Following decades of political and economic instability, Somalia has set up a National Payment System as part of its plans to develop its financial industry.
Somalia is struggling to rebuild after 20 years of civil war and is still battling an insurgency by al Shabaab, an al-Qaeda affiliate.
Central Bank of Somalia Governor Abdirahman M. Abdullahi said in an interview that the 13 lenders in the Horn of Africa nation can now
“become inter-operable, connected to the clearing and settlement system of the central bank and able to transact with each other,”
The system will “facilitate transactions between vendors and their customers more efficiently.”
Last year, the Government of Somalia secured a debt-relief deal with the World Bank and the International Monetary Fund as it sought to return to the global financial system.
The Government is now in talks with lenders who aren’t part of the Paris Club, an informal group of mostly rich western government creditors, to potentially further reduce the nation’s liabilities that stood at $4.5 billion in June.
In line with this system, the central bank connects lenders to a clearing and settlements platform to enable them to process real-time money transfers. It also includes interoperability capabilities for debit and credit cards, mobile network operators and automated cash machines.
The central payment system is to an advantage for the nation’s financial sector after recent developments, including the launch of a visa card in July by the International Bank of Somalia. The central bank also issued the first mobile-phone-based financial-services license to Hormuud Telecom, and is looking to print new Somali shilling notes.
According to Abdirahman M. Abdullahi, CBN Governor;
The payment system “will enable more financial inclusion in a secure and safe manner,” said Abdullahi. “The impact on the economy will be unprecedented. It will boost trade and business.”