Somalia is one of Africa’s poorest countries by World Bank standards, with GDP per capita of about $500, but there are some ways it is better than the rest of Africa. Apart from having the cheapest mobile data rate in Africa (US$0.50 for one gigabytes; or just ₦190 if you’re in Nigeria), the east African country has gone ahead to issue its first ever mobile money license to a private company, even ahead of its neighbour Ethiopia, which is seven times bigger than it in population.
However, granting the mobile money license does not mean that mobile money operations have not been going on in the country. For every month in the year 2018, the country recorded approximately 155 million mobile money transactions, worth $2.7 billion. Similar transactions have also been going on in the country for the past 10 years.
What the Central Bank of Somalia had merely done was to issue the country’s first ever money license to an entity, thereby ending the era of unregulated mobile money services in the country.
The license went to Hormuud Telecom, the country’s largest telecommunications provider, which runs the Electronic Voucher Card (EVCPlus) free mobile money service.
Read also: Ethiopia’s Only Telecom Company Ethio Telecom Finally Goes Mobile Money
Hormuud Telecom Sticks Out Of The Competition
CBS’ license to Hormuud Telecom is a major achievement for the telecom company as it helps it to partially heave some sighs of relief from the country’s crowded telecoms market, currently made up of 11 licensed local operators.
Although Hormuud’s new license may not make much difference as there are already numerous unregulated services in operations, it may however help the telco to position itself early for post-regulation market share.
According to the World Bank 2017 report, mobile money service in Somalia has reached a penetration rate of 73% (83% in urban areas), compared to a penetration rate of 15% for formal bank accounts. Somalia’s Dahabshiil is one of the largest money transfer companies in Africa, operating in 155 countries.
Majority of Somalian households (58%) make one to four transactions each month and tend to use mobile money over cash for purchases between US$2 and $300. A mobile money account must be linked to a bank account for transactions over $300. As a result, digital money is an excellent cash replacement, and it can be used for everyday transactions such as bill payments, paycheck receipts, and merchant transactions. Nevertheless, a study by Hormuud Telecom revealed that cash-out rates on mobile money platforms in Somalia are less than 5%, indicating a greater number desires to keep money in mobile wallets rather than cash it out.
In contrast to Kenya’s well-known Mpesa mobile money transfer service, Somalia’s transactions are mostly in US dollars. Though mobile money providers are mobile network operators, they are increasingly becoming part of large conglomerates that also provide banking and money transfer services, as in Kenya.
Generally, the East African region has a booming mobile money market. As of 2019, the total value of mobile money transactions reached $17 billion in Kenya, $12 billion in Tanzania and $5.9 billion in Uganda.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer