The banking system in the Horn of Africa States (HAS), comprising  Somalia, Ethiopia, Eritrea, and Djibouti (The SEED countries), remains largely underdeveloped and functions primarily as a basic service provider. In its current state, the sector focuses mainly on deposits, withdrawals, remittances, and limited credit provision. 

Its reach is restricted by low financial inclusion, weak regulatory frameworks,  fear of entry of international finance into the region, and limited access to modern financial instruments. As such, it plays a minimal role in driving economic growth or structural transformation. 

Yet, the banking system in the Horn of Africa holds significant potential to evolve into a powerful engine of development. Realizing this potential will require deliberate policy reforms, strengthened institutions, enhanced regional cooperation, strategic investments in financial infrastructure and innovation, and the promotion of more dynamic and competitive banking institutions.

One of the most fundamental ways the banking sector can drive development is by mobilizing domestic savings and redirecting them toward productive investments. Currently, large sections of the population in the HAS region remain unbanked or rely on informal financial systems. 

By expanding access to secure formal savings mechanisms, banks can encourage savings across all socioeconomic levels. A broader deposit base would allow banks to expand their lending capabilities, channeling resources into agriculture, manufacturing,........

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