Recommendation 6

Developing guidelines
for cash transfers in Somalia:

Enabling
environment

This document Recommendation 6 – Enabling Environment belongs to a larger set of recommendations

aimed at improving mobile money cash transfer processes in Somalia. Topics covered in the set of
recommendations include: MPSP service offering, automation of the cash transfers, post distribution
monitoring, common recipient registry, proof of ID, and enabling ecosystem. This document focuses on
the enabling environment.
This sixth set of recommendations is slightly different from the others since it is cross-cutting and
provides recommendations targeted at South Central, Puntland and Somaliland government entities to
support the other five sets of recommendations.
 Developing guidelines for cash transfers in Somalia:
Enabling Environment
Recommendation 6

GSMA Mobile for Humanitarian Innovation

The GSMA represents the interests of mobile operators The GSMA Mobile for Humanitarian Innovation programme
worldwide, uniting more than 750 operators with almost works to accelerate the delivery and impact of digital
400 companies in the broader mobile ecosystem, including humanitarian assistance. This will be achieved by building
handset and device makers, software companies, equipment a learning and research agenda to inform the future of
providers and internet companies, as well as organisations digital humanitarian response, catalysing partnerships
in adjacent industry sectors. The GSMA also produces the and innovation for new digital humanitarian services,
industry-leading MWC events held annually in Barcelona, advocating for enabling policy environments, monitoring
Los Angeles and Shanghai, as well as the Mobile 360 Series and evaluating performance, disseminating insights and
of regional conferences. profiling achievements. The programme is supported by the
For more information, please visit the GSMA corporate UK Foreign, Commonwealth & Development Office.
website at www.gsma.com Learn more at www.gsma.com/m4h or contact us at
Follow the GSMA on Twitter: @GSMA m4h@gsma.com
Follow GSMA Mobile for Development on
Twitter: @GSMAm4d

The Somalia Cash Working Group (CWG) leads the

inter-sectoral cash coordination mechanism and aims
to improve the coordination of cash assistance, quality
of implementation of cash assistance monitoring, This material has been funded by UK aid from the UK
evaluation and learning. It is co-chaired by the World government; however, the views expressed do not
Food Programme and Concern Worldwide/Somali necessarily reflect the UK Government’s official policies.
Cash Consortium. The Financial Service Provider (FSP)
workstream’s objective is improving the systems and
processes of humanitarian mobile money cash transfers in
Somalia, benefiting programme participants by working
with implementing agencies, mobile network operators,
private sector and learning partners. The GSMA M4H has
supported the FSP’s work since 2020.
Further information on the Somalia CWG can be found here:
www.humanitarianresponse.info/en/operations/somalia/
cash-activities

Altai Consulting partnered with Tusmo in Somalia GSMA Mobile for Humanitarian Innovation Programme
Contributors
Jaki Mebur, Market Engagement Manager
Belinda Baah, Insights Manager
Ken Okong’o, Senior Policy and Advocacy Manager
 Developing guidelines for cash transfers in Somalia:
Enabling Environment
Recommendation 6

1 Current state
Mobile Payment Service Providers (MPSPs)
The ICT mobile money landscape in Somalia is The Dahabshiil conglomerate is Hormuud’s biggest
divided across several MPSPs: competitor. Dahabshiil bank partnered with Somtel,
which provides mobile money services through its
It is dominated by the Hormuud conglomerate,
platform e-Dahab. Somtel operates across the three
which includes the MPSPs Hormuud in South-
Somali regions.
Central, Gollis in Puntland and Telesom in Somaliland.
The three MPSPs have a partnership with the Salaam NationLink was one of the pioneers but it is losing
Bank, which allows the MPSPs to expand the range market share. It provides mobile money services
of mobile money services through platforms EVC through its platform E-Maal. It operates solely in
Plus in South-Central, Sahal in Puntland and ZAAD in South-Central Somalia.
Somaliland.

Figure 1

MPSP Landscape

South-Central Puntland Somaliland

HORMUND GOLIS TELESOM

Mobile
Network SOMTEL / HQ in Somaliland but only around 20% market share outside of Somaliland
operators
NATIONLINK

EVC+ SAHAL ZAAD

Mobile Money
SOMTEL / HQ in Somaliland but only around 20% market share outside of Somaliland
Platforms
E-MAAL

SALAAMAH SOMALI SALAAMAH BANK DAR ES SALAAM BANK

Financial
Services DAHABSHIIL
Providers

Hormund conglomerate Dahabshiil conglomerate Nationlink Connection within conglomerates

Most INGOs/agencies work with the Hormuud conglomerate because of their wide geographic reach and
market share. They all offer similar services to both INGOs/agencies and individual customers.
 Developing guidelines for cash transfers in Somalia:
Enabling Environment
Recommendation 6

Existing policies and regulations

Financial institutions and mobile money
As described in more detail in the annexed passed by the Somaliland Cabinet before 2021.
policy and regulatory analysis document, several Currently, a set of mobile money guidelines have
regulations have been developed to support the been developed in Somaliland;
mobile money ecosystem, including:
• Anti-Money Laundering and Countering the
• National Communications Act (2017) in South- Financing of Terrorism (AML/CFT) Act, passed in
Central and the Somaliland Telecommunications 2016 in South-Central and in 2019 in Somaliland.
Law (2011) in Somaliland, which aim to create
Puntland is in the process of developing its own
an environment conducive to investment in the
regulations but is very much reliant on Mogadishu’s
sector, infrastructural development and more
regulations for the time being. While Somalia fares
efficient service delivery;
well in terms of existing regulations overall, the
• Mobile Money Regulation (2019) in South-Central enforcement of these regulations is lagging. Poor
which acts as the main regulatory document for implementation has led to ‘self-regulation’ by the
the mobile money sector. A similar regulation is MPSPs.
being developed in Somaliland and aims to be

Identification
The three regions differ in terms of the status of state ID system exists, but is expensive and is only
their national ID system. Somaliland is the most provided by municipalities in the major towns. Less
advanced in that a national ID system exists with people therefore own an ID card in Puntland than
biometric identification through iris scanning. in Somaliland. South-Central is the least advanced
However, in practice, not all residents have an region in terms of an ID system. No official ID system
ID card, particularly those in remote areas, due exists. The system is however under development
to the associated cost, access to government with support from the World Bank through SCALED
institutions and requirement of providing a birth UP (Somalia Capacity Advancement, Livelihoods and
certificate at registration. Similarly, in Puntland, a Entrepreneurship, through Digital Uplift Project).

Registration criteria
Mobile money registration criteria depend on each MPSP:
• EVC Plus (Hormuud): registration criteria depend similar to the one associated with the SIM card,
on the type of account. For a normal account, no the user must fill in an electronic registration
ID is required, and a phone number is enough. form (including full four names, mother’s name,
For an upgraded account ($700 limit), an ID date and place of birth and residence), and
is required. These registration criteria are not provide a photo and valid identity document
compliant with international standards.1 (passport, driver’s license or national/state ID).
In case the person does not have a valid ID, they
• ZAAD (Telesom) and Sahal (Gollis): to open a
must be referred by a local chief or well-known
normal mobile money account, the user must have
businessperson. This process is mostly compliant
a SIM card registered to their name. The name
with international standards.
provided for the mobile money account must be

1 International standards refer to those described in the ISO 12812 series of standards and technical specifications, see https://www.iso.org/news/2016/05/Ref2083.html
 Developing guidelines for cash transfers in Somalia:
Enabling Environment
Recommendation 6

Relationships with the Governments

Between MPSPs and the governments
The MPSPs in the three regions have very different between Gollis and the government. Gollis is
relationships with the government: not involved in the development of regulations
and does not formally share information with
• Somaliland: ZAAD has an active relationship
the government. However, they are sometimes
with the government. They share reports with the
asked by the Ministry of Telecommunications
Bank of Somaliland on a regular basis, including
to share information about their SIM and
subscriber reports and financial reports, and have
mobile money users. Contrary to the other two
an open dialogue with them. They also participate
regions, their main counterpart is the Ministry of
in the development of regulations through their
Telecommunications rather than the Puntland
participation in validation workshops. It is a
State Bank.
consultative process. Their main counterpart is the
Bank of Somaliland.
• South-Central: Hormuud does not share any “ We have a good relationship with
information with the government. In the past, they government, more specifically the
were not involved in the development of policies
Ministry of Telecommunications and
either. However, this relationship has improved
recently as they were invited to provide inputs the Ministry of Commerce. We don’t
towards the National Communications Act (2017) work together for the development
and the Mobile Money Regulation (2019). Their of regulations but work together on
main counterpart is the Central Bank of Somalia. telecommunications [implementation].”
• Puntland: There is a very weak relationship – MPSP, Puntland

Between INGOs/agencies and the governments

INGOs/agencies are involved with the governments In Somaliland, INGOs’/agencies’ counterparts are
in the development and implementation of safety the Ministry of Planning and Development (MoPD)
net programmes, but the governments are not and the Ministry of Employment, Social Affairs
involved in their relationship with MPSPs. In the and Family (MESAF). They then negotiate at the
development of safety net programmes, in Somalia, municipality level.
INGOs/agencies first interact with the government
at the Federal level, with the Ministry of Planning,
Investment and Economic Development (MoPIED),
and the Ministry of Labor and Social Affairs (MoSA).
They then negotiate at the state and district levels.
 Developing guidelines for cash transfers in Somalia:
Enabling Environment
Recommendation 6

2 Identified challenges
MPSPs
The three MPSPs from the Hormuud conglomerate The three MPSPs have different levels of interest
share common opinions concerning the level regarding their involvement in the regulatory
of regulation that surrounds the mobile money process. In Somaliland, regulations seem to be
landscape. The mobile money space has been changing at the right pace, as new regulations are
largely self-regulated in the past 10 years, which developed with the emergence of new technologies.
has both advantages and disadvantages. On one ZAAD expressed particular interest in developing
hand, the lack of regulations helps their business as regulations related to data and consumer protection,
it dissuades newcomers from entering the market, to both protect the consumers and the MPSPs.
leaving the majority of the market share to the In South-Central, there is interest in developing
conglomerate, and can result in lower fees which more regulation to benefit the private sector, not
benefit the customers. Somalia’s mobile money just the government, as well as implementing the
system are some of the few in the world that are free current regulations. MPSPs also had an interest in
at point of utilisation. A lack of regulation means being more involved in the process of developing
that customers’ rights are not protected so are at regulations. In Puntland, there is very little
the mercy of the private sector and deposited funds involvement of MPSPs in regulatory development
are at a higher risk as liquidity rules are not enforced. and no interest on the MPSP side to have more
Allegation of corruption is common, as MPSPs pay regulations implemented or to be more involved in
money to the local government and non-state actors the process.
to facilitate mobile money processes, which are often
undocumented.

“ We were working without rules and regulations for the last 10 years. To work in such
an environment had its advantages and disadvantages… We want more regulations
that benefit the private sector, not just for the government. And these regulations
should be consulted with us during their drafting and enacting as well so that we can
have our say.” – MPSP, South-Central
 Developing guidelines for cash transfers in Somalia:
Enabling Environment
Recommendation 6

Technology companies
Technology companies could offer solutions towards • Lack of KYC checks: when creating APIs and
the improvement of the mobile money cash transfer portals, technology companies need to sign data
system, but have cited several challenges which have protection contracts with MPSPs. There is a need
stopped them from investing in Somalia so far: for high KYC requirements and regulations, which
is not currently the case in Somalia.
• Instability: instability would render market entry
difficult for any type of business, whether referring • Centralised system: there is a perception that
to insecurity or political instability. the Central Bank of Somalia has control over how
mobile money works and is particularly involved in
• Poor business environment: the business
the process in Somalia.
environment in Somalia is not conducive for
new market entrants from any sector. The weak • Potential new entrants cite the involvement of
regulatory framework and lack of implementation the government in setting up their business as a
leads to corruption, which is difficult for new challenge.
entrants. Insurance is very difficult to obtain for
• Immaturity of infrastructure: technical challenges
businesses.
of the telecommunications ecosystem.
• Lack of financial service regulations: the
• Lack of customer interest: none of the INGOs/
regulatory framework is not well defined, leading
agencies the technology companies work with
to potential money laundering and foul play.
have shown any interest in using their services in
Somalia.

“ We do not work in Somalia because there are technical challenges in bringing

together Somalia’s telecommunications ecosystem, the regulatory framework is not
clearly defined, infrastructure is not mature, there is political instability and potential
for money laundering. Additionally, there are instabilities, which is difficult for any
business.” – Technology firm, Nairobi
 Developing guidelines for cash transfers in Somalia:
Enabling Environment
Recommendation 6

INGOs/Agencies
INGOs/agencies cited the uniqueness of the Somali INGOs/agencies. INGOs/agencies have expressed
context. Technology innovation is fast paced, which the lack of leadership of the government as a
offers a lot of opportunities. However, INGOs/ challenge. The space is very much self-regulated by
agencies perceive there are many challenges the MPSPs, rather than being led by the government.
associated with the environment, namely the largely INGOs/agencies also cited inconsistencies within the
self-regulatory space and the lack of a national ID Federal government, and also between the different
system. Authentication, receipt verification and levels of government.
systemic risks were the main challenges shared by

“ The federalist structure of Somalia makes programming and discussions with the
government difficult. First, we discuss with the Federal Government, then they discuss
with the district levels. … State level also has its own complications because there are
frictions between the federal and the States levels.” – INGO/agency

INGOs/agencies also complained about rash the help of the Cash Working Group. However, they
decisions made on the side of the government. would like to limit these rash decisions and create
A particular example was cited whereby the a more consultative process when it comes to cash
Government of Somaliland decided to pass a law to transfers.
tax all cash transfers. This issue was resolved with

“ Often there are challenges with the government as they impose rules from one day to
the next.” – INGO/agency

3 Potential solutions
The governments could provide support to the mobile money cash transfer process
in Somalia by taking steps towards facilitating the business environment in broad
terms, but also by developing regulations associated with particular components
of the process. In the broader sense, the governments could work on clarifying and
implementing existing regulations, update regulatory guidance to address issues
created by these disruptive innovations as well as developing policies and regulations to
enable more conducive business environments overall. In the more targeted sense, the
governments could work towards developing and implementing regulations related to
identification, data and consumer protection, and financial stability.
 Developing guidelines for cash transfers in Somalia:
Enabling Environment
Recommendation 6

4 Targeted recommendations
Topic Recommendation Difficulty2 Timeframe3 Cost4

Identification (Ministry of Support INGO/agency and MPSP initiatives Medium-

Planning, Investment and Low Low
to create a common population registry term
Economic Development/
Ministry of Planning In Somaliland: Increase efforts to increase
and Development and the accessibility of national ID cards to
Central Bank/Bank of all sections of the population, including Medium-
Somaliland) Moderate Moderate
decreasing the cost, easing the birth term
certificate criteria and participating in
campaigns to register those in remote areas

In South-Central: Continue efforts in the

creation of a national ID system, with
High Long-term High
the support of the World Bank through
SCALED UP

Data and consumer South-Central: Implement the articles

protection (Central Bank/ related to consumer and data protection
Bank of Somaliland) provided in the Mobile Money Regulation Medium-
Moderate High
and expand on them to include articles term
related to safeguarding funds and deposit
insurance

Somaliland: Include articles on consumer

and data protection in the new Mobile Low Short-term Low
Money Regulation

Financial stability Develop regulations related to financial

(Central Bank/Bank of stability to create confidence in the mobile
Somaliland) money system by decreasing the potential
Medium-
for fraud and ensuring solvency to minimise Moderate Low
the risk of collapse.5 This would encourage
term
new entrants and support the ecosystem in
general

Existing regulations Clarify and implement existing regulations

Medium-
(Central Bank/Bank of to encourage external technology providers High High
Somaliland) to enter the market and foster innovation6
term

Business environment Provide a more conducive business

(Ministry of Commerce/ environment to attract new entrants to
High Long-term High
Trade) work in Somalia/Somaliland, in particular
regional technology firms7

2 The level of difficulty refers to the level of effort and coordination required to implement the recommendations. Recommendations with a ‘low’ difficulty level might only require
coordination within one type of stakeholder, while those with a ‘high’ level may require coordination between multiple types of stakeholders.
3 The timeframe refers to how long it is assumed to take for a recommendation to be implemented. ‘Short-term’ recommendations are those that could be implemented within a
period of three months, ‘medium-term’ could be implemented between three months and year, while ‘long-term’ recommendations could be implemented over period of more
than a year.
4 The cost refers to how much each recommendation is expected to cost to implement. ‘Low’-cost recommendations should require little to no cost at all to implement, ‘medium’-
cost recommendations would require a certain amount of investment but which could be covered by one type of stakeholder, while ‘high’-cost recommendations would require
significant investment from multiple types of stakeholders.
5 For more details, see ‘Regulatory Environment Analysis’ within this series of documents
6 Ibid
7 For more details, refer to the World Bank Group’s ‘Doing Business Somalia 2020’: https://www.doingbusiness.org/content/dam/doingBusiness/country/s/somalia/SOM.pdf