East African Community partner states-Tanzania, Kenya, Uganda, Burundi and Rwanda have recently agreed to implement a regional payment system that will settle across border payments from the EAC on real time.

Speaking to the Guardian in an exclusive interview at the Bank of Tanzania’s pavilion (BOT) during the just ended 38th Dar es Salaam International Trade Fair (DITF), Computer Analyst, with the National Payment System (NPS) at BOT Stephen Mahendeka said that the system known as East African payment systems (EAPS) is currently in operation where three countries-Tanzania, Kenya and Uganda are participating.

The successful launch of the EAPS is a remarkable milestone and a key achievement by the Monetary Affairs Committee (MAC) towards the integration of the EAC region’s financial sector.

“We are aware that the initiative has been ongoing since 2001 pursuant to the Committee’s decision that required the EAC Central Banks to work out modalities to facilitate cross border funds transfer for the region and to the benefit of the community’s population.”

Mahendeka says EAPS is a secure, effective and efficient funds transfer system that enhances efficiency and safety of payments and settlement within the EAC region.

The systems operates on a real time gross settlement basis by utilizing the linkage between the various Partner States’ Real Time Gross Settlement (RTGS) systems using SWIFT (Society for Worldwide Interbank Financial Telecommunication) messaging network for safe and secure delivery of payment and settlement messages to the central banks of participating country.

EAPS will therefore increase efficiency and facilitate cross border transactions that is essential for boosting intra-regional trade among the East African.

EAPS is currently operational between Kenya, Tanzania and Uganda successfully linking Kenya Electronic Payment and Settlement System (KEPSS), Tanzania Interbank Settlement System (TISS), and Uganda National Interbank Settlement (UNIS).

Other findings reveal that Rwanda is in the process of testing the linkage between Rwanda Integrated Payment Processing System (RIPPS) and EAPS. RIPPS is expected to be fully linked to EAPS very soon. Burundi is in the process of implementing the RTGS system and is expected to join EAPS once the system is in place.

The operation involves exchange of message from selected commercial banks across the partner states using the local real time gross settlement systems (RTGS) of the central banks of participating country.

The system architecture is based on using the local RTGS systems of partner states and SWIFT network to ensure security of cross border payments. The system enables usage of local currencies for settlement of payments in the region.
That is a payer in Tanzania who pays for goods or services in Uganda will be required to pay in Tanzanian shillings at his/her commercial bank that is participating in the EAPS, subject to the prevailing exchange rate of the Uganda/Tanzania shillings.

Thus, it is envisioned that East Africans will be able to save on the foreign exchange-hard currencies such as US Dollars, Sterling pounds, and the like.
The system also facilitates effective payments for cross border obligations. Other benefits include reduction of costs and foreign exchange usage consumers.

Fragmented payment systems are a major obstacle to financial integration at the regional and international levels. The building of common infrastructures and payment systems certainly is one of the conditions for efficient allocation of financial flows among the east African countries.

According to Bank of Tanzania (BOT), EAPS, which is now alive, will enable real time cross border payments in the EAC, thus bolstering efficient payments of goods and services in the region.

Payment systems have immensely contributed to enhancing access to formal financial services through the mobile phone payment services. The recent released FinScope survey, 2013 indicates that 49.9 per cent of adults in Tanzania use mobile money.

Innovations in payment systems continue to provide an efficient infrastructure for leveraging financial inclusion in the country.
Also the recently launched national financial inclusion framework recognizes the role of robust payment infrastructure as key enabler to access financial services.

Payment systems have also contributed to enhance efficiency of government payments by connecting all sub-treasuries in the Tanzania inter-bank settlement system (TISS). Government payments will now be effected with reduction of settlement time lags and enhanced security of payments.

In the pursuit of stimulating efficiency in payment streams in the country, the bank embarked in modernizing the cheque clearing system by undertaking a project to automate clearing operations in the country through a cheque truncation system using image based clearing.

BOT adds that the inter-link of the domestic payment systems with regional and international systems positions the country to attract investment and facilitate efficient cross border trade.

In view of that BOT together with other regional central banks, is implementing cross border payment systems for the EAC and SADC.

It says a well functioning payment system is necessary for successful execution of monetary policy. Security and oversight of such systems are critical as they are strategically important for the economy.

EAPS like any other real time gross settlement system has many benefits that accrue to users including; real time funds transfers, safe and efficient transfer of large value payments, enhanced safety of funds transferred through the utilization of SWIFT infrastructure, finality and irrevocability of payments, increased accessibility as EAPS is available in all the commercial banks’ branch networks, and same day settlement.

EAPS uses local currencies of the East African countries including the Kenya Shilling, Tanzania Shilling, Uganda Shilling, Rwanda Franc and Burundi Franc. In addition, it reduces the cost of transactions as well as the cost of doing business in the region.

EAC business community and the public in the EAC region are encouraged to use this opportunity to use the EAPS system and benefit from the immerse attributes including safety and efficiency to boost the regional trade and intra-regional payments.

Source: IPP Media

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