Kampala. Traders across East Africa will be able to transfer money across borders in the East African region within a day thanks to a new initiative that has inter-linked the region’s central banks.
The initiative, which is part of the project by
the East African Community member states, to grow their capital markets
has taken effect in Uganda, Kenya and Tanzania while Rwanda and Burundi
are expected to join later.
The East African Cross Border Payment System
(EAPS) will use the Real Time Gross Settlement system (RTGS), which has
been operational since 2005 where settlements are made immediately
unlike the previous two to three days taken to receive the money
previously.
“The EAPS connects the Real Time Gross Settlement
system of a country in the East African states from the single system to
that of a multi-currency system,” Ms Joyce Okello, Bank of Uganda
director of payments and settlements, said in an interview with The
Citizen’s sister paper, Daily Monitor.
The system is expected to ease money transfers within the region, where regional trade volumes are growing.
Unlike the previous system that involved using a
third party correspondent bank, the new system allows someone to walk
into any commercial bank in the region, and ask to transfer money across
the border. But there must be a currency conversion first.
“You can approach any commercial bank in the
region and buy whatever currency you want to send. Then your banker will
transfer it,” Ms Okello said.
“If bank A is making a payment on behalf of a
Ugandan trader to a firm in Nairobi, the customer is required to send
the money to bank B with which they have agreed, which will in turn
reroute the money to the Kenyan bank. Then bank B will send the money to
the recipient bank,” Ms Okello explained.
The bonus about it is that the charges incurred while using the correspondent third party to transfer money will be eliminated.
Asked whether there are any risks involved in the system, she said plans were underway to install a monitoring system.
