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Innovation in the Absence of a State: Mobile Money in the Somali Territories

Nicole Stremlau

Somalia is often described as ‘lawless’ and the world’s worst ‘failed state’. Twenty years of continued violent conflict has left a legacy of destruction, crumbling infrastructure and a lack of formal government institutions. This absence of regulation has also given rise to the piracy, shadow networks, and vibrant trade that have become characteristic of Somalia’s surprisingly functional informal economy. Despite significant interventions and efforts by the international community, and the UN in particular, to create and implement structures of governance, from the presidency to the army, most initiatives remain largely symbolic. The Federal Government’s authority does not extend far beyond the capital city of Mogadishu with the rest of the Somali territories controlled and governed by a patchwork of forces. These groups include the al-Qaeda allied Islamist group Al Shabaab in South-Central Somalia, the self-governing state of Puntland, and its northern neighbor, Somaliland, which is actively seeking independence partly by virtue that it has its own governance institutions and is largely stable, peaceful and relatively democratic.  

In this varied political and economic context there has been a fascinating experiment  - the growth of a vibrant Information Communications Technology (ICT) sector despite the absence of a legal and regulatory environment, and without the state institutions that would normally support the development of such media.1 The growth of this sector has leveraged social networks, particularly with the diaspora, and has helped develop services that would normally be provided by the government or formal institutions.  Private companies have proliferated, providing telecommunications and Internet infrastructure and creating products uniquely suited to the Somali context.  Given the complexity of operating in such a varied political environment, and with pressing security concerns, investment has been almost exclusively led by Somalis, both from the Diaspora and within the country. This is a substantially different environment than telecommunications in countries across the rest of the continent, which have been dominated by multi-national companies such as India’s Bharti Telecom or France’s Orange.

While many parts of the ICT sector have experienced significant growth, from phone in radio shows to internet cafes, one of the most innovative platforms to emerge has been mobile money, a service that is accessible through mobile phones and allows customers to send and receive money, or even in the case of Somaliland, hold money in e-wallets.  Kenya has the most vibrant mobile money market on the planet with almost 70% of adults using their mobiles for payments while Somalia, and Uganda, are close behind.2 Mobile money has become a crucial tool for poor people that do not have access to a bank account and are excluded from the global and national economy.3  

With the proliferation of cell phones in Somalia and across the continent, mobile money has become an important tool for civic engagement. The study of civic media, which looks at citizen involvement through new forms of technology and media, has tended to overlook what media usage looks like in informal, and often highly unstable contexts. Cell phones in Somalia are a way to manage finances, connect with community and access information. Similar to the well-known MPesa in neighboring Kenya, mobile money in Somalia has grown to occupy a central role in increasing citizen participation and inclusion in the local and international economy.  It has, however, taken on very local characteristics and has also adapted to the particularities of the Somali context.  

Somalia may lack a formal banking system but the dynamic hawalah (money transfer) system that has developed provides many financial services, including facilitating the flow of an estimated 1.6 billion USD in remittances from the diaspora, making this one of the most important contributors to the country’s GDP.4 The remittance industry, in partnership with a relatively inexpensive yet strong telecommunications network, much of which they own, has encouraged the growth of the mobile money sector.    Hormuud, known as Telesom in Somaliland and as Golis Telecom in Puntland, has the market share through Zaad payment system, which allows users to pay for items in shops (including informal markets), transfer money and pay bills. It has even been adopted by some institutions to manage payrolls; for example Amoud University, one of Somaliland’s leading universities, not only accepts course fees using mobile phone payments but also pays its hundreds of employees using Zaad.  

Zaad’s more comprehensive approach to mobile money and banking has, along with its competitors, both contemporary and aspirational, encouraged the move to a more cashless economy.  While MPesa has tended to focus on person-to-person payments, mobile money in Somalia has filled a more traditional banking need.  Somalis use mobile money as e-wallets, holding money in the system and saving it securely for larger purchases or transfers, in essence acting as a bank account.  It has been further adapted to the Somali context in that it is free for all users, in contrast with other mobile money companies that are more commonly fee based.  Furthermore, mobile money in Somalia functions in USD rather than Somali (or Somaliland) shillings, the effects of which are not always considered positive. While USD has always been a major currency in the Somali territories, its growing use through Zaad has also been seen to encourage inflation and penalize civil servants who are among those primarily paid in local currency.5 

The growth of mobile money has been completely reliant on local dispute resolution mechanisms, including customary or xeer law and networks of trust, which have both helped facilitate and support the remittance industry. This more bottom-up approach to innovation, whereby technology has succeeded in starting to address challenges of everyday governance and service delivery is also an important lesson for the importance of taking a context-based approach to understanding innovation and the potential of new technologies to engage marginalized communities.


The CIA World Factbook, ‘Somalia country page,’ the Central Intelligence Agency,

Iazzolino, Gianluca. 2014. “Somaliland has embraced mobile money – but at what price?” The Guardian Online, May 19.

Penicaud, Claire and Fionan McGrath. 2013. “Innovative inclusion: How Telesom ZAAD brought mobile money to Somaliland.” Mobile money for the unbanked.

Stremlau, Nicole. 2013. “Somalia media law in the absence of a state.” Journal of Media and Cultural Politics 8(2): 159 – 174.

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