In 2009, Somaliland’s biggest mobile network operator, Telesom, launched their mobile payment service “ZAAD”, and today more than 10% of the 3.8 million inhabitants are subscribed to the service.
As with normal mobile money systems, you can transfer, receive, and deposit money with ZAAD. The mobile money service is used for different purposes such as paying for your groceries, dinner at the restaurant, or your electricity. Other money payment transactions include livestock trade, merchant payments, and bill and salary payments.
Recently on a trip to Somaliland I took through the streets Hargeisa, the capital of Somaliland, my Somali colleague and I wanted to purchase some traditional Somali fabric. I brought US Dollars and some Somaliland shillings with me as both currencies can be used in Somaliland. But within a few seconds, my colleague paid for the fabric through his mobile money wallet, and the transaction took less than 10 seconds.
Payments in Somaliland that are done via mobile money services appear to be the most convenient financial tool, especially for merchant payments. In most shops there is a ZAAD account number written on a board that customers should to use when paying for their products.
I was surprised by the level of use and the trust in mobile money services that I experienced in Somaliland. While I have likewise experienced a common use of mobile money in Tanzania and Kenya (though as part of different set of financial tools such as a bank account) it seems to be different in Somaliland and largely affects everyday life.
In 2013, Somalilanders carried out 30 ZAAD transactions per month on average, compared to the global average of 8.5 transactions, according to GSMA. The service is special compared to other mobile money services, as it there is no charge when using it. Instead Telesom ZAAD gets profit from different services, such as airtime recharge.
In Somaliland there are no international commercial banks running, because of the lack of recognition as an independent country. Instead, Somalilanders have been depending on Mobile Transfer Operators (MTOs), such as Dahabshiil, that allow for international remittance transfers.
Other Mobile Money Services in Somaliland
Interoperability exists between MTOs and the telecom industry in Somaliland. The few banks or MTOs existing in Somaliland, such as Dahabshiil, are typically used for international remittance transfers, especially from the Somali diaspora to their families and friends in Somaliland. Dahabshiil has branches in 126 countries worldwide.
Another example is WorldRemit – an online transfer system that allows an individual to send money to a person’s mobile wallet so that he/she can go claim the transfer amount at a Telesom shop.
Somtel, the competitor of Telesom, has only a bit of the market share in the country with their mobile money services. However, Somtel International and Dahabshiils group launched their own mobile money system called “E-Dahab” in 2015 for Somtel Users. With E-Dahab a person can put money into her/his mobile wallet account, and as with ZAAD, amongst others, use it for merchant payments.
Not only is competition between Mobile Network Operators (MNOs) getting more vivid, but MTOs and MNOs are forming partnerships to try and create better services for the population to embrace. It is the realization of mobile money as a significant tool that can help to create a financial infrastructure that has not been present in Somaliland, and it can help to develop basic and potentially better financial structures in the country.
A Background on Somaliland
Somaliland is often unknown to the outside world mostly because of their lack of recognition as an independent nation state. It had its secession from the rest of Somalia in 1991, and it has since shown a spectacular case of peacebuilding, highly supported by traditional elders and clan leaders.
Today Somaliland is a democracy with a multi-party system, supported by the house of elders (guurti), following both traditional law (xeer) and sharia law. This state of relative peace is quite the opposite of its southern neighbor that still struggles with war and insecurity, especially with Al-Shabaab controlling large parts of South Central Somalia.
Somaliland has the fourth lowest GDP in the world, and there are huge socio-economic challenges for Somaliland, with an unemployment rate between 60-70% among youth, if not higher. According to GSMA, in 2013, 70% of the population was illiterate and 98% were financially excluded. One could see this as preventing people from accepting and trusting mobile money services, such as ZAAD, but so far, there is a growing number of Somalilanders incorporating the service into their everyday lives.
Mathilde Krabbe Krogholt specializes in ICT4Development and is involved in the “Somaliland Youth Empowerment Initiative Project” between with the Danish NGO, Afrika Kontakt and the Somaliland NGO, Haqsoor.