NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, May 20, 2014

Grasping his mobile phone, Abdirizak Yussuf Mahmoud prowls the Mohamud Haybe livestock market outside Hargeisa, the capital ofSomaliland. A camel catches his eye and the bargaining begins. He shakes the hand of the trader, haggling in a silent code. Pinching an index finger adds 1,000 dollars to the price; grabbing a hand means 5,000 more.

Once agreement is reached, the handshake is broken. A quick chat confirms the details, before the sale is completed by mobile phone. No cash changes hands, no papers are signed. Instead, Yussuf Mahmoud types into his handset, the seller’s phone chirps, and the deal is done.

Such scenes are commonplace in Somaliland, where innovation and technology are filling the void left by the absence of international commercial banks and formal banking infrastructure.

In the past, a purchase like Yussuf Mahmoud’s would have required a signed letter authorising the withdrawal of cash from one of Hargeisa’s many money transfer operators. Now the favoured transaction mechanism is Zaad, a pioneering mobile money platform inspired by Kenya’s M-Pesa service.