Somalia’s mobile money industry is on a growth trajectory that is likely to continue, bringing with it “staggering risks,” according to the World Bank, which commissioned a study on the sector.

World Bank staff Rachel Firestone, Tim Kelly and Axel Rifon blogged on the bank’s website on Thursday about the findings of the study, which was conducted throughout 2016 by Altai Consulting, through the Bank’s Somalia ICT Sector Support Project.

They point out that mobile money in Somalia is a kind of “virtual, dollarized currency,” adding, “Mobile money usage, and the extent of the dollarization and virtualization of the currency it represents, is actually far higher than previously thought.”

A stark example is the prevalence of mobile money usage (73%) compared to the 15% of the population who have accounts with formal banks. The 2016 research finds 88% of Somalis above the age of 16 own at least 1 SIM card, while 83% of SIM card owners use mobile money.

Users of the mobile money services can cash-out their eMoney, make deposits to mobile money accounts, pay bills and collect salaries. Typically, transfers range between US$20 and $200 each.

“The ecosystem is already robust, with nearly two-thirds of users choosing to keep funds in their mobile accounts rather than cashing them out. Large shares in the value mix of disbursements and bill and merchant payments, suggest an expanding ecosystem as increasing numbers of institutions and businesses start using mobile money,” write the World Bank team.

Altai’s research covered all of Somalia’s federally ministered states, though the World Bank did not divulge details about the research methodologies.


Players in the Somali mobile money system include Hormuud’s EVC+ and Telesom’s Zaad. Given the complexity of operating in the Somali political environment, investment in telecommunications has been almost exclusively led by Somalis, both from the diaspora and within the country.

This is a substantially different environment than telecommunications in countries across the rest of the African continent, which have been dominated by incoming multi-national companies such as India’s Bharti Telecom or France’s Orange.

“As a result, the ICT sector has been able to leverage Somali social and business networks, and has created products uniquely suited to the Somali context.”

The World Bank says that strong links exist between mobile network operators in Somalia and money transfer businesses. These links are important not only for domestic use but also for processing incoming transfers of international remittances.


Risks and regulation

The World Bank wants to see better government regulatory systems as well as private sector adherence to financial and consumer security requirements. Among the reforms that it recommends are regulations to ensure parity between eMoney and cash in banks.

“Many Somalis report that mobile money is unreliable and puts their money at risk because of a lack of interoperability between different services and transparency over funds. There are also reports of agents struggling to maintain cash for cash-out transactions while the system continues to lack customer guarantee,” say the World Bank staff.

This kind of irregularity in the current market points to underlying risks. The World Bank cautions, “Just as mobile money in Somalia offers startling opportunities, it also comes with staggering risks.”

The slate of reforms recommended by the World Bank also includes enabling Somali Shilling based mobile money transactions alongside US dollar based payments, and passing a Communications Act to license mobile network operators.

World Bank is also piloting a government platform for bulk payments using mobile money, in collaboration with established mobile operators, which will be used for making salary payments to civil servants. Somalia’s Central Bank, Ministry of Finance and Ministry of Posts Telecom and Technology are involve din this effort, as is the international Multi-Partner Fund.

“The pilot will model and test the role of industry-friendly regulatory best practices through salary payments to civil servants and cash transfers to support Somalia’s drought response. This could then help the industry gain more trust from the international community and Somali consumers.”

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Categories: Economy Somalia

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