Somaliland’s first mobile money platform was launched in 2009. Called Zaad—meaning ‘to grow’ or ‘to prosper’ in Arabic—it was started by the popular mobile phone company, Telesom. Zaad’s mobile money transfer service has since become a feature of a financial landscape hitherto dominated by Somali remittance companies. Today, Zaad has a profound impact on the way people in Somaliland save and transfer money, so much so that industry organizations such as the Groupe Spéciale Mobile Association (GSMA)—a global association of mobile telephone operators— view it both as an example of best practice in financial inclusion, and of the transformative potential of mobile money.

This paper uses qualitative studies to examine the way Zaad is reshaping livelihoods and looks at the implications of its popularity for the relationship between state and non-state actors and its effect on Somaliland’s institutional framework. These studies challenge the dominant, technocratic view of mobile money by examining its neglected political and economic dimensions, shedding light on issues of legitimacy and trust and the relationship between the state and citizens. Far from being financial, the story of mobile money is instead a story of converging and conflicting narratives of statehood.

Mobile Money in Somaliland ReportDownload PDF (3.01 MB)

Although Somaliland broke away from the rest of Somalia in 1991, it lacks formal international recognition as an independent nation state. As a result, no international commercial bank has offices there. But the history of its many remittance companies goes back to the 1970s, when hundreds of thousands of Somalis began sending money back home from jobs abroad, mostly in the Arabian Gulf. Zaad entered a market dominated by these well-established Money Transfer Operators (MTOs). It has since managed to outperform MTOs inside Somaliland, even in key economic sectors such as livestock and trade. Its success is widely attributed to Telesom’s business model and outreach strategy, as well as to Zaad’s flexibility, popularity with retailers, and the fact that its money transfers are free of charge.
Zaad has grown because it uses US Dollars, meeting popular demand for hard currency in Somaliland. This helps people transfer and store US Dollars in Somaliland, giving them a mechanism to cope with a domestic economy whose volatility the state of Somaliland seems unable to address. In May 2015, following pressure from the government and Somaliland’s Central Bank, Telesom unveiled a new Zaad service in Somaliland shillings (ShSl). Its initial operations were limited.

In rural areas, Zaad faces other constraints, with distribution and local perceptions of the service affected by several factors.

Less reliable network coverage and network outages discourage people in rural areas from using it when other options like hard cash are at hand. Furthermore, Telesom’s customer policy requires ownership of an official identity card (ID) to use the service.

Women in rural areas often lack official documentation, and even women who can use a male relative’s ID to open an account do not always do so, risking losing control of their money. Zaad is primarily viewed as an interface with the urban economy, being more popular with farmers travelling to town on market days to sell livestock or vegetables than with other rural inhabitants.

In Somaliland there is a division between those people and organizations who use foreign currency and those who use local currency: the first is between the large-scale businessmen and international relief and development workers who operate in US Dollars and civil servants who are paid in Somaliland shillings by the state; the second is between urban inhabitants who use US Dollars and rural inhabitants who use Somaliland shillings.

Businesspeople, employees of NGOs and other international organizations, and those with a sizeable flow of US Dollars from overseas, are more able to diversify their financial practices. Stuck within the shilling economy, most civil servants criticize Telesom’s influence on currency use as excessive and have called for stricter government oversight of the company’s assets.

Zaad is shielded from the Central Bank’s scrutiny because there are no local banking laws to regulate it. This is a reflection of the weakness of Somaliland’s state institutions. Civil servants portray the popular use of the US Dollar as something that undermines the sovereignty of the state. While nationalistic in tone, such anti-Zaad rhetoric is a projection of vested interests, and is sometimes connected to a historic loyalty to the rival heavyweight of the Somali money transfer business, Dahabshiil, which originated in Somaliland and started operating internationally in the late 1990s.

Importantly, Zaad has not replaced other MTOs, which continue to serve as a financial interface—in US Dollars—between Somaliland and the rest of the world. Within the territory, shillings continue to be the main means of monetary transaction with the state. This is being challenged by Zaad, which facilitates the internal circulation of dollars. Its apparent success in ‘banking the unbanked’, however, has yet to be properly verified. Despite its undeniable impact, many argue that true global financial inclusion will happen only when international banks open up in Somaliland.

Published on 19 Nov 2015 —View Original

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