Abstract:
The dollarization phenomenon has been widespread among the East African countries for many decades. This
trend results in several consequences that might be either beneficial or harmful to these countries and their likes.
The objective of this research was to empirically examine the causes, consequences and the future scenarios of
dollarization in one of the leading regional countries such as Somalia. The research used a survey of over 100
respondents and applied descriptive statistics and t-tests to achieve the above objectives. The findings show that
the main causes of Dollarization in Somalia are the implementation of the Hawallah (money transfer) system,
the remarkable absence of the central bank and other monitoring financial authorities, the increasing exports and
imports of the Somalian economy, the loss of confidence in the local Somalian Shilling, and the relative ease at
which the Somalian Shilling can be printed and manipulated by selected market players. These causes are found
to be mainly triggered by the revenue from exports, the policies and regulations implemented by the Somali
government, the Somali Diaspora, and the international aid organizations. This has resulted in the foreign traders
buying Somali goods at a relatively lower price and taking advantage of the depreciated Somali Shilling against
most international currencies.
