Yesterday MasterCard announced it will be the first international payments network to enter Somalia through its partnership with the country’s Premier Bank.
The deal means the bank will now issue and accept MasterCard-branded cards in Somalia, with around 5,000 debit cards expected to be issued this year. The result: for the first time, MasterCard holders travelling to Somalia can make payments or withdrawals using Premier Bank’s infrastructure.
“Any one of two billion MasterCard-branded cards can be used on Premier Bank’s infrastructure, currently ATMs… but it is obviously going to evolve to include points-of-sales in the near future. So the significance of this is that it is really opening up [Somalia],” MasterCard’s vice-president and area business head for East Africa, James Wainaina, told How we made it in Africa.
Opening up to the global economy
Somalia, which has undergone years of civil war, did not have a formal parliament until 2012 after its president Siad Barre was overthrown in 1991. Years of instability impeded development, and the country has a low penetration of banking infrastructure with the vast majority of the population still excluded from the formal financial system.
According to Wainaina, the deal makes travel easier for both MasterCard-holding foreigners entering the country and Somalis travelling outside. “So travellers into the market do not have to carry cash… Hopefully this is a journey that will reflect a lot more positivity [about the country] and that of which one can do business in Somalia.”
He added the partnership with Premier Bank also marks a step towards increasing financial inclusion in Somalia and bringing the country into the global economy.
“Statistics we have been exposed to show us that 8% of Somalia’s population above the age of 15 have access to formal financial services,” he said, cautioning that this could be unreliable due to challenges of gathering dependable data.
“But there is a huge financial inclusion opportunity.”
The greatest impact can be seen in the remittance market, which is an essential source of income for many Somalis. Foreigners, expatriates, members of the diaspora and international organisations are now able to transfer funds via a traceable network, eliminating the risks of transporting cash.
“Currently it is estimated that between US$1bn to $1.3bn in remittances is from the Somali diaspora… and the challenges are related not so much to where the funds have originated from, but who the recipients of such funds are.”