country, amount |
| Mobile money fees | According to the operator's tariff | Network used, amount transferred |
| Notary fees | Paid if the agreement is authenticated | City, amount, type of deed |
Useful items to secure a loan between relatives
- ID documents of the lender and the borrower
- Signed and dated acknowledgement of debt
- Signatures and contact details of two witnesses
- Dahabshiil, Amal or Taaj transfer receipts
- Screenshots or statements of mobile money transactions
Mistakes and scams around private loans in Somalia
- Lending a large sum with nothing in writing, which makes proof impossible if a disagreement arises between families a few years later.
- Joining a hagbad run by a stranger who disappears after collecting the pot in the first round.
- Sending application fees through EVC Plus to a so-called diaspora lender found on TikTok or Telegram.
- Confusing a family gift with a loan because nobody said at the outset whether the money had to be repaid.
Lenders to contact
- Dahabshil Bank International: Islamic bank operating in Somalia, providing personal banking services and Sharia-compliant financing solutions for households and businesses throughout the region.
- Dahabshil Bank: Islamic bank operating in Somalia and the Horn of Africa, offering Sharia-compliant financing including real estate finance for business customers.
Your concerns about private lending in Somalia
Is a hagbad legal in Somalia?
Yes, a savings circle between people who know each other is an old and tolerated practice. It is not supervised by the CBS, which means that in case of fraud members have no public guarantee and must turn to mediation or the courts.
Can you charge interest on a family loan in Somalia?
Islamic tradition, widely followed in Somalia, prohibits interest on a loan. Relatives therefore practise qard hasan, where only the amount lent is repaid, possibly with a gift freely offered by the borrower.
Are there Somali crowdlending platforms?
No crowdlending platform appears among the institutions licensed by the Central Bank of Somalia. Any app presenting itself as one should be treated with caution, especially if it demands a payment before releasing funds.
How do you prove a repayment made by phone?
Confirmation text messages and the EVC Plus, Sahal or eDahab history provide a useful record. It is wise to keep screenshots and note each payment on the acknowledgement of debt signed by both parties.