Somalia Integrates Mobile Money Payment System
What you need to know about Mobile Money
The ability to transfer funds, pay bills, save, borrow or even acquire insurance coverage via a mobile phone is very satisfying. This is how mobile money is transforming the lives of individuals and businesses in Africa. Beyond the convenience which mobile money provides for the individual, it is also important at the macroeconomic level as it helps to regulate money flow in an economy and keep inflation at bay. Mobile money payment is a tool which has been used by governments in Africa and globally, to check the integrity of tax payers. For instance, Mauritius reported a 12 percent increase in tax returns in the first year of implementing mobile payments. However, the government can only use mobile money payment as a tool if it is licensed in the country, and this realization appears to have driven the government of Somalia into joining the rest of Africa in adopting the mobile payment system.
What you need to know about Somalia
Years of conflict and fragility have left Somalia’s economy with a range of challenges; crude population growth rate has outrun economic growth, the people have been subjected to intense poverty and vulnerability, the economy is cumbered with recurrent external trade and climate shocks, active insurgency and an incomplete political settlement has also affected the country’s economic strength. Somalia reached the Decision Point of the Heavily Indebted Poor Countries (HIPC) initiative on March 25, 2020, restoring the country’s access to regular concessional financing and launching the process toward debt relief.
Somalia’s exposure to multiple types of shocks such as the rude effects of climate change, the locust infestation, conflict and insecurity, and more recently, the COVID-19 global health pandemic, presents numerous challenges to a country at an emerging stage of state-building. The effects of the pandemic have been projected to pose substantial headwinds to the economy, with growth downgraded from 3.2% before the onset of the health pandemic to potentially negative 2.5 to 3.0%, as consumption falls due to lower remittances and job losses, and exports of livestock decline.
On March 31, 2020, Somalia reached an agreement with the Paris Club on terms of debt relief, and they are now working with remaining creditors to reach similar agreements. Somalia also resumed servicing its outstanding debt to the AfDB and IDA. To receive irrevocable debt relief, Somalia must maintain sound macroeconomic policies, implement its poverty reduction strategy—the Ninth National Development Plan (NDP9)—for at least one year, and complete a set of policy measures known as Completion Point triggers that are aimed at promoting inclusive growth and poverty reduction. Did this prompt the integration of the mobile money payment policy in Somalia? Well, if it really did, then the Paris Club deserves a shout-out for inspiring the policy integration by way of their debt relief conditions.
Somalia Integrates Mobile Money Payment
On February 27, Somalia’s central bank announced that the country’s first mobile money license had been awarded to Mogadishu-based Hormuud Telecom Somalia Inc., a move aimed at formalizing the country’s digital payments system and integrating it with the global financial system. By granting the license to Hormuud, the bank becomes subject to the central bank’s regulation and must give transaction record of all monetary transactions made through the bank’s mobile money system. Hormuud Telecom’s CEO Ahmed Mohamud Yuusuf said that the move will help tackle the widespread currency counterfeiting problem in the country.
Hormuud Telecom has been operating in the region since 2002; the company runs the Electronic Voucher Card or EVCPlus, a free mobile money service used by 3 million of its 3.6 million subscribers in Somalia. The Governor of the Central Bank of Somalia Abdirahman M. Abdullahi pointed that Somali businesses, international investors and NGOs can continue to use Hormuud’s EVC Plus with renewed confidence.
What does Mobile Money Integration Offer?
The new regulation formalizes digital transactions as the primary payment method within the country and will enable further integration of the Somali financial system with the international financial system. Moreso, with the Somali shilling highly devalued at $1 to 25,000 Somali shilling, a devaluation which has been consistent for over a decade, the integration of mobile money payment will help increase the value of Somali’s shilling in the long run.
While mobile money may be seen as a simple solution to making money more easily accessible, it can also be a key part of changing economies and improving the lives of millions of people.