Assessing Institutional Capacity for Domestic Revenue Mobilization in Somaliland: Case Study of Ministry Of Finance and Economic Development.

This study assessed the institutional capacity of the Ministry of Finance and Economic Development (MoFED) of Somaliland for domestic revenue mobilization, with a view to identifying the key constraints and opportunities for enhancing revenue generation performance. Despite more than three decades of state-building, Somaliland's public finance system remains heavily dependent on customs revenue, diaspora remittances, and declining donor support, while institutional weaknesses in human resources, technology, and organizational and legal frameworks continue to constrain domestic revenue performance, and empirical research specifically examining MoFED's institutional capacity for domestic revenue mobilization remains scarce. The general objective of the study was to assess the institutional capacity of MoFED for domestic revenue mobilization and to identify the key constraints and opportunities for enhancing revenue generation performance. The study is significant because it provides the Government of Somaliland, MoFED, and development partners with an empirical diagnostic baseline for designing more effectively targeted public financial management reforms, while also contributing to the limited academic literature on institutional capacity in fragile and unrecognized states. A descriptive-explanatory research design employing a quantitative approach was adopted, using a structured five-point Likert-scale questionnaire administered to a sample of 50 respondents drawn from the Inland Revenue, Customs, Budget, ICT, Human Resources, and Administration departments of MoFED, selected through stratified random sampling; data were analyzed using descriptive statistics (frequencies, percentages, means, and standard deviations) and Pearson correlation analysis. The findings revealed that MoFED possesses a moderate-to-high level of institutional capacity, with technology and systems recording the strongest performance, followed by organizational and legal framework and human resource capacity, and that all three institutional capacity dimensions were significantly and positively correlated with domestic revenue mobilization performance, with technology and systems emerging as the strongest predictor and human resource capacity the weakest. A statistically significant, positive, and moderately strong relationship was found between overall institutional capacity and domestic revenue mobilization performance (r = 0.629, p < 0.01), while the main institutional challenges identified were the absence of consistently merit-based recruitment and promotion, inadequate professional training, weak inter-departmental coordination, limited effectiveness of existing tax laws, and inadequate ICT infrastructure. The study recommends that MoFED institutionalize merit-based recruitment and promotion, expand professional training programs, strengthen inter-departmental coordination mechanisms, review and update existing tax laws, and continue investing in ICT infrastructure, and it further recommends that policymakers treat institutional capacity strengthening as a central and mutually reinforcing pillar of Somaliland's domestic revenue mobilization strategy.

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Keywords: institutional capacity, domestic revenue mobilization, Ministry of Finance and Economic Development, Somaliland, public financial management