Region gears up for low-cost transfer of funds

By James Anyanzwa

 Households and businesses across the region are set to benefit from fast, efficient and relatively cheaper monetary transactions.

This follows the move by the region’s monetary authorities to implement a single payment platform.

The platform is  part of efforts to roll out a regional financial system that delivers affordable, efficient and safer financial services. It targets the East African Community’s (EAC) unbanked and rural population.

 “We are working towards a common East Africa Payments system,” Stephen Nduati Head of the National Payments System at the Central Bank told The Standard. 

“Infact we are piloting it and hopefully by August or September,  it should be running.” Mr Nduati noted that the pilot project is being carried out in Kenya, Uganda and Tanzania.

Regional payment system

According to the project’s appraisal report by the African Development Bank (AfDB), large value or time-critical systems are still not in place in all the EAC partner States. The report dated October 2012 calls for speedier implementation and integration of the national Real Time Gross Settlement (RTGS) system. This is aimed at developing a regional cross-border large value and time-critical funds transfer system.

“Integration with the Society for Worldwide Interbank Financial Telecommunication Network is a prerequisite, if EAC member states wish to access the ‘high value’ East Africa Payment System (EAPS),” says the report. The report notes that while Tanzania, Uganda and Kenya have integrated their RTGS systems to establish the foundation of the EAPS, Rwanda and Burundi are yet to do so.

Burundi is required to acquire and implement an RTGS system.

According to AfDB, Tanzania, Kenya and Uganda, have started integrating their RTGS systems.

The first phase of this process commenced live operations in May last year.  “The EAC States  maintain mixed levels of payment systems, automation and standards with implications on the ability to integrate the payment and settlement system at a regional level,” says report.

The project funded by the World Bank is required to support the proposed East African Monetary Union to function effectively. It will also contribute to managing the convertibility of currencies in the region.

There is increased sharing of information by the regional Central Banks as well as capital markets.

Commercial banks with a regional presence have also eased cross border-transactions, where one can use a single ATM card to withdraw money across the borders.

These include KCB, Equity and Barclays Bank. According to AfDB, at least four out of the five EAC countries are expected to have implemented the project by 2014 with hopes of going live in all the five countries in 2016.

The project involves integration of financial market infrastructure to realise the real RTGS and retail systems across the region.

Technological platform

Others include harmonisation of financial laws and regulations and capacity building. It is expected that integration of existing systems will be completed by 2014. The regional technological platform will be in place by 2016.

An integrated regional payment and settlement system is expected to  fast-track funds transfer across the five EAC countries. This will stimulate trade as well as ease movement of capital within the region.

The technological platform will encourage more people to enter the formal banking system to undertake retail funds transfers. “In the period leading to the desired state of full financial sector integration and Monetary Union, there is a need to ensure that integrated payment and settlement systems are adequately supported throughout the EAC Partner States,” says AfDB.