MasterCard Targets $1.6B Somalia Remittances Business
MasterCard Worldwide this week started issuing credit cards in Somalia in a bid to tap the $1.6 billion annual remittances business that has been disrupted by U.S. and U.K. banks suspending their services on fears of inadvertently being involved in money laundering or terrorist financing.
MasterCard is linking up with Somalia’s Premier Bank and has already distributed its first credit cards to Somalis, after a three-year process to set up shop in the strife-torn nation in the Horn of Africa, said Daniel Monehin, division president for sub-Saharan Africa said.
The move illustrates MasterCard ’s willingness to take risks in Africa, even going into the continent’s most dangerous corners ahead of its key competitor, Visa . It also heralds a first step in lifting the effective financial blockade of Somalia.
“We’re not lowering our standards, we are keeping with all anti-money-laundering regulations,” Mr. Monehin said in an interview on the sidelines of the World Economic Forum for Africa in Cape Town. He said he expected the cards to be used for ATM withdrawals, to begin with.
Somalia has been increasingly financially cut off from the rest of the world, leaving its vast and wealthy diaspora unable to send money back home. After several banks in the U.S. and the U.K. withdrew their services from Somalia, citing increasing regulatory costs, yet another blow came earlier this year when Kenya, home to a large Somali community, cracked down on informal money-transfer systems known as hawalas that were key in Somali remittances.
“If the country’s not under sanctions, it’s open for business,” said Mr. Monehin of the decision to tap the Somali market, adding that MasterCard won’t charge over and above what it charges elsewhere because of the tough operating environment there, although additional fees may be extracted by the partner bank.