BY ABDIKARII M JAMA BARRE
Global payments services provider MasterCard has revealed plans to deepen financial inclusion in Somalia using the latest card payment technology systems. The American firm says it will partner with banks and telcos to open up the largely unbanked population of the country whose systems remains largely underdeveloped due to years of administrative challenges. MasterCard has already partnered with Somalia’s Premier Bank as part of its roll-out plans.
MasterCard president for Middle East and Sub Saharan Africa, Daniel Monehin, who spoke to the Somalia Investor Magazine, said there is a huge potential to tap in the Somali financial space using modern technology.
“We have already partnered with the Premier Bank and we are constantly in advanced stages of talks with banks and Telcos to drive our reach to as many Somali citizens as possible. The beauty of technology is that it can penetrate even areas considered remote or hostile for establishing a physical business unit,” Monehin said.
MasterCard is currently establishing $11M technology lab in Nairobi to help improve financial inclusion in the region. Technology solutions developed in the lab will be tailor made to fit the circumstances of the intended areas most of which still largely consist of the unbanked The payment service provider said there were in advanced talks with other major banks in Somalia with significant footprints to provide the crucial infrastructure needed to reach more people and incorporate them into the formal financial system.
The goal is to open up the market for payment solutions and improve financial inclusion.
Monehin noted the country’s underdeveloped technology infrastructure presents it with an opportunity to benefit from the latest technology in light of advanced industry trends.
“Somali isn’t very disadvantaged because in technology there’s a late-mover advantage the same way those who began using phones ten years ago bore more burden than those beginning to use phone’s right now. Late entry enables efficient and low cost solutions to be deployed in areas with certain infrastructural challenges. Such areas end up with the best technologies.” He further projected that the entry will be procedural as there are many dynamics at play including the assessment of partnerships that will drive the largest reach to the unbanked population across the economic strata.
Recently, local wireless provider Telesom launched Zaad, a mobile banking system in Somaliland region. Fortune magazine reported difficulties in implementing such system in volatile states considering that 70 per cent of the region’s estimated 3.5 million inhabitants are illiterate and majority are without bank accounts or ATM card.
“Since Somaliland region lacks formal financial institutions, bringing financial inclusion and contributing to the economic well-being of our society is the primary aim,” says Abdirahman Adan Shire, services manager for Zaad at Telesom’s headquarter in Hargeisa. Thanks to Zaad, Somaliland region has achieved one of the world’s highest rates of digital transactions in roughly two years.
At present some 281000 active subscribers use their mobile phones every day to transfer money, make purchases, pay bills, and buy airtime. That number is expected to burgeon.
MasterCard’s entry into Somalia is expected to find relevance in the country where African Development Bank report released in 2013 indicated 66 per cent use bank accounts to receive money from family members living elsewhere.
The American giant payment fir announced at a June World Economic Forum on Africa, that it had entered into partnership with Premier Bank, becoming the first international payments network to enter Somalia.
As a result of the partnership, Premier Bank now issues and accepts MasterCard-branded payment cards in Somalia. The country has not had any form of formal banking service since the collapse of the government and financial services system in 1991.
Somalia’s Minister of Planning and International Cooperation, Abdirahman
Yusuf Ali Aynte, said the move would be a major boost to open up the country to financial opportunities in a rapidly transforming business world.
“Somalia has made significant strides to rebuild the country and instill peace and stability. Today marks a historic milestone, signaling Somalia’s financial liberation following years of global economy exclusion.” Premier Bank AT M machines are currently being used as the platform for cash withdrawals as other payment platforms will be incorporated later. The bank has projected to issue 5,000 MasterCard debit cards this year, followed by prepaid cards, and point of sale (POS ) machines.
Introduction of the MasterCard payments network will improve payment capacity within government agencies. Foreigners, expatriates and international aid organisations sending funds to Somalia can do so via a formal, traceable network that complies with international security standards, eliminating the risks of transferring and transporting cash.
Remittances contribute well over $1B to Somalia’s economy annually, a 35 percent of the country’s GDP. These funds are an essential source of income for individuals and development of the country.
Deepened financial inclusion and the availability of such digital payments will go a long way in reassuring foreign investors, Somalis in the diaspora and those distributing aid who remain crucial to Somalia’s economic well-being.
Premier Bank, Managing Director Mahat Mohamed Ahmed said the MasterCard- branded debit cards enable Somalis to withdraw funds from any MasterCard-licensed AT M globally, shop online, and pay for goods and services at millions of merchants that accept MasterCard payment cards around the world. “We can now provide our customers with a safe, cost-effective and convenient means of transacting both at home and abroad. It is our hope that increasing card payment usage in Somalia will encourage merchants and citizens to demand more electronic payment services as they engage with and contribute to the formal economy.”
Demonstrating the value of close collaboration in the banking and payments technology industries, this landmark partnership is a significant step towards reducing Somalia’s dependence on cash, increasing financial inclusion and ultimately contributing to the country’s financial stability.
“To promote economic growth in Somalia, which has long been isolated from the global economy, there is a need for electronic payment solutions that align with international security and regulation standards,’’ says Daniel Monehin, Division President for sub-Saharan Africa, MasterCard.
The agreement with Premier Bank comes at a time when MasterCard is working closely with governments and financial institutions across Africa to introduce safe and simple financial solutions. This goal is in tandem with the institution’s vision of a world beyond cash.
On the other hand, MasterCard entry into Somalia with its electronic payment system is bound to open trading opportunities with an international payment platform available in a country where banking services penetration is still quite low.
The service will open up Somalia- based businesses to international practices while enabling them to transact in world currencies. The tourism industry that crumbled following the civil unrest is beginning to experience spikes of rebirth. Historical sites, beaches, waterfalls, mountain ranges and national parks are receiving visitors.
Electronic payments should provide a bigger incentive for tourists to spend more. Consequently this will revive the industry, create jobs while bring in much needed foreign exchange.
MasterCard, through its philanthropy arm, MasterCard Foundation, is known for its massive corporate social responsibility. The country is hoping it will benefit from sponsorships of students in both secondary and tertiary learning institutions.