Technology has brought safe and simple financial solutions to Somalia, a place where, until the past few years, they were completely non-existent. In June 2015, MasterCard became the first international payment network to enter Somalia, a country that hasn’t had a formal banking or financial system since the collapse of its government in 1991. MasterCard issued its first 5,000 debit cards to be used by Premier Bank, one of the few commercial banks in the country. The cards will be compatible with Premier’s ATMs, whereby customers can conduct cash withdrawals. MasterCard’s products will be the first domestically-issued debit cards in Somalia, the last remaining country in Africa not under sanctions that the company hasn’t worked in yet.
Somalia has been mired in decades of conflict since 1991, and the government continues to battle al-Qaeda-linked Al-Shabaab insurgents. Despite the formation of a federal parliament in 2012, creating a more stable government, turmoil continues to severely restrict development of the banking system. For example, the country installed the first ATM machines in the capital, Mogadishu, only last year.
The new debit card system, in addition to allowing cash withdrawals, will enable access to funds from abroad and “address a long-standing concern that governments like the U.S. and U.K. have had with our informal banking sector, where they always had doubted whether all the money was going to [the] right people,” Abdirahman Yusuf Ali Aynte, Somalia’s minister of planning and international cooperation, told Bloomberg. Every year, Somalia receives approximately $1.3 billion in remittances, accounting for between 25 and 45 percent of its economy and exceeding the amount it receives in humanitarian aid, development aid, and foreign direct investment combined, according to Oxfam. The introduction of the MasterCard payments network means that there is a new, secure option for this crucial remittances lifeline – at a time when foreign bank accounts linked to Somali remittances are being shut down for fear of terrorist financing. Premier Bank is one of only four Somalian lenders that participates in the Swift system, according to Bloomberg business. Swift provides identification for lenders internationally and enables money transfers in compliance with international security standards. Additionally, the payments network offers government agencies an efficient platform through which to transfer salary disbursements.
The partnership with Somalia’s Premier Bank should be seen as an attempt to keep banks relevant at a time when many Somalis are turning to mobile banking. The World Bank’s Global Findex recently reported that Somalia was one of the most active mobile money markets globally with 26 percent of the population using mobiles to pay bills (the highest rate in this category in the world), and 32 percent using them to send and receive money.
In its offer of long-term support to help build sustainable financial institutions in Somalia, MasterCard’s partnership encourages future international investments in the country and, it is hoped, will contribute to the revival of its economy.
Have you read?