By the murky green-blue ocean in northwest Somaliland, there is an open-air café with no name. There is only one item on the menu. Patrons compete with hordes of flies and mangy street cats for fresh tuna pulled from the ocean, bisected, peppered, and grilled. This coastal town, Zeila, population 8,500, has no agriculture or industries to speak of, much less commodities, investors, or tourists (unless one counts the migrants regularly shuttling back and forth from the Djibouti border). The only roads back to civilization are a series of diverging wheel ruts vanishing into the desert.
That’s why I’m amazed when, after my friends and I eat through 90,000 Somaliland Shillings (about $13.50) worth of fish, Saeed takes out his cellphone, glances at a number crudely stenciled on the corrugated tin wall, and tells me that our bill has been paid with ‘Zaad.’ I had been dreading counting out the cash in devalued Somaliland Shillings, which only come in denominations of 500, 1,000, and 5,000 (and those 5,000 notes are rare.)
Zaad is a mobile payment system that is radically transforming commerce and finance in Somaliland. At present, almost one-fifth of Somaliland’s population of 3.5 million are using Zaad to make payments. A higher percentage of people likely receive payments or interact in some other way with Zaad. The service, which has become ubiquitous in the past three years, has given Somaliland’s once stagnant economy a jolt. The simple fact of Somalilanders having access to cash on hand and being able to transfer sums has boosted the demand for consumer goods. It has enabled more and more shops to clog the streets and markets to move more expensive items—including current-model iPhones—off the shelves with relative ease.
Mobile money—moving personal cash around via cell phones—is not a new phenomenon in East Africa. In 2007, Kenyan telecom providers rolled out M-Pesa, a program that has become the poster-child of African mobile money. Tanzania and Uganda quickly followed, setting up their own mobile banking programs.
Mobile banking giant Telesom’s main branch. Photo by Mark Hay
What makes Zaad special is the rapidity and extent to which it has permeated Somaliland society. Somaliland is one of the poorest and least connected countries in Africa. The de-facto independent nation broke away from Somalia in the early 1990s. A protracted civil war against Somalia’s dictator Siad Barre left Somaliland’s farms burned, ports ruined, and the main city of Hargeisa bombed to rubble. After the war, the country restored some small industry and set up taxes on sales at nomadic herders’ animal markets and hope to make a steady income from ports and fishing towns, but the specter of piracy, illegal fishing, and toxic waste dumping make that unlikely. Up to 40 percent of the population still depends on remittances from relatives abroad to survive. Yet, unlike any other nation with mobile banking, Somalilanders can pay most of their bills from their phones.
Until recently, there has been no financial infrastructure in Somaliland to speak of. The country just drafted legislation allowing the establishment of Islamic banking, which will comply with shariah law by forbidding interest on savings or loans. But the nascent Central Bank has yet to issue licenses, so the nation still has no banks. Before Zaad, Somalilanders either stored their cash with a hawala (an informal money transfer system, like Western Union but usually cheaper) or with local street vendors or moneychangers. Moving money around literally meant moving money around—bundles of cash would be loaded into an Isuzu truck and hauled from one town to the next. In a place like Zeila, a money truck might arrive once a week. No one recalls the trucks ever being robbed or vanishing, but cash did disappear.