After 1991, Somalia became a prime example of economic collapse and state failure, clearly illustrating the pernicious effects of lack of development and poor local governance on establishing and sustaining central authority. Currently poverty in Somalia becomes a prominent and continuing affair. People in Somalia, have acclimatized to the consequence of poverty. Approximately, 43% of Somalia?s population lives below the poverty line. Poverty in Somalia is more pronounced in the local areas than in the national areas and there is no a reduction plan from the central government of Somalia.

The objective of this paper is to examine the effects of local governance on poverty reduction in Somalia in general and the local governance performance in Mogadishu. The article also analyses the relationship between local governance and poverty reduction based on three dimensions of local governance which are; accountability, responsive and community participation. Data was collected from university lecturers and Mogadishu municipality workers through cross-sectional survey. The study shows that there are positive direct relationship between local governance and poverty reduction. Therefore, if effective poverty reduction policies are set by local government then poverty can be eliminated