As the country comes to terms with the effects of Covid-19 on its economy, Mobile Money Service is poised to play a major role in rebuilding. The Central Bank of Somalia is keen on regulation and sanity in the sector.
Well into the second year of the Covid-19 pandemic, the economies of various countries report, as expected, slowed growth and bumps occasioned by the disruption in business and lockdown protocols that threatened to grind everything to a halt.
A recent report by the Central Bank of Somalia (CBS) that looks at the economy, paying special attention to the financial sector presents an intimate look at how Mobile Money Networks and mobile money transfer service providers have responded to the pandemic and how the sector will be essential as the country begins to recover.
Writing in the Quarterly Economic Review, the Governor of the Central Bank of Somalia, Mr. Abdirahman Mohamed Abdullahi said that financial sector reform that has been undertaken in the country has created a stable environment for micro and macroeconomic growth.
“Evidence indicates that the various macroeconomic and financial sector reforms are undertaken by the core economic agencies of the Federal Government of Somalia have enabled the economy to weather the storm. However, significant challenges remain. During this quarter, the Central Bank of Somalia issued the first ever mobile money license. This great milestone is expected to play a pivotal role in the Central Bank’s financial stability objective,”
Regulating the financial sector
The report reveals that as of March 2021, the financial sector in Somalia was composed of 13 commercial banks, 10 Money Transfer Businesses (MTBs), and 1 Mobile Money Operator
(MMO). Since 2014, the Central Bank has issued nine (9) prudential regulations, including the recently issued regulations on AML/CFT for the financial sector (2019), and Mobile Money Regulation (2020), four (4) guidelines for the banking sector, including the two recent guidelines, one for Shariah Governance Framework and the other one for Islamic Financial.
The significance of these regulatory efforts in rebuilding the economy as the country gets its Covid-19 situation under control can be seen in how lack of regulation adversely affected Mobile Money Transfer services in the past decade.
Mobile money services, offered by non-banking entities such as telecommunication firms that own and offer mobile telephone services, emerged 10 years ago but operated without regulation despite the fact that these companies handled billions of dollars yearly. This lack of regulation was a potential minefield seeing as the services of these firms touched the lives of millions of Somalis both at home and abroad.