3. Pay electronically or be a millionaire
I spent a long time working in Africa with telecom companies so I know that mobile payments are pervasive and help bridge the gap between urban and rural areas. In Somaliland, mobile payments are so important that they are estimated to account for half of the transactions and they are made in US Dollars.
While this may sound strange, there are a few reasons why this makes a lot of sense. Firstly, the Somali currency, the Shilling, is constantly devalued and suffers from inflation. So it is less and less valuable every day.
Secondly, the amount of counterfeit Shilling is so high that the World Bank estimates 98% of the currency is fake.
Thirdly, the exchange rate of the Shilling is about 8,000 per US Dollar so you only need to exchange 100 US Dollar to become an instant millionaire.
And lastly, the most common currency denomination is the 1,000 Shilling so you need to carry a bucket load of notes every time you need to pay for something more than a coffee. Seeing wheelbarrows full of stacks of cash around the Hargeisa market is not unusual.
All of the above creates the perfect ground for an electronic, US Dollar based mobile payment system to thrive. And thrive it has. Around the country, you can see small khat sellers and street vendors receiving small payments with the local mobile payment systems, Zaad or eDahab.
What do they do with all that electronic cash in US Dollars? They go to the money market and exchange it for Shilling if they need local currency.
The money changers display their goods on the floor, like any other seller, only in their case, we are talking about money, stacks of it amounting to $20,000 in the local currency. And just exchange whatever you need it for. How do they get it out? They then go to the telco companies who offer the service and cash out the US Dollars. Continue to next page
