The Influence of E-Money on Currency Crisis and Depreciation in Somalia

Abstract

This study focused on the influence of E-Money on currency shortages and depreciation in Somalia. The aim of the study was to examine the influence of E-Money on currency shortages and depreciation in Somalia. The research used qualitative research approach and collected the data through documentary review of books, articles, journals and reports on the influence of E-Money on currency shortages and depreciation in Somalia. The key findings of the study on the influence of E-Money on currency shortages and depreciation in Somalia encompass: E-money technology lacks security leading to currency shortages and depreciation leading to currency shortages and depreciation, dollarization of the E-Money decreases the value of local currency leading to currency shortages and depreciation; E-Money creates exchange rate instability since it transfers and receives money into the country using powerful foreign currencies such as dollar that decrease the value of the local currency; E-Money decreases ability to supervise, monitor and control country’s currency leading to currency shortages and depreciation; E-Money affects the reserves of the country leading to currency shortages and depreciation and lastly E-Money in Somalia has got limited expansion and coverage creating currency shortages and depreciation especially in the rural areas of the country. The study recommends that the Federal Government of Somalia through the Central Bank of Somalia should introduce and enforce effective supervision on all the issuers of E-Money; the government should provide solid, transparent and effective legal arrangements that provide the rights and duties of the merchants, customers, issuers and operators of E-Money to control fraud and other illegal activities within E-Money in order to control currency shortages and depreciation; should provide effective technical security to ensure smooth and transparent use of E-Money in the country; the government should parliament should pass and implement effective law such E-Money Act that can protect the people against criminal abuses arising from E-Money such as money laundering; the government should assess and report monthly monetary statistics to overcome the causes of currency shortages and depreciation and lastly the Federal Government of Somalia through the Central Bank of Somalia should impose reserve requirements on all the issuers of E-money (Electronic money) in Somalia to control currency shortages and depreciation.