Connect with us

Business

The suprising place where Cash is going extinct

Published

on

Half a dozen men crowd round one of the many small colourful wooden shacks off a main street in Hargeisa, Somaliland, shouting and arguing over the quality of khat – a mild narcotic that has been likened to both coffee and cocaine – that they’ve just been hastily handed by the vendor.
Customers quickly come and go, grabbing bundles of the green leafy, legal plant that they deem good enough before punching digits into phones and disappearing as quickly as they came.

“We need to do everything quickly, and paying with cash here is slow,” Omar, one of the khat sellers says as he chews on the green leafy plant himself. “It keeps people calm if they can get their khat quickly.”

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.

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.

There are not many things tiny Somaliland can claim to be a world leader in, but cashless payments might be one
“Most people are paying by mobile now,” Omar says, as he processes a payment on his mobile in one hand. “It’s so much easier.”
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 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.

The breakaway republic’s own currency which now trades at around 1 USD to 9,000 shillings. A few years ago it was just half that.

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.

“To buy one of these in shillings you’d need one or two million!” Ibrahim Abdulrahman, an 18-year-old shop assistant in a jewellery shop says, as he points to a row of small gold necklaces, laughing slightly at the notion of someone attempting to buy in local currency.

“One person can’t carry that amount of money – it’s too much. You would need a bag to carry it,” he continues gesturing with both hands. “We never take Somaliland shillings now, just dollars and mobile.”

Cash is being increasingly sidelined as more and more people adopt the cashless approach

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.

In a country with high illiteracy rates, simplicity and functionality has helped the technology flourish

“This is just from today,” Eman Anis, a sprightly 50-year-old street seller in Hargeisa’s bustling gold market says, showing sales of over $2,000 (£1,513) on her mobile. Payments through mobile she says have rocketed from 5% two years ago to more than 40% now.

“It’s just easier to use mobile, the exchange rates are a problem, but now we can do everything through Zaad,” Anis says referencing the most popular mobile payments company. “Now even the beggars have Zaad.”

While her words are flippant in nature, there is some truth to what she says. 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.

“Because of the drought we had nothing to sell and no money, but family members sent money to help,” Mahmoud Abdulsalam, a camel herder who became displaced due to the drought says from Haaro in western Somaliland.

“Even in the countryside we use mobile money.”

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.
“Even in the countryside we use mobile money” – Mahmoud Abdulsalam

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.

There are murmurs of corruption and concern from some over the lack of regulation as the two private companies that have cornered the

mobile banking sector continue to have unchecked influence on the already fragile economy. An economy that is exposed to corruption in government and relies heavily on the export of livestock in a region where drought is common and mass animal deaths can be just a matter of months away.

While mobile payment services in other countries use local currencies, in Somaliland both companies deal strictly with US dollars, aiding an increasing reliance on the dollar in the autonomous region in east Africa.

Surrounded by wads of Somaliland shillings piled and bundled together into walls of money on the roadside, moneychangers in the breakaway republic like Mustafa Hassan say not only is their business suffering but that the mobile payment system is corrupt, causing inflation, and creating a mini illegal economy of its own.

“We expected the government to either regulate this or stop it [mobile payments], because there are many problems with mobile money here. It’s controlled by two companies and it is like they are just printing money,” Hassan says, as other men in the exchange trade gather round him and nod in agreement.

“It’s causing inflation. Everyone who should have money in their pocket is now using mobile, even to do small things like take the bus and none of this is in local currency, it’s in dollars.”

Yet despite this, Hassan reluctantly still uses the mobile payments system, with customers able to send him dollars direct to his phone which he then exchanges for shillings on the street.

“You know it makes things easy, someone can send me money quickly and easily,” he admits. “A cashless society here is possible – and it’s already on its way. What that means for moneychangers like me, I don’t know.”

While Somalilanders continue to embrace the technology and the jolt it’s given to the economy, moneychangers like Hassan can be hopeful at least that there still remains a few stalwarts that are unconvinced.

“It’s a bank in your pocket, it could get stolen. I always use cash, for everything,” Abdullah, an elderly man says, standing out as an anomaly at the khat stand as he pays with cash rather than by mobile.

“I don’t know if I will ever change to mobile,” he shouts back as he rushes away, shooting off into a nearby busy road as vehicle horns beep frantically at people to move out of the way.

“That’s like asking when I’m going to die, who knows!”

Continue Reading
Advertisement
Click to comment

You must be logged in to post a comment Login

Leave a Reply

Business

Camel milk is a healthy investment

Published

on

DAILY NATION — In the light morning breeze, camels stick their heads out of acacia trees. Close by are calves separated from their mothers in an enclosure made of acacia branches.

The Seeds of Gold team is in Karionga village, a few kilometres from Nanyuki town, Laikipia County, to meet Halima Haji.

The 78-year-old woman rears camels for milk.

Her herd contains 62 dromedary camels which produce a maximum of between six to eight litres of milk each daily and four litres during the dry season.

“That one is from Turkana, the other is Pakistan and a majority of them are Somali,” Halima tells us as she takes us around the farm.

In a good month she can earn a Sh1.2 million selling the milk at Sh80 per litre locally. The milk price can go up to sh100 to Sh150 in supermarkets.

As we let the amount sink, Halima is already telling us how spot the different breeds based on height, shape and skin colour.

“The Turkana one is shorter and has a dark brownish colour while the Somali one is white and tall with the males having a broader face. I do not keep much of Pakistan camels because they are nomadic and easily get lost,” said Halima.

Halima started out with only six camels which she bought in Isiolo County at Sh15,000. Currently, one camel sells at between Sh150,000 and Sh200,000.

“I was interested in rearing the camels after learning of the health benefits of their milk,” she said.

Every morning before 8am when she visits the farm she has leased to graze the camels, she drinks three glasses of the raw milk.

Camel milk is said to be high in insulin which makes it suitable for diabetics, people suffering from arthritis and lactose intolerant children, among others.

Her daughters who have accompanied their mother to the grazing fields say camels are her true love.

“You have really made her day by coming here, she is very happy now,” said ZamZam Haji, Halima’s youngest daughter.

LESS FOOD AND WATER

The animals’ productivity largely depends on the seasons such that during the dry season the milk production per animal goes down compared to days rains are heavy and consistent.

Currently, the vegetation that germinated following the rains experienced in the last quarter of last year is diminishing and this is the worst season for the herders.

She hoping the dry spell will be assuaged semi-zero grazing system.

“The camels will definitely go out in the field to graze but I am planning that come back and graze somewhere together,” she said.

Halima is currently stocking up feeds for the animals to counteract the imminent drought as the weatherman predicts rains will begin in April.

The animals are going to be fed with bran and seed cake which will ensure they continue being productive despite the drought.

“We want the government to come up with a directive that will see companies manufacture feeds for camels just like there is for cattle and poultry,” said Halima.

Camels are replacing cows and goats in the pastoralist communities as choice livestock as the country continues to grapple with the vagaries of climate change.

According to Halima, camels can do with less food and water compared to livestock.

In her herd she has one male dromedary camel that helps in reproduction.

She said land shortage is the main hindrance to camel farming.

For instance she has leased a 300-acre piece of land to graze her camels at Sh20,000 per month.

They also rely on neighbours who partitions part of their land to allow the camels to graze at a fee of Sh500 per month.

Halima has previously had a herd of over 200 camels but lost a number to drought that took a toll on both humans and animals countrywide last year and to diseases.

REAR CAMELS FOR MILK

She has employed three men who take care of the animals and milk them.

“I only allow them to milk the camels once per day in the morning, the rest of the day the calves are left to feed,” she said.

John Oguk, an expert in camel farming, said the common diseases that affect camels are foot and mouth, lumpy skin disease and mastitis.

Dr Oguk says a camel’s hump consists of stored fat which the animal metabolises when food and water are scarce.

“When the camels use their stored fat in the hump, it will diminish but will refill once they eat or drink again,” said Dr Oguk.

Halima said she collaborates with the veterinary doctors in the county to ensure her animals are all well vaccinated and free of diseases.

Besides liaising with the county vets, she also ensures her camels are bathed with pesticides that ensure they are free of ticks and other harmful flies.

She sells her milk to WhiteGold milk processing company that pasteurises and packages the milk in Nanyuki.

The company that was opened last year buys milk from pastoralist communities as far as Isiolo, Marsabit and Wajir counties. It is seeking a to reach Mandera County this year.

Camels are not only used for milk. They also leather and meat products.

“We have used the camels for transport for long but I think it is time we used them to turn in a profit,” she said.

Halima is looking to bring women together to rear camel for milk.

Continue Reading

Business

How to Turn $200,000 Into a $670 Million Business

Published

on

Seven years ago, Ismail Ahmed set out to build a startup that could send cash electronically from the U.K. to Africa. He had $200,000 and a lot of experience in the money transfer business in his native Somalia.

Today, London-based WorldRemit Ltd. sends money to 148 nations and has just raised $40 million in a deal led by LeapFrog Investments, an investment firm in London, the company said in a statement on Thursday.

The Series C funding round values the fintech firm at more than $670 million, according to a person familiar with the transaction, who asked not to be identified because the matter is private. WorldRemit’s longtime backers, Accel Partners and Technology Crossover Ventures, invested in the deal.

WorldRemit, which specializes in sending money via mobile phones, will use the cash to try to grow its customer accounts globally to 10 million from 2 million by 2020. The company is making a big push in transfers between the U.S., Asia, and Latin America.
“The U.S. will grow our revenues as much as 40 percent over the next few years,” Ahmed, WorldRemit’s chief executive officer, said in an interview.

But the company faces stiff competition from The Western Union Co., the longtime powerhouse in the $444 billion global remittance business, as well as other fintech firms such as Remitly Inc., a Seattle-based company that raised $115 million in a private fundraising deal in October.

WorldRemit is on course to record 60 million pounds ($81 million) in net revenue this year, a 46 percent jump from 2016, according to Ahmed. The company is looking at a potential initial public offering in two to three years, he said.

Continue Reading

Business

New market means increased economic opportunities for one Somali town

Published

on

In Somalia’s Puntland region, Bossaso’s local market provides a source of income for local traders. For women, however, the market is especially important.

After years of conflict, many households are reliant on money generated by women to survive. In some households, women contribute more than 70 percent to their families’ income.

And the majority of women in Somalia earn money from informal sectors – including working in local markets.

Unfortunately for traders in Bossaso, selling their goods in the city’s main market was no longer an option. In 2012, a fire severely damaged Bossaso Market – a place many women traders depended on for their livelihoods.

With funding from the Government of Japan, UNOPS oversaw the construction of a new market with improved facilities to support women entrepreneurs in Bossaso.

“We’re grateful for the support of the Government of Japan and UNOPS, who worked closely with us to implement the project,” said Engineer Yazin Mire, Bossaso’s mayor. “Many businesses will benefit from this market, which will help several different communities, including Yemeni refugees and returnees who fled from the conflict in Yemen.”

Giving women a say in their future

Before the construction of the new Bossaso Market began, information was collected from female traders during an extensive consultation process. This allowed them to be actively involved in the design and planning of the new site, ensuring their needs were taken into account from the beginning. In all, nearly 2,000 market traders, both male and female, participated in the data collection process. That data was used to define the scope of the construction of the new market.

An extensive community needs assessment was also conducted to encourage a sense of community ownership of the project, as well as to contribute to the long-term sustainability of the new market.

Training for the future

The new Bossaso Market will enable traders, particularly women, to become economically self-sufficient. In addition to the new market, local entrepreneurs also received training – carried out by the Japan Center for Conflict Prevention – aimed at teaching them new skills to help their businesses thrive. More than 200 traders – nearly 90 percent of them women – either received business skills training or business start-up kits.

“The Government of Japan is delighted with the success of this project, which contributed to stabilization of the region through the empowerment of women, in collaboration with the Japan Center for Conflict Prevention,” said the Embassy of Japan. “The Government of Japan is confident that those who got vocational training will play an important role in leading the local economy and society.”

Asiya Ali Farah owns a kiosk in Bossaso. She participated in a training session on microfinancing. “One day, I hope I will become a lender,” Asiya said. “So that I can give loans to Somali women who need help starting up small businesses to feed their families.”

“Microfinancing is not new in Somalia, but there are not many female traders with access to it yet,” explained Japan Center for Conflict Prevention Secretary General Yukiko Ishii. “The training was intended to help participants access emerging, locally available microfinancing schemes to boost their small business.”

The new skills learned as part of the training sessions will help market traders generate a higher income. This in turn can help increase economic development in the region – and encourage stability.

Continue Reading
Advertisement

TRENDING