The way somali currency stayed afloat is quite simple and this is my take on it. The business-men analyzed carefully what the purchasing power of each somali was and this was mainly done in 'dollar' because most remittance come in dollar. The average Somali gets maybe $200 a month. That's their purchasing power. The currency traders then figured out a reasonable rate for 1 dollar against the shilling using that figure or what-ever figure they agreed was the average income of the consumer because after-all they are the ones coming to the market place and buying most of the things being sold.
Once they figured out the currency rate between the dollar and shilling using that method say $200 a month. They had to price all the goods in the market-place to reflect the purchasing power of the consumer. You will need to figure out what $1 can buy you, what $2 dollar can get you and so forth. They couldn't charge for example a loaf of bread or a meal at a restaurant at $5 dollars because that's going to take out a big chunk away from the persons $200 a month purchasing power, because they have like $5 per day with that sort of income, they can't spend it all in 1 meal or loaf of bread. People would be rioting about starvation and not able to live.
The business-men for example can't base prices at western levels or who will come and shop there? they will have no customers and their goods will either rott away or turn to dust. It's in their interest to sell it at local prices. The key is they don't want to sell goods to cheap and customers don't need to keep coming back to buy more or to expensive where no customers comes at all. They want that middle-ground where they empty out the person as much as possible within their means. So if a person has $5 to spend a day, he will charge them $1 for a meal at a restaurant, 20 cents for tea, and so forth. You want them to lose that $5 spending money and come back the next day and spend again until their purchasing power for the month is reached. The business-man has no control over people's pocket, he has to work with what they have. He can't change the purchasing power of customers, he has no choice but to work with they have in their wallets. All a Business person can change is making sure where he is getting those supplies is as 'low' as possible which can mean 'bad' products in the country because they will use black market and dodgy back-lane stores in Dubai selling un-sell-able products in their country to you or basically the left overs or Chinese knock-offs. Luckily PL addressed this with the food/drinks quality labatory in Bosaso and Garowe, which is one of the reasons I think the business community is mad to be quite honest!!!
But honestly the business community only hope for success is to get the cheapest prices possible on their goods in Dubai, which means going to the black market. That's why we need a strong government to ensure quality standards because the business people have no incentive to do quality control on their products, it's a business and businesses is about lowering their out-going costs(dubai) and maximising their selling costs(somalia), that's where their profit is made.
I always wondered how they can sell so cheap in Somalia even if they buy it expensive overseas and I realized it's the cost of living is far cheaper. So if they make $100 a day in sales, that's pretty much their living costs covered for the month. Economics and currency isn't as simple as supply/demand with notes, that's western economies because their governments are strong, they have banking sector who they provide those funds too which means they tell them the rules like what sort of interest rates they can sell/loan that out to people in the market place.
