Somalia, a country ravaged by civil
war over the past 15 years, may not be an obvious market in which
to launch a modern payment card programme, but one money transfer
business, Dahabshiil, has taken the bold step of launching the
first-ever debit card offering in the country.

The service, called Dahabshiil
eCash, will enable customers to pay for goods and services at any
shop, restaurant, hotel or petrol station that is an official
Dahabshiil merchant and has a POS terminal on the premises. The
service is also aimed at tapping into the growing importance of
remittances, and the nearly one million Somalians who work abroad
who regularly send money back home.

Dahabshiil eCash is available to all customers
with a Dahabshiil account and debit card transactions are made via
internet connection, which means that the money is transferred from
the cardholder’s account to the merchant’s account immediately.

Abdirashid Duale, CEO of Dahabshiil, said: “We
are delighted to be the first company in the region to provide our
customers with the facility to make and receive payments via debit
card. This underlines our intention to be at the forefront of the
region’s banking and money transfer sectors. We believe Somalis
here have the same needs as people in the UK or America and that’s
why the debit card will make their lives easier. We hope Dahabshiil
eCash will help create a cashless society.”

While this noble aim is at odds with the
current state of the Somalian economy, where the vast majority of
the population lives on less than $1 per day, the Dahabshiil eCash
service is remarkably advanced in a country where payment cards are
virtually unheard of. The debit card requires both a PIN and
signature authorisation and all transactions are protected by
industry-standard SSL 128-bit encryption.

A cashback service is also available for
Dahabshiil customers so that they can add an extra amount of money
to the total purchase price of a transaction and receive the cash,
along with their goods. Dahabshiil plans to expand its eCash
service to utility providers and major educational institutions in
Somalia to allow students to pay for tuition fees. It will also
incorporate the eCash service into its worldwide remittance
business to enable the nearly one million Somalian migrant workers
worldwide to transfer money back to Somalia in a more secure and
efficient manner. There are an estimated 250,000 Somalians in the
UK alone.

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Duale said: “Transferring remittances is a
lifeline for many people in the developing world whose friends or
family live in Europe and regularly send money home. Access to
payment services like these will help to bridge the digital divide
among Somalis and will revolutionise the way they make and receive
payments with each other and with the world.”

Population and economy

Somalia’s population was estimated
to be around 7.8 million at the end of 2008 with a density of
around 32 people per square mile. Two-thirds of the population live
in rural areas, with the remainder living in the major urban areas
including Mogadishu, Baidoa and Kismayo in south central Somalia,
Garowe, Bosaso, Galkacyo and Las Anod in the north east regions,
and Hargeisa, Boroma, Berbera, Burao and Erigavo in the north west
regions. Somalia’s official languages are Somali and Arabic, but
English and Italian are commonplace.

Somalia’s economy is based on traditional
agricultural production – in 2007 the country’s GDP was estimated
to be around $2.6 billion, with per capita income of $333, which is
lower than that of Kenya at $350 but higher than Tanzania ($280),
Eritrea ($190) and Ethiopia ($100).

However, remittances from Somalian emigrants
worldwide is a rapidly growing element of the economy, with around
$1 billion remitted back to Somalia annually, according figures
from the World Bank. Around 750,000 Somalians are estimated to have
gone to work in Europe, the US and Canada, Australia, New Zealand
and the Middle East, sending part of their earnings abroad back to
Somalia via remittances. Although cash is by far the most dominant
payment method in Somalia, the country’s central bank has made
intensive efforts to develop a modern payment system. Significant
investments have been made in expanding telecom networks, enabling
private remittance entities (known as Hawalas) to make both local
and international monetary transactions possible.

Somalia’s central bank is in the process of
granting licences to the Hawalas so that they can become fully
fledged commercial banks and broaden the range of financial
services on offer.