SOMALILAND, THE EAST AFRICAN COUNTRY ON ITS PATH TO BECOME THE FIRST CASHLESS SOCIETY IN THE WORLD 

Did you know that the Somliland currency, shilling, is so devalued that shoppers wander markets with wads of the paper money thrown in their bags as one US dollar is equal to 9,000 Somliland shillings?

Somaliland, a self-declared republic in East Africa, faces high illiteracy and has an economy ravaged by a civil war. But it might just become the first cashless society on Earth as the self-declared country, which broke away from Somalia in 1991 but remains unrecognised by the international community, has become something of a wild frontier for cashless payments as it charts a trajectory towards creating the world’s first cashless society.

Whether in a shack on the side of a road or a supermarket in the capital of Hargeisa, mobile payments are fast becoming the standard in the country. No cash is transferred, and there’s not a credit card in sight. But customers haven’t got their daily khat fix for free; they’ve paid using their mobiles, transferring money on the sandy Somali street in seconds with little more than a mobile phone and a few numbers.

There are not many things tiny Somaliland can claim to be a world leader in, but cashless payments might be one. While developed and developing countries alike have been moving toward cashless payments with phones or contactless cards, Somaliland’s motivation is unique. This shift away from cash is in part due to the rapid devaluing of the Somaliland shilling, the breakaway self-declared republic’s own currency which now trades at around 1 USD to 9,000 shillings. A few years ago it was just half that.

Somaliland broke away from Somalia in 1991 at the start of the country’s deadly civil war – a conflict that has continued in different forms to this day.

The shilling also experienced a turbulent beginning. Introduced in 1994 it was widely used to finance weapons and the region’s war against armed groups, before later being printed on demand by officials to further political aims in the breakaway republic, resulting in an almost constant devaluing of the currency year by year.

With denominations of 500 and 1,000 being the most common, just paying for a few groceries can require a wad of notes, while a medium-sized transaction requires a bag stuffed with the currency.

As for moneychangers who make their living exchanging US dollars and euro to shillings on the street, wheelbarrows are often used to move the piles of notes from one street to the next.

With no internationally recognised banks, no formal banking system and ATMs somewhat an alien concept, two private companies – Zaad which was launched in 2009, and the newer e-Dahab – have filled the void creating a mobile banking economy where money is deposited through the companies and stored on phones, allowing items to be bought and sold with personalised numbers.

From brick and mortar shops in Hargeisa to street sellers sitting on old worn crates down dusty dirt roads in the country’s rural east, cash is being increasingly sidelined as more and more people adopt the cashless approach.

In a country with high illiteracy rates, simplicity and functionality has helped the technology flourish. Paying requires little more than typing in a few numbers followed by a code unique to the vendor. Such codes are everywhere, crudely stenciled on the façade of tin shacks or market stalls, and in more expensive establishments, printed out, laminated, and neatly placed prominently on an interior wall. It requires no internet access so even the most basic of mobile phones can be used, with users moving money from their mobile banking account to another by dialing numbers and codes in a similar way to topping up a mobile phone.

The payment system hasn’t just made life easier for consumers and merchants; it’s also made life possible for some of the poorest. With Somaliland hit by a deadly drought over the past year that has devastated the agro-pastoral livelihoods of hundreds of thousands of people, mobile payment technology has allowed Somalilanders in urban areas to quickly send money to their impoverished and starving rural relatives.

With vendors now reporting that the use of mobile payments has increased from around 10 to 20% a year ago to nearer 50% now, the technology is fast becoming the preferred way to make transactions in tiny Somaliland, a country with a minuscule economy and where camel is the largest export. In Somaliland, some employers have even began paying through mobile.

Research carried out throughout 2016 found that 88% of Somalis over the age of 16 owned at least 1 SIM card, with 81% of Somalilanders living in urban areas, and 62% of those living in rural areas using mobile money services. With the prevalence of cheap mobile phones on the continent, other African countries like Ghana, Tanzania, and Uganda have seen a similar mobile money revolution, with Kenya’s version of Zaad, M-Pesa, believed to be used by around half the population.

However, not everyone is happy with this rapid movement away from cash.

Source:

Read the full article here:

https://www.bbc.com/future/article/20170912-the-surprising-place-where-cash-is-going-extinct