Somali officials on Saturday issued the country's first license to a mobile money service, bringing regulation to the widely used digital payment process for the first time.

The Central Bank of Somalia awarded the license to the country's largest telecommunications provider, Hormuud Telecom, which runs the Electronic Voucher Card or EVCPlus, a free mobile money service used by 3 million of its 3.6 million subscribers in the Horn of Africa country.

The use and circulation of Somali banknotes has been dwindling because of the absence of central monetary policies and because little new paper currency has been printed. But private businesses have nonetheless flourished in Somalia, where unregulated mobile money is extensively used for most buying, selling and transfers.

Mobile money services emerged 10 years ago but were never regulated. The new regulation formalizes digital transactions as the primary payment method within the country and will enable further integration of the Somali financial system with the international financial system, officials said.

The license was issued by the governor of the Central Bank of Somalia, Abdirahman Mohamed Abdullahi, on Saturday in Mogadishu.

"We have developed a robust regulation, and based on that we have issued the first license of its kind in the country today," Abdullahi told VOA Somali.

"This has huge significance. I cannot express in words how important this is."

Easy to access

Abdullahi said the mobile money service is the preferred choice of Somalis because there is a low bar for accessing it.

"For the mobile money, you can actually buy a mobile phone, SIM card and then register yourself and start using right away, starting from one dollar or half a dollar or whatever amount you want, whether you want to deposit it, make payments from the convenience of your home or transfer money," he said.

Hormuud Telecom said it was delighted to receive the first license.

"The news today cements what we've known for a long time - that Somalia is moving towards being the world's first truly cashless economy," said company CEO Ahmed Mohamud Yusuf. "This issuing of a mobile money license for the first time is arguably one of the most important steps taken by Somalia since the end of the war."

An estimated 155 million mobile money transactions, amounting to about $2.7 billion a month in Somalia, were reported by the World Bank in 2018. At the time, the World Bank praised mobile money platforms for "immensely" easing transactions and providing opportunities for economic growth but raised red flags about "plausible fiscal risks" in the event of disruption to mobile money platforms. It also said the platform's lack of regulation caused serious macroeconomic effects.

The Somali shilling has had severe devaluation over past decades because administrations and businesses increasingly preferred using U.S. dollars. Today, one U.S. dollar is worth 25,000 Somali shillings, about the value of one kilogram of rice.

EVCPlus recognizes both Somali and U.S. dollars but operates on dollars only because the economy of Somalia is being dollarized due to devaluation. This devaluation hits the poorest Somalis hardest, particularly those who don't receive dollar earnings or remittances from relatives living abroad.