After the collapse of the government of Somalia followed by decades of civil war in the country all governmental system has also collapsed and gone with the government too. There was no central government and none of the government organs that does functioning including the financial system which is one of the systems that collapsed with the government. The war has caused a displacement of people from every corner in the country to the rest of the world mostly Africa, Europe and America. Some of the people who were incapable of leaving the country whatsoever reason stayed the country and believed and imagined that living in the country without a government might be logic and acceptable.

Because many of the displaced left their families behind, people needed a way to transfer funds back to their families in the country. This challenge effected all spheres of life be it primary lives of people in general and businessmen and households in particular. As a result, Hawala system emerged seemingly as the merely solution for this challenge

Hawala System in Somalia

When many countries like Somalia in which the possibility of transferring money from one country to another country or area was in a question mark, the Hawala system became the only mechanism that stood out and made it possible to transfer money in any corner of the world. At that time, it was efficient to use it as a method of payment, practical in terms of relevance, and cost-effective system in terms of transferring funds in out of the country and it has been used for millennia. Although it can be said that there were very rare banks if nothing, but the role that Hawala system played cannot be compared with what both Islamic and conventional banks could play as a role.

Hawala served more people than any other mode of transfer existed at that era. Moreover, one of the greatest that Hawala contributed is by serving as a key player in the humanitarian aid sector. Since civil war affected the country and that there was no a financial transfer system in the country and most of the regions. The system (Hawala) served as an important humanitarian need to the people. Many businessmen in Somalia needed to purchase imports from other countries and to transfer funds outside Somalia, the Hawala system was the only prominent system existed being simple and straightforward that can fulfill the needs of the businessmen. Due to many challenges and the effect of technology many businesses do not sustain in the market as a result how technological advancement led to the emergence of mobile wallets in Somalia will be explained in the following paragraphs.

Mobile Wallet on Money Transfer in Somalia

Globally, mobile technology and internet have become part of the everyday life in some people of in many developing countries in the world. Its common that cell phones are used variety of reasons including calling, taking pictures and few of the people use it as to abreast with the world on political matters. In Somalia and like many other African countries there was a time where there was a very limited resource, infrastructure and difficulties in accessing the financial providers. Recently, Somalia has made rapid progress in the area of ICT and telecommunication infrastructure that led the country to becoming the leading internet and mobile communication in the region.

A 2014 global financial inclusion survey report revealed that Somalia is one of the most active mobile money markets. The economy and lives of many people in the developing countries is changed by the mobile technology advancement where many people started using their cell phones for financial transactions such us sending and receiving money transfers. Thus, let us look at the definition of Mobile money in the following paragraphs:

History and Definition of Mobile Money

The definition of mobile money varies in across all industries but in accordance of world bank it is defined as the provision of financial services through mobile devices.  Moreover, it is when financial services are performed electronically via mobile money. There are three services that mobile money offers in general which are mobile banking, mobile payment and mobile transfers. The three services are confusedly used by people believing that they are the same.

Mobile banking is one of the types of mobile money service that allows clients of financial institutions to have access to their personal or organizational accounts in order to perform transfers and payments. This service can be only used by or available to the people with the possession of formal bank accounts. This service might be said that is only available in the developed countries not the developing countries due to the low level of financial inclusion. Despite of the people with formal bank accounts there are many other unbanked people with the need to get active in the financial markets. Thus, there is what we call Mobile payment which is available for the unbanked people to use.

This kind of mobile money service does not require the users to have bank accounts. They just link to their Mobile SIM Cards and send and receive money. It allows for the unbanked customers instead of cash to buy and sell goods from merchants physically or remotely using their mobile phone wallets. The third mobile service is Mobile transfers (also known as person-to-person “P2P” or Money remittances). This service allows unbanked people to send and receive sums of money from any other mobile users if they are even subscribed to other different telephone service providers across the country (from urban to rural areas) and international borders too.

Historically, there are many researches that shown that Safaricom and Vodafone’s M-pesa (“M”- for mobile and “P” for “Pesa” for “Money” in Swahili) were the only bodies that initially made mobile money popular for the first time in 2007, in Kenya (Migration et al., 2014). The M-pesa of kenya is the revolution of mobile money. From that time on, adopters of the mobile money have increased over time followed by Uganda, South Africa and finally but not the least Tanzania.

Although there are many mobile network operator (MNO) providers in Somalia such as Telecom, Nationlink, Golis and Telesom and Hormuud. A prominent Mobile money service provider is Horumuud Telecom, a leading telecommunication company in Somalia. Hormuud was started in 2002 as a telecommunication company in Somalia when the idea of communicating through mobile phones was a dream to many of people in Somalia. Since then, Hormuud grown and begun to provide other very important services to the community such as Mobile money and internet.

Conclusion Remarks

The world witnessed technological advancement that affected all spheres of life such as mobile technology as a way to money transfers. The general overview of mobile wallets role in this article shows that mobile money has brought an advantage into the communities to provide real-time communication network and quick financial services to people in rural areas who lack the world of banking and financial service providers. This will fill a huge niche that developing countries lack which is the alleviation of lacking banking infrastructure in Somalia and many parts of the developing countries.

Although mobile money might bring so many yet-to-identify consequences it contributes to local development including faster, safer, and more convenient money transfers. It may also lead to lowering the cost of sending and receiving money across and beyond the country, of Somalia. Hence mobile money services will lead to a positive outcome. Shortly, it might be seen that governmental agencies accept giving salaries through mobile money payments (mobile wallets) which we mainly use to pay utilities and so many others. Hormuud telecommunication company changed the way Somalis used to pay money in which they become a key player in mobile money services such as mobile banking and mobile wallets for money transfers in Somalia.

They have led the country to a positive outcome. Though Hormuud is the leading there are still many other competitors that provide the same services Hormuud provides. Questions and clarifications remain on how mobile money services will affect the lives of users in Somalia and therefore bring the attention of the future researchers and everyone interested into the industry of mobile money services to further investigate and provide an accurate and reliable data in the extent of the reliability, safety and the ultimate effect of mobile money services in Somalia.