When he rolls into a gas station to fill his tank, Barkhad Dahir doesn’t get out of his car. He punches a few buttons on his cellphone and within seconds he has paid for the fuel.
With the same quick keystrokes on his phone, he pays for virtually everything he needs: groceries at the supermarket, a few oranges from a market stall, a shoeshine on the street, a cup of sweet milky tea from a café, and even, if he wants, an afternoon’s worth of khat, a mild drug favoured by many Somalis.
“Everyone here has his own bank, with easy access and no restrictions,” boasts Mr. Dahir, a local journalist. “Even lying in bed, you can be paying your bills.”
Here in one of Africa’s poorest countries, where illiteracy is high and traditional banks are almost non-existent, a mobile revolution has created an informal electronic banking system with more efficiency and convenience than anything in Canada.
In the cities of Somaliland, the future has arrived: cash is disappearing, credit cards are unnecessary, and daily shopping is speedy and digital. Almost every merchant, even hawkers on the street, accepts payment by cellphone.
It’s an innovation that could transform the continent. Africa is already leading the world in the use of mobile money, and its growth is accelerating. In countries such as Kenya, Tanzania and Uganda, mobile-money accounts have become much more widespread than bank accounts. More than 17 million Kenyans (two-thirds of the adult population) are using mobile-money services, mainly to transfer money to family members or business partners in distant locations, but increasingly for bill payments and small loans.
Somaliland, a region in northwestern Somalia that has broken away and declared independence from Mogadishu, has one of the world’s highest rates of digital transactions. Most transactions are on Zaad, a service of the biggest mobile-phone company, Telesom. A survey last year found that the average customer made 34 transactions per month – a higher rate than almost anywhere else in the world.
“I don’t even carry money any more,” says Adan Abokor, a scholar and democracy activist in Somaliland.
“I haven’t seen cash for a long time. Even small payments, like a bus ticket, can be made with Zaad. When my kids are at school and they want a sandwich, I send them the payment by Zaad. It’s immediate – there’s no waiting for it, no counting of cash.”
The system is impressively simple and secure. Subscribers give an occasional lump-sum payment to Telesom and then use this balance to pay merchants digitally. To make a purchase, they dial a three-digit number, enter a four-digit PIN and then enter the merchant’s Zaad number and the amount of the payment. Every merchant – even street vendors – keeps their Zaad numbers prominently displayed. Within moments, the customer and the merchant both receive text messages to confirm the payment and the transaction is done.
Mobile money has also drastically reduced the cost of crime and security for consumers, private companies and government offices. The Coca-Cola branch in Somaliland, for example, is the only cashless Coca-Cola company in Africa. About 80 per cent of its sales to its retail distributors are done through Zaad, while the remainder are done by electronic bank transfers.
“We never handle a single dollar in cash,” says Moustapha Osman Guelleh, chief operating officer of Coca-Cola’s licensed bottler in Somaliland. “We don’t have any issues of having to keep cash in a safe.”
Many companies use Zaad for all of their salary payments to their employees. “It has made life easier for our people,” says Khader Aden Hussein, general manager of the Ambassador Hotel in Hargeisa, who uses Zaad to pay all of his 300 employees and almost half of his suppliers. “What amazes me is that even illiterate people have learned how to use it.”
Of the 3.5 million people in Somaliland, more than 500,000 subscribe to Telesom, and more than half of these subscribers are using Zaad.
The mobile-money system grew out of Somaliland’s heavy dependence on remittances from Somalis who work abroad – an estimated $1-billion annually. Remittances are increasingly sent home electronically and mobile money became a natural outgrowth.
There are other key reasons for the dramatic rise of mobile money here: the lax regulation of the telecommunications sector, which has had the unintentional effect of encouraging innovation; the weak local currency, which has created a dollarized economy (since Zaad is denominated in dollars); and even Somali cultural factors. “Somali society is an oral culture, so everyone needs a mobile phone,” Mr. Abokor says.
The biggest African user of mobile money is Kenya, where the most popular service, M-Pesa, has 15 million subscribers through the leading cellphone company, Safaricom. It was originally used mainly by migrant workers to transfer money home to their families. But now it is widely used to receive salaries and pay bills and school fees.
That was just the beginning. More than 1.2 million Kenyans are now using M-Shwari, a mobile-banking system created last November, which allows them to set up their own savings accounts, earn interest and borrow money with their cellphones.
Often they use the service to borrow a few dollars for their cash needs, repaying it a month later for a single fee of 7.5 per cent (less than the interest rates of street lenders).
Loans are usually approved immediately and customers can collect their cash from the nearest M-Pesa merchant, usually in the same neighbourhood.
“I use it often, especially when I’m broke,” says Doris Obondo, a 21-year-old employee at a cyber café in Nairobi.
“You don’t have to go into the long queues at the bank. Near the end of the month, when my salary is getting finished, I just borrow from M-Shwari. One evening I had nothing to eat, so I borrowed 200 shillings (just over $2) and then I repaid 215 shillings a month later.”