2.
2 Financial Performance
Organizations are formed with particular goals in mind, and to fulfil these goals, they must
carry out their operations both efficiently and effectively. To maintain their performance and
achieve their objectives, organizations should adopt successful business strategies. The
assessment of an organization’s performance is based on its ability to meet these specific
goals. Performance refers to the ability to operate efficiently, profitably, survive, grow and
react to the environmental opportunities and threats (Muhammed & Hussaini, 2018).
Performance serves as a key indicator of a society's level of development. Recently, the
challenges posed by the global business landscape have emphasized the importance for
corporate organizations to prioritize the success of their enterprises. Firm performance has
emerged as a critical variable that has garnered the interest of scholars in both finance and
management fields .It reflects the degree to which an organization meets its goals,
showcasing how well it has progressed over time. Additionally, firm performance is a useful
measure for assessing how effectively an organization achieves its objectives in ways that
benefit all stakeholders. It pertains to a firm's capability to realize its goals through the
efficient and effective application of available resources (Muhammed & Hussaini, 2018).
A company's financial performance can be enhanced by eliminating waste within benefits
services and systems. The level at which a company meets its established goals and mission
regarding efficiency, effectiveness, and economy is known as the "key success factor."
Valuable insights about a company's financial performance and position can be obtained from
a robust internal control system, as represented in financial statements This information is
essential for various stakeholders who are evaluating management effectiveness and making
financial decisions (Hassan, 2022).
According Ahmed (2021) financial performance is measured through customer satisfaction,
profitability, and market share, which can be reflected in reduced customer complaints. For
organizations to perform well, they must critically evaluate the needs of customers and all
stakeholders, ensuring they understand how best to meet those needs. The internal control
system is intertwined with the organization’s operating activities and is most effective when
integrated into the organization's infrastructure. This integration becomes essential for the
organization's success, leading to ongoing improvements in performance standards and
serving as a competitive advantage. Decisions .
There are several ways to measure a company’s financial performance, among which are
return on investment (ROI) and return on assets (ROA), which subjectively assess how
effectively the company can utilize its primary business assets to generate profits .One
effective approach for a company to achieve positive financial performance is by eliminating
waste within its processes and systems related to benefits services. The key success factor for
a company is largely determined by its ability to efficiently, effectively, and economically
fulfil its mission and objectives. A company’s financial performance and overall position are
reflected in prior reports regarding the soundness of its internal control systems, which are
essential for stakeholders to evaluate the company’s stewardship and make informed
economic decisions (Hanoon,Rapani, Khalid,2020).
2.3 Somalia Banks
Somalia's banking system has been profoundly affected by the political instability that has
plagued the country in recent years. This has led to a lack of properly functioning banks, with
some money remittance companies stepping in under the guise of banks and offering limited
financial services. In 1970, all foreign commercial banks were nationalized, followed by the
establishment of two public commercial banks in 1971: the Somali Savings and Credit Bank
and the Somali Commercial Bank. These banks were designed to function independently,
each with a capital of [Link]. 2,500,000, funded equally by the Somali Government and the
Central Bank of Somalia(Warsame, 2016). As noted in Warsame (2016) both banks were
completely owned by the government and operated similarly to commercial banks, focusing
on deposits, savings, and short-term loans. Unfortunately, the financial system in Somalia
descended into a severe crisis due to the negligence of corrupt officials, which severely
impacted the day-to-day operations of the banking sector.
According to Warsame (2016) two newly established institutions in Somalia were fully
owned by the government, functioning with objectives and activities similar to those of
commercial banks. Their operations were primarily based on deposits, savings, and short-
term loans. However, the financial system in Somalia fell into a deep crisis due to the
complacency of corrupt officials, which significantly impacted the daily operations of the
banking system.
Currently, financial services in Somalia are managed through various informal institutions
that emerged after the national government's collapse. Since the formal economic structures
and financial systems have remained fragile since the 1980s, their failure has had a minimal
impact on the majority of the population. Traditionally, loans have been obtained from family
members without the need for banks. With no formal banking sector in place, the primary
method for transferring funds into Somalia is through remittance companies that operate
using a trust-based system called Hawala, which bypasses conventional transfer systems
(Warsame, 2016).