Financial exclusion is seen as an important impediment to growth in developing countries (see Schumpeter, 1912; King and Levine, 1993; and Levine, 1997). Exclusion is particularly prevalent in sub-Saharan Africa as there is a significant gap in financial infrastructure compared to other developing regions (see Demirg¨u¸c-Kunt and Klapper, 2012).

One consequence of this underdevelopment is that many African households lack access to traditional banking services. Filling this gap, the rapidly expanding mobile phone networks introduced mobile money (m-money) wallets, which are attached to the phone number of the customer and provide many functions of traditional bank accounts. Mobile money provides consumers with access to a relatively inexpensive and reliable way of performing financial transactions that can potentially augment money liquidity and ameliorate crime-related risk. An expanding literature in marketing and economics demonstrates the positive effects of new institutions and technologies on economic efficiency in emerging markets. Aker (2010) demonstrates that mobile phones reduce dispersion of grain prices in Niger, and Jack and Suri, 2013 use consumer expenditure surveys to conclude that adoption of mobile banking contributes to consumption smoothing and do not find an effect of m-money on savings rates. There is also growing literature in marketing studying similar issues , particularly Miller and Mobarak (2015), Sudhir and Talukdar (2015), Qian et al. (2014) and Zhang (2015). However, despite very significant adoption of m-money in many developing countries, there is insufficient analysis of a potential impact of m-money on alleviating financial exclusion. This paper provides evidence on the impact of mobile-money transfer systems (Zaad and E-Dahab) on inflation of the newly emerged country in east Africa who has separated from Somalia by self declaring 1990, that is Somaliland, using a unique observation set of millions of mobile -money transfer problems I have seen and witnessed in the economy of the country and how this system inducing inflations to the economic system. I analyzed the transaction patterns and classified the uses of m-money into those that reduce the risk of exposure of different crimes among the society, and on the other hand, those that causing inflation to the country and that is the point by which my focus is or which is good sounds to the society those are tackling with inflation problems induced by what so called Zaad and E-dahab offered by those two private leading companies in the country.  
As the popularity of inflation targeting has spread, inflation forecasting has become a central element in economic policy-making.  Many emerging markets and developing economies have adopted inflation targeting since the 1990s. Yet, forecasting inflation is notoriously difficult; and especially challenging in emerging markets given the high weight of food in the consumer price index, volatility in food , energy prices and the exchange rate as well. Clements and Hendry (2002) argued that structural breaks are the chief cause of forecast failure. The large structural shifts in the world economy include trade and financial globalization; and shifts in individual economies, including an increasing economic weight on services. Monetary policy itself has generally shifted to a greater focus on inflation. The many structural shifts need to be carefully modeled. But the case is very difficult for a small government by which the world community didn’t recognized to secure every aspects of live and economy, because of that weak government which doesn’t save guard the financial sectors of the entire country, under that circumstances to my mother land it caused the emerging of privatization of all economic activities which are supposed to be manipulated by different governmental sectors like : control of telecommunications, control of exchange rates, banking systems in the country, supply of electricity and all basic needs of live. Some structural shifts are still playing out: an example is financial innovation via the rapid spread of mobile money, which has sparked concerns for inflation in East Africa recently.
Sending or receiving money for either payment of salaries, settlement of business transactions, payment of school fees, or for family support is a common phenomenon for both businesses and individuals. It requires efficient, reliable and affordable money transfer services whereby money can be deposited in one location and withdrawn in another in both urban and rural areas (Kim et al., 2010, and Contini et al. 2011). The informal systems of money transfer such as individuals carrying money on themselves or sending drivers and conductors to highways are not susceptible to the robberies and thefts, that means the case has change well according to pervious adverse time we passed through the streets of the country at large and in Hargeisa particularly where most of the Somaliland’s populations have moved into. I also noted that money sent to friends and relatives through letters and parcels of the carriers companies was sometimes misused and at times never reached its destination or may be stolen. Other challenges associated with the informal and semi-formal systems, include delays and long queues.
Conditional and unconditional cash transfers have been an important component of social protection policies in developing countries since the 1990s (World Bank 2006, World Bank 2009, DFID 2011). While there is widespread evidence of the effectiveness of such programs in improving development outcomes, the costs of such programs are rarely discussed. Yet many cash transfer programs present logistical, operational and security challenges, especially in countries with limited physical and financial infrastructure like Somaliland, as they require carrying cash in small denominations from urban centers to remote rural areas. These costs can affect the cost effectiveness of cash transfer programs causes cash pull inflations as compared with other types of interventions.
The introduction of mobile phone-based money transfer systems (m-transfers) in many developing countries offers an alternative means of providing such cash transfers. By allowing the money to be transferred via a mobile phone, such programs could potentially reduce the costs to implementing agencies of providing cash transfers to remote populations, especially in areas with few financial institutions. Furthermore, m-transfer systems may also prove easier for cash transfer recipients to collect and use their transfers, provided they have ready access to m-transfer service providers.
Using m-transfer systems to disburse cash may lead to additional impacts on program recipients. By altering the costs involved in obtaining the transfer, the Zaad and e-dahab programs could affect prices of consumer goods to go up which mostly the consumers don’t bear. Although Zaad and e-dahab programs make purchases easier and modify investment in productive activities. But the biggest problem that these services are causing is cash pull inflations, because every $100 which is recharged to my account will be $100 in account as a digit which I have access to buy every transaction I need in personal and other $ 100 in Telesom or Dahabshiil pockets that is $ 200 in total, one in the person’s pocket and other in the companies pocket.  On the other hand, there is no government controlling and leading to these two companies they put the economy all of their money. Truly putting economy money which that economy doesn’t need leads that the economy feels inflation, but if that country has an effective central bank it is the job of the central bank to absorb that extra money from the economy in order to run smoothly. The case is different in Somaliland where most monetary activities implemented by a privet individuals whose ultimate goal is to maximize profit with lower costs. The other biggest problem I have seen since this service was introduced by Telesom Company is that exchange of dollar to local currency was totally going up every day. Furthermore, people misused the service and there is always money the seller of every commodity will increase you by default. For example if you ride a bus and send the driver to $0.5 he will give 1500 slsh although the exchange rate of $1 is 7500 slsh or 8000slsh and this is same in every seller and buyer of different goods and service in the markets of the country.        
Access to the mobile money transfer system could increase households’ access to financial services and informal private transfers, thereby allowing households to better manage shocks (Morawczynski and Pickens 2009, Blumenstock, Eagle and Fafchamps 2011, Jack and Suri 2011). Access to the mobile phone could enable households to improve their communication with members of their social networks, thereby allowing them to better respond to shocks or improve their decision making with respect to agriculture and labor markets (Jensen 2007, Aker 2010, Aker and Mbiti 2010). Finally, the greater relative privacy of the mobile money transfer approach could reduce inter-household sharing of transfers within the village (Jakiela and Ozier 2011) or affect intra-household decision-making with respect to the transfer (Lundberg, Pollack and Wales 1997, Duflo and Udry 2004, Doss 2006).
In Somaliland most people haply use mobile money transfer system and they do believe that mobile money transfer system is helpful system, but don’t know the economic impact it has on the economic system of the country at aggregate level.
In summary, let me clarify my position on current inflation of the country, our country is tackling worst inflation we have ever met for the last 25 years and it needs positive solution and policy. I believe that current authority should count both the leading private two companies (Telesom and Dahabshiil), I am also encouraging to upcoming authorities to have a good and white policy in monetary system of the country. Nevertheless when you have dilemma where you have use mobile money transfer services controlled by these two private companies who are not much caring about the society and what policy is causing what effect except for cost minimization and profit maximization only, there is no choice other than using. But we have to keep in mind the economic problems we are committing as well as the future impact of our live. Eventually I recommend to government and the population particularly educated group to realize that mobile money transfer system is the one predisposing inflations to our weak economy which all it’s consumer goods are import and send abroad to a millions of hard currency. Let us think of our future instead of short-term interests. Today Somaliland needs an honest, visionary, competent, decisive, confident and creative central bank.
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Author: Mukhtar Abdi 


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