Somalia is experiencing a remarkable recovery from decades of war and instability. Moving forward it is essential for the country to develop a strong and sound financial system which is up to international standards in terms of  efficiency, transparency and regulation. One key element of the Somali financial system is mobile money. Mobile money allows Somalis to store money, as well as to receive and make payments. This is a major development for a country that lacks a strong currency, remains unsafe in many regions and in which 90% of the population does not have a bank account.

Two out of every five adults in Somalia reported having a mobile money account in 2014. However, the mobile money sector in Somalia remains unregulated and this has raised concerns about issues related to security, criminal activity, customer protection, taxation and state authority, among others.

Somalia is also a major receiver of remittances. The country receives an estimated remittance inflow of over $1 billion each year, close to one quarter of GDP, from around 2 million Somalis spread around the world. There is substantial space for the link between remittances and mobile money in Somalia to be further developed. Most remittances transactions are small transfers that could be delivered via mobile money and a sound regulatory system is essential to make this happen.

This report provides recommendations to the Central Bank of Somalia to strengthen the proposed regulation of mobile money in the country. These recommendations are provided with the purposes of strengthening and safeguarding international remittances. There are other areas of this regulation that are currently being evaluated and supported by other organizations such as the World Bank. Also, the regulation of the mobile money market in Somalia is closely linked with the regulation of the communications sector that is currently being developed. The discussion mainly focuses on the case of South and Central Somalia. The case of Somaliland, where the remittances and mobile money markets are more integrated, is used as a case study in the report. The report provides recommendations in four areas: currency, customer identification, transaction limits and integration with other initiatives.