Somalia's ability to develop its mobile money market and tap into international remittances is being hampered by civil war and conflict between extremist groups.

The country's first mobile money platform, Zaad was launched in 2009 and has grown. Run by mobile operator, Telesom, the platform has made inroads but has not yet lived up to its full potential, says mobile money research and advisory firm, Mondato in a note released Wednesday.

Telesom's rival, Dahabshiil, had also launched its own mobile money service.

"Somalia has managed to raise a relatively strong mobile money ecosystem out of the ashes of its civil war and crashed economy, but the ongoing existence of Islamic extremists in the country has meant caused continued troubles for its significant diaspora, in particular in the United States, and their ability to send critical money remittances back home," analysts at Mondato said.

Another recent report on the civil war ravaged African country's mobile money sector, released by the Rift Valley Institute, stated that regulatory oversight in the Somalian mobile money sector is lax.

Other African countries such as Tanzania, Zimbabwe and Kenya have moved in to regulate the mobile money sector, with other countries imposing taxes on mobile money transactions.

"Zaad is shielded from the Central Bank's scrutiny because there are no local banking laws to regulate it. This is a reflection of the weakness of Somaliland's state institutions," claimed Gianluca Lazzolino in the research paper titled Following Mobile Money in Somaliland, released last month.

Mondato said of Somalia's mobile money sector; "International mobile money remittances are not yet an option for the country, despite the widespread use of mobile wallets within the country".

It added that banks in the country are sceptical of running into regulatory problems as a result of third party partners' and agents' effectiveness in implementing efforts to counter financing of terrorism laws.

"Here is a real pain point for Somalis that mobile money has the potential to ameliorate, but regulation and fear of prosecution, as well as vested interests, have created a potent brew that benefits no-one, except perhaps the terrorists," said Mondato.