by Ismail D. Osman
Saturday June 17, 2023
Over the past decade, fintech has
revolutionized the way we think about money transfer and finance. In Somalia,
where traditional banking are confined to major cities, fintech has played a particularly important
role in enabling financial inclusion and promoting economic growth.
Somalia is widely regarded as a hub for
remittances, with an estimated 2 million Somalis living abroad and sending
money back to their families and communities., For many years, the country
lacked a reliable and efficient system for transferring money. Traditional
banks were few and far between, and those that did exist were often confined to
big cities, and very in efficient. As a result, many Somalis turned to informal
methods of money transfer, such as hawala networks, which were often risky and
unreliable.
Fintech has helped to change this
situation, by providing secure and efficient methods for transferring money
across borders. Companies like Hormuud have developed innovative mobile money
platforms that allow Somalis to send and receive money using their phones,
without the need for a traditional bank account. These platforms have become
hugely popular in Somalia, and have helped to promote financial inclusion and
economic growth.
But fintech has not just transformed money
transfer in Somalia - it has also revolutionized the way we think about finance
more broadly. Through digital lending platforms, Somalis can now access credit
more easily than ever before, without the need for collateral or a lengthy
application process. This has given small
businesses and entrepreneurs the
opportunity to grow and expand, which in turn has helped to drive economic
development in the country.
However, fintech is not without its
challenges. As the industry continues to grow, there is a need for robust
regulation and oversight to ensure that consumers are protected and that the
financial system remains stable and secure. There is a need for continued
investment in digital infrastructure and education, to ensure that all Somalis
have access to the tools and resources they need to participate in the digital
economy.
The fintech companies like Hormuud have
played a crucial role in promoting financial inclusion and economic growth in
Somalia. By providing reliable and efficient methods for transferring money and
accessing credit, Fintech has helped to create opportunities for millions of
Somalis, and has paved the way for a more prosperous and connected future.
Indeed, Hormuud Telecom has played a vital
role in providing a lifeline for Somalis, particularly in remote and
underserved areas. Through its mobile money platform, EVC Plus, Hormuud has
enabled millions of Somalis to access financial services and participate in the
digital economy.
However, the lack of a strong and stable
government in Somalia has posed significant challenges for the fintech
industry, particularly in terms of cybersecurity. Without proper National
ID based on the latest biometric
technology and oversight, fintech
companies may struggle to comply with the stringent Know Your Customer (KYC)
regulations.
It’s worth noting Hormuud EVC Plus, a
mobile money service, uses biometric phone identification to prevent theft and
robbery. Biometric data, such as fingerprints, makes it harder for a burglar to
steal money. This technology secures mobile transactions by allowing only the
phone and account owner to access funds. Biometric identification reduces theft
and robbery, making Hormuud EVC Plus a safe and dependable mobile money
service.
To address this issue, fintech companies
& Federal Government in Somalia must work together to provide biometric
based nation ID while investing in
robust cybersecurity measures and work closely with the other stakeholders to
develop effective policies and regulations. This may include measures such as
encryption, multi-factor authentication, and regular security audits and
testing.
The success of the fintech industry in
Somalia will depend on the Government 's ability to build trust and confidence
among customers and stakeholders, by prioritizing compliance and regulations
such as KYC (know your customer) and AML (anti-money laundering) and working
collaboratively to address the challenges they face.
It’s without a doubt that fintech
companies can help to create a more secure and prosperous future for all
Somalis.
Ismail D. Osman: Former Deputy Director of Somalia National
Intelligence & Security Agency (NISA) – Writes in Somalia, Horn of Africa
Security and Geopolitical focusing on governance and security. You can reach
him [email protected] @osmando