Mobile money transfers in Somalia and how it differs from other African countries..

Nice piece. Apparently, mobile transfers have taken off in Somalia in a big way.

Mobile money initially started as a simple exchange of airtime credit between users. Over ten years ago, mobile network operators formalised this by offering mobile money services. It was quickly perceived as a convenient and safe way of making transactions and storing money.

Unlike Kenya’s famous Mpesa mobile money transfer services, Somalia’s transfers are mainly available in US dollars. Though the companies offering mobile money services are mobile network operators, as in Kenya, they are increasingly forming part of large conglomerates that also offer banking and money transfer services.

When looking at the total value of transactions, Mpesa’s are about $ 10 million a month while all mobile transactions in Kenya come to $ 3.17 billion a month. In Somalia transactions are worth about $ 2.7 billion a month.

Several factors have encouraged the impressive uptake of mobile money:

Many Somalis own mobile phones – about nine out of ten Somalis, above the age of 16 own one.

Nearly 60% of Somalia’s population is nomadic, or semi-nomadic, and move around a great deal, to find adequate grazing and water for their livestock. So mobile money suits their lifestyle and is also used to facilitate trade.

Concerns over the high prevalence of fake money, absence of monetary regulation, capacity, and limited access to traditional banking services also make mobile money an effective substitute for cash.

Today, mobile money also facilitates vast remittance flows which are critical to most Somali households due to a lack of opportunities in the Somali labour market. Taking advantage of this trend, remittance companies are increasingly partnering with mobile operators to transfer funds directly to recipients’ mobile money accounts.

What is the difference with other African countries?

A few things are different.

Banking, telecommunications and money transfers are so closely intertwined that its resulted in the emergence of two large conglomerates, with partnerships between a mobile network operator, bank and money transfer organisation. This is not really the case elsewhere in Africa.

Also, operators have adopted a different business model, based on indirect revenue generated from other services – like the sale of airtime. They are therefore able to offer mobile money between users as a “free” service (without transactions charges or taxes). This is not the case in many other countries in the region.

Another factor that’s different is the virtual absence of regulatory supervision despite the fact that mobile network operators control vast sums in circulation.

Operators also rely on their own distribution network, not external agents (as they do in Kenya). This means that coverage is more limited.

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