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Regional payment system to lower money transfer fees

BUSINESS
By - Jenny Clover | Oct 7th 2012 | 2 min read
By - Jenny Clover | October 7th 2012
BUSINESS

By Jenny Clover

Traders from select sub-Saharan Africa countries will see their money transfer costs slashed by the introduction of a new regional payment system, Rwanda’s central bank has said.

Under the Regional Payment and Settlement System (REPSS), traders will pay a flat rate of 0.25 per cent to transfer euros or dollars across borders, an improvement on standard bank fees which can be as high as 5 per cent of the transfer. The system will save money as the funds will be transferred through member countries’ central banks, with customers using commercial banks to deposit and withdraw cash on each side of the transfer.

“We want to make sure our people here in Rwanda can do much more trade,” Bank of Rwanda Governor Claver Gatete told reporters in Kigali.

The REPSS system initially will be used by traders in Rwanda, Mauritius, Sudan and Swaziland, with several other member countries of the African regional trade block Common Market for Eastern and Southern Africa (Comesa) expected to join. Tanzania, a member of the East African Community (EAC) trade block, has committed to join the regional payment network but generally only Comesa member states are expected to use the REPPS system in the near future.

“One of the biggest markets we have to target is Comesa, which has a population of 413 million people in 19 countries. In order to facilitate that kind of trade, we need to make it cheap and easier for the people to transact within that market.” Regional Comesa trade stood at $17.4 billion in 2010, with cross-border payments costing around $600 million a year.

Gatete said Rwandan traders alone could save up to $23 million per year under the new system.

The system will only transfer US dollars and euros initially but could be expanded to local currencies in the future, Gatete added. As an additional incentive, no fees will be charged the first six months.

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