In the last five years, Somaliland has moved ahead in terms of mobile money uptake and use. One of the poorest countries in Africa, Somalia is not often considered a likely source of innovation. Somalia, and specifically the region of Somaliland, has low literacy and low government capacity. Regulation has historically been either unenforceable or nonexistent.
However, in 2009 when Somaliland’s leading mobile network operator, Telesom, launched ZAAD, a mobile money platform, the venture took off. Experts credit a confluence of factors for its success. First, high currency volatility led to the increased use of the U.S. dollar in Somalia; people in the country, however, report that it is difficult to find dollars in denominations lower than $20, and mobile money has filled that low-value gap. Second, a regulatory vacuum in Somalia has allowed Telesom to roll out at a rapid pace with few restrictions. Third, a high volume of remittances comes into Somalia from other countries, which has provided the business case for investment into the space. Finally, users did not have many difficulties using the platform at the beginning (and payments could be made with no accompanying fees).
Source: GSMA (2013)
As early as two years after ZAAD’s introduction, over 30 percent of people in Somaliland reported having used a mobile phone to send and receive money. People in Somaliland report that everyone – from beggars on the street to the Coca-Cola distribution warehouse – uses and accepts mobile payments, and few places use cash. This model offers interesting insights into how mobile money can grow and change in the absence of regulatory bottlenecks and alternative systems.