By Mark Anderson in Hargeisa
Somaliland's mobile money-transfer system, Zaad, has gained hundreds of thousands of customers, bringing convenience to a territory that lacks a formal banking system, but not potential customers
THE MONEY TRANSFER SYSTEM IS USED BY SHOPS, HOTELS, MARKET STALLS – AND EVEN QAT SELLERS/PHOTO/MARK ANDERSONFlicking through a stack of dirty Somaliland shillings after coming up short to pay for a car wash, Asad Egeh, a legal advisor, asks: "Does anyone have 2,000 shillings?" Unperturbed by the lack of response, he takes out his phone and in just a few seconds transfers SSh2,000 ($0.30) into the seven-year-old car washer's Zaad account.
Zaad is a mobile money-transfer service offered by Telesom, the self-declared country's largest network operator. Telesom has 500,000 subscribers, and it estimates that 40 percent of the territory's population has a mobile phone. About 306,000 Somalilanders use Zaad, which was first launched in May 2009.
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With a population of around 3.5 million, Somaliland has no formal banking sector. The country's parliament is in the process of passing legislation that will establish a central bank, paving the way for commercial banks to set up shop. According to lawmakers, the legislature is due to pass the Commercial Banking Act within the next six to 12 months.
Somaliland's Zaad service is not the same one that has attracted the attention of United Nations investigators in Somalia. UN Security Council Resolution 1844 identified ZAAD, a rival service operated in Somalia by Hormuud Telecom, as a possible fundraising channel for the Islamist rebel group Al-Shabaab, which controls much of southern Somalia. The 17 February resolution calls for an asset freeze and travel ban on prominent Somali businessman Ali Ahmed Nur Jim'ale, who the UN says has used Hormuud Telecom's ZAAD to send money to the Islamist group.
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Abdikarim Mohamed Eid, Telesom's managing director, is keen to emphasise the difference between the two firms. "Zaad is owned by Telesom, so it's not going to affect us because we have no relationship with Puntland or south Somalia, we are focused on Somaliland," he says. "Telesom is owned by a group of around 1,000 Somaliland-based shareholders."
The power of Zaad can be seen on the streets of Somaliland's capital, Hargeisa. Shops, market stalls, restaurants and hotels all use Zaad. Sellers of the drug qat accept payment through Zaad. Telesom, the mobile telephone network used by Zaad, pays its employees through the service.
No more bundles In a territory with a gross domestic product estimated at $1bn, the $700m attributed to remittances from the diaspora in 2010 is big business. Zaad levies a 4-5 percent service charge on transactions, which changes depending on the amount transferred. "Zaad grants banking access to populations without financial services," says Abdikarim.
According to Laura Hammond, team leader of a recent UN Development Programme report on the role of the Somali diaspora, Zaad has grown in significance: "It's attractive primarily because it's secure and relieves people from the necessity of having to carry around bundles of cash."
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The service limits standard users to transfers of $500, while merchants are allowed to transfer up to $2,000 at a time. 'Special arrangements' are made for its wealthier users, depending on the amount in their bank accounts.
Somaliland's finance minister Mohamed Hashi says that the service evades taxation. "Zaad makes things easier, it really helps. But we haven't been able to control the Zaad and the telecommunications systems because we have neither the equipment nor the expertise," says Hashi. ●
This article was first published in the April 2012 edition of The Africa Report, on sale at newsstands, via our print subscription or our digital edition.
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