MasterCard has become the first international payments network to enter Somalia through partnering with Premier Bank Ltd, signalling a huge business potential in a country that has long been shunned by Western powers due to perpetual wars and conflicts.

The US-based technology firm is eyeing growing volumes of remittances estimated to contribute over $1 billion to Somalia’s economy and 35 per cent of the total value of goods and services produced in the war-ravaged state in a year.

The funds are an essential source of income for individuals and necessary for the development.

James Wainaina, MasterCard’s vice president and area business head for the  East African region said the firm’s entry into Somalia is in line with its broad growth strategy for sub-Saharan Africa.

“We recognise that there are challenges in this market (Somalia) but for me it is about opportunities. The market is continuing to open opportunities emanating from remittances from the diaspora, non-governmental organisations (NGOs) and donor funded activities,” Mr Wainaina told The EastAfrican through a phone interview last week.

“There are no restrictions in terms of working with Somalia and from our perspective we engage with a market because there is a need. Basically there is a huge drive in digitising the Somali economy in line with global trends.”

Mr Wainaina however acknowledged that there are challenges of having an effective payment infrastructure.

The launch of MasterCard payment system in Somalia is expected to open the country’s economy to electronic transactions both in government and private sector.

MasterCard currently has a presence in Kenya, Uganda, Tanzania, Rwanda, Burundi, Zanzibar and South Sudan, and the firm is sniffing for more business opportunities from the rest of Africa through partnerships with local financial institutions.

The firm’s partnership with Somalia’s privately-owned Premier Bank was announced at the World Economic Forum in Cape Town, South Africa last week.

Premier Bank, which has only two branches in the capital Mogadishu,  will now issue and accept MasterCard branded payment cards in Somalia, a country that has never had any form of formal banking service since the collapse of the government and financial services system in 1991.

READ: US banks criticised for banning remittances to Somalia

“Somalia has made significant strides to rebuild the country and instil peace and stability,” said Abdirahman Yusuf Ali Aynte, the country’s Minister of Planning and International Co-operation.

Mr Aynte said the partnership signals Somalia's financial liberation after years of exclusion from the global economy.

The latest development means that government agencies in Somalia have a platform through which to transfer salary disbursements.

Foreigners, expatriates and international aid organisations sending funds to Somalia can now use a formal, traceable network which complies with international security standards, eliminating risks of transferring and transporting cash.

The bank, which is licensed and regulated by Central Bank of Somalia, will also issue 5,000 MasterCard debit cards this year, followed by prepaid cards and point of sale (POS) machines.

Premier Bank's MasterCard-branded debit cards will enable Somalis to withdraw funds from any MasterCard-licensed ATM globally, shop online, pay for goods and services around the world.

The bank’s managing director Mr Mahat Mohamed Ahmed said increasing payment card usage in Somalia will encourage merchants and citizens to demand more electronic payment services as they engage and contribute to the formal economy.

“We can now provide our customers with a safe, cost-effective, convenient means of transacting both at home and abroad,” he said.

The partnership between MasterCard and Premier Bank is a significant step towards reducing Somalia's dependence on cash, increasing financial inclusion and ultimately contributing to the country's financial stability.

According to Mr Daniel Monehin, MasterCard’s division president for sub-Saharan Africa, the firm is working closely with governments and financial institutions across Africa to introduce safe and simple financial solutions throughout the continent.

"To promote economic growth in Somalia, which has long been isolated from the global economy, there is a need for electronic payment solutions that align with international security and regulation standards,'' he said.