Over two decades of external efforts at institution-building in Somalia have failed to revive a functional central government there. There are many reasons for this, not least of which are powerful local interests in perpetuating weak government institutions, facilitating corruption and other illicit activities. But some notable successes have occurred at the local level, both with formal and informal governance mechanisms. Municipalities have been particularly effective sources of formal governance in Somalia’s failed state, providing basic security and services via legitimate and responsive local authorities. In addition, informal hybrid governance arrangements, drawing on a combination of customary authority, sharia courts, business leaders, women’s market groups, and professionals, have been a critical source of routinized, legitimate governance and rule of law in Somalia. External actors have struggled to understand these arrangements and their place in wider state-building efforts. Where external aid has helped with local and informal governance in Somalia, it has been carefully calibrated and based on close contextual knowledge, not template-driven projects.