According to a recent World Bank Report, Somalia has one of the most active mobile money markets in the world, outpacing most other countries in Africa.
The report says:
“Approximately 155 million transactions, worth $2.7 billion, are recorded per month. Mobile money has superseded the use of cash in Somalia, with over 70 percent of adult Somalis using mobile money services regularly.”
Growth Despite Setbacks
The rapid growth and adoption of mobile money in Somalia however has not been brought about by a robust infrastructure and laws. On the contrary, the financial institutions in the country are fragile and underdeveloped.
The mobile money ecosystem in Somalia lacks a robust consumer protection and know-your-customer requirements. As a result, the system is still very vulnerable to service disruptions which could have massive macroeconomic effects should that occur.
According to stats released by the World Bank on the Somali Economic Update:
- Almost three-quarters of the population 16 and older (73 percent) use mobile money.
- Penetration rates are highest in urban areas (83 percent) and camps for internally displaced people (72 percent).
- In in rural areas, 55 percent of the population uses mobile money.
- About 36 percent of GDP flows through mobile money systems.
- The value of mobile money transactions in Somalia is estimated at $2.7 billion a month.
Why Mobile Money is Successful in Somalia
Explaining the reason behind this impressive adoption of mobile money, the report points to a lack of trust on the Somali shilling, and instead, trust is placed on mobile money, the ease of mobile money for small transactions, and a lack of a formal banking sector.
The report also notes:
“Unlike elsewhere in Africa, balances on mobile money wallets tend to be held rather than cashed out. In other African countries, mobile network operators are still thinking about how to incentive customers to maintain balances in their mobile money wallets. In Somalia, operators have already partnered with local retailers and merchants to ensure smooth digital exchanges, even for low-value transactions.”
To ensure increased stability in the mobile space in Somalia, the Central Bank of Somalia is in the process of establishing a regulatory framework which should see the industry experience further growth.