Open banking in Somalia – Open Banking Nigeria

Somalia

Overview

Somalia, located in the Horn of Africa, faces significant socioeconomic challenges, with over 70% of the population living on less than $1.90 a day. The country’s economy is primarily informal, heavily reliant on remittances, agriculture, and livestock. Despite these challenges, Somalia’s financial sector is evolving, with mobile money services playing a pivotal role in bridging the gap in financial inclusion.

The Central Bank of Somalia (Banco Nazionale Somala) is the primary regulator of the financial sector. It has introduced reforms to stabilize the financial system and promote digital financial services. However, specific open banking or data-sharing regulations are yet to be implemented in the country.

Key Developments and Innovations in Digital Finance

Somalia has seen progress in digital payments and fintech innovations:

Mobile Money Services: Mobile money has transformed Somalia’s financial landscape for the better, with services like Hormuud Telecom’s EVC Plus dominating the market. These platforms create a solid foundation for digital financial services and are widely used for peer-to-peer transfers, international remittances, and bill payments, significantly improving financial access for the unbanked population.

NFC Wearable Payments: In October 2024, Somalia launched its first NFC wearable payment solution, a significant milestone in the country’s journey towards digital transformation. The initiative integrates near-field communication (NFC) technology into everyday accessories such as eyeglasses, rings, wristbands, smartwatch straps, and even phone cases. These devices enable consumers to make quick, secure payments by tapping their wearable at any compatible point-of-sale (POS) terminal, ATM, or NFC-enabled payment point.

Opportunities for Open Banking in Somalia

Though open banking has not yet become a reality, the potential for its adoption exists, driven by the growing reliance on digital financial services. Key opportunities include:

Increased Financial Inclusion: Open banking could integrate Somalia’s mobile money ecosystem with traditional banks, providing a unified platform for financial services and expanding access to underserved populations.
Improved Remittance Services: Remittances are a critical lifeline for Somalia, accounting for a significant portion of GDP. Open banking could facilitate seamless and secure data sharing between financial institutions, enhancing the efficiency of remittance services.
Fostering Innovation: Open APIs would allow financial service providers to develop innovative solutions, such as lending platforms or budgeting tools, tailored to Somalia’s unique financial needs.

Looking Ahead

Although open banking has not yet been implemented, Somalia’s growing fintech ecosystem and the Central Bank’s reform efforts provide a foundation for future developments. Investments in digital infrastructure, combined with regulatory advancements, could pave the way for open banking in the long term.

We will continue to monitor Somalia’s financial sector and provide updates on new developments as they emerge.

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