Mobile money began as a basic means of exchanging airtime credits between users. Mobile network carriers formalized this over 10 years ago when they began selling mobile money services. It immediately gained a reputation for being a handy and secure method of conducting business and holding funds.

In contrast to Kenya’s well-known Mpesa mobile money transfer service, Somalia’s transfers are mostly in US dollars.

Though mobile money services are provided by mobile network carriers, they are rapidly becoming part of big conglomerates that also provide banking and money transfer services, like in Kenya. Mobile money transactions in Somalia are estimated to be worth $2.7 billion every month.

Several reasons have aided the rapid adoption of mobile money:

Mobile phones are widely used in Somalia, with nearly nine out of ten Somalis over the age of 16 owning one.

Nearly 60% of Somalia’s population is nomadic or semi-nomadic, meaning they move around a lot in search of enough grazing and water for their cattle. As a result, mobile money is convenient for them and is also utilized to ease trade.

Concerns about the high incidence of counterfeit money, the lack of monetary regulation, capacity, and restricted access to traditional banking services all contribute to the effectiveness of mobile money as a cash alternative.

Due to a dearth of prospects in the Somali labor market, mobile money now permits large remittance flows, which are important to most Somali households. Remittance businesses are increasingly cooperating with mobile carriers to transmit funds directly to recipients’ mobile money accounts, taking advantage of this trend.

How popular is it, and what do most people use it for?

According to our household survey data, roughly 73 percent of Somalis over the age of 16 use mobile money services at least once a month – while majority use it more frequently, and high-income earners use it even more frequently. Every month, over 155 million mobile money transactions take place.

It can be used for a variety of purposes.

Paying bills – for purchases between $2 and $300 – is one of the most prevalent. As a result, mobile money is significantly more popular than cash. Water, electricity, and charcoal are among the products that two-thirds of those polled use it to pay for. Another argument is that it may be used to purchase groceries, durable products, and animals.

Nearly 40% of parents pay their children’s school fees with mobile money. It’s also popular for sending money to friends and family.

It’s also being utilized to save, according to our findings.

Currently, the majority of transactions are between individuals, but businesses are becoming more interested. Receiving paychecks via mobile money, for example, has proven to be a crucial component in driving greater adoption.

What are the advantages and disadvantages of this expansion?

Somalia does not have a well-developed formal financial system. Only approximately 15% of the population has access to a bank account. Financial inclusion has been aided by mobile money.

It’s an easy and quick way for vulnerable populations to get money. Many humanitarian organisations utilize it to reach rural areas because it is seen as speedier and safer than cash donations.

Because most establishments accept mobile money, it gives recipients more flexibility and eliminates the need to travel, lowering the danger of security problems.

Nonetheless, there are certain significant hazards associated with the mobile money system. The most serious issue is a lack of regulation, which leaves the system vulnerable and fragmented.

Money laundering and terrorism financing are other threats. This is due to a lack of “know your customer” compliance, which means that few SIM cards and mobile money accounts are registered using a valid form of identification, as required by worldwide banking regulations. As a result, accountability and traceability are hampered.

Another concern is that, unlike in a traditional bank account, there is no guarantee that the cash will always be available. Because there is no assurance of parity between mobile money balances maintained by carriers and those stored in individual and company accounts, this is the case.

In Somalia, transfers are mostly available in US dollars, which is detrimental to the country’s economy. This is changing; in Somaliland, for example, payments under $100 must be done in Somali shillings.

The industry is also mostly untaxed, which means it does not contribute to crucial government revenue.

What sets Somalia apart from other African countries when it comes to mobile money?

A few things have changed.

Banking, telecommunications, and money transfers are all so interconnected that two major conglomerates have emerged, with partnerships involving a mobile network operator, a bank, and a money transfer company. This is not the case throughout the rest of Africa.

In addition, operators have developed a new business model based on indirect revenue collected from other services, such as airtime sales. As a result, they are able to provide “free” mobile money between users (without transactions charges or taxes). In many other countries in the region, this is not the case.

Another distinguishing feature is the virtual lack of regulatory oversight, despite the fact that mobile network carriers handle huge sums of money in circulation.

Operators also rely on their own distribution network rather than relying on third-party agents (as they do in Kenya). As a result, coverage is restricted.


Please enter your comment!
Please enter your name here