Mobile phone currency: How Somalia is building a cashless, safer society
May 2nd, 2016 | By FCT
In our EXPERT/ease special feature last month, we took a look at Bitcoin, the “cryptocurrency” that’s been bubbling away beneath the surface of orthodox finance, attracting scandal, criminality and some very original thinking, all at once. But meanwhile, in North Africa, there’s a cashless society growing by leaps and bounds, in, of all places, Somalia.
We’ve written before on this blog about the Kenyan mobile phone economy in and around Nairobi, fuelled by airtime-as-currency; most savvy travellers know you can pay your cab fare from the airport in airtime, on a system called M-PESA, “pesa” being Swahili for money.
But Somalia’s gone a lot farther, a lot faster—and with far more at stake, namely the future of the country.
The arithmetic is starkly simple: decades of horrific civil wars have destroyed the banking sector and the rise of mobile phones has removed credit and debit cards from the equation. In a country with a still-stratospheric crime rate, the safety of cashless transactions is transforming not only how ordinary people do business, but the very fabric of Somalia itself; a country still dependent on billions in remittances from Somalians working abroad and sending money home to loved ones. In fact, the CIA estimates fully 20% of the country’s GDP is from expat Somalis.
The number of mobile phone subscriptions in Somalia has nearly tripled over the past three years—and the World Bank’s Global Findex Database 2014 reports some 40% of the Somali population of 12.3 million has a mobile money account.
The upshot? Businesses line once-shell-holed streets; produce vendors and cafés thrive; cabbies are far safer and buy their fuel with a few clicks of their phones. One note on M-PESA: the Somali system is denominated in US dollars and thus stable. Subscribers to the biggest mobile money service, EVCPlus, can buy more airtime, pay their utility bills and move money around via pre-approved payments—all without an internet connection.
Needless to say, all this progress has driven competitiveness in Somalia’s telecom sector through the roof. And all this in a so-called failed state, where so much else in the Somali economy struggles. It’s heartening.