The partnership with Sida will empower citizens by promoting entrepreneurship.
Leading Somali financial institutions have partnered with a Swedish agency to enable communities have access to loans.
The partnership with the Swedish International Development Cooperation Agency (Sida) will empower citizens through entrepreneurship.
The programme was launched on April 18 with Dahabshiil Bank International as the leading partner.
This is the first time a foreign agency is engaging in such a project in Somali which is recovering from years of turmoil.
Other partners are Premier Bank and International Bank of Somalia.
On its website, Sida says the purpose of the project is to "expand the provision of low collateral loans to small and medium size enterprises (SMEs) throughout the Somali region".
Speaking during the launch, Swedish Ambassador to Somalia Andreas von Uexküll said the undertaking will provide the institutions with the relevant instruments to enlarge "their lending procedures and open up new and viable markets".
Further, the programme will increase access to finance for merit-worthy SMEs that lack sufficient collateral or possess other non-financial credit challenges.
Maryan Haibe, a local entrepreneur who was at the launch, welcomed the initiative, saying "it makes all the difference working with home-grown banks. I feel that by gaining access to finance, I will be able to transform not only my life, but that of my family and the wider community.
"I call on other foreign governments and international financial institutions to follow Sida’s lead."
Also at the launch were women who had already benefited from such a scheme through Dahabshiil, supported by the Swedish government and other donors, who spoke about how, until now, they believed they would never have access to finance.
They explained how they received small loans from Dahabshiil which enabled them to set up businesses such as clothing and livestock.
It also enabled them to obtain credit-worthiness and access further finance from Dahabshiil, which helped them improve development by growing their businesses and generating jobs.
Somalis in Sweden continue to play an important role in the recovery of the country that was torn apart by civil war.
The diasporans' remittances facilitate access to health, education and investment.
Many send funds through money transfer firm Dahabshiil.
"The strong ties between our countries, not least through emerging private business initiatives, call for a deeper engagement by Sida in the development of financial services with a view to reducing poverty and rebuilding the country," Ambassador Von Uexkull said.
The ambassador emphasised that SMEs are fundamental because they help create job opportunities.
Equally, Dahabshiil's chief executive officer Abdirashid Duale embraced the initiative, saying it will benefit many Somalis.
More importantly, Mr Duale said such a programme will encourage youth to remain in the country and rebuild it rather than seek opportunities elsewhere.
"This kind of partnership between Somali banks and international actors like Sida will increase job creation and development across the Somali-speaking regions," he said.