• Reference: P-Z1-HZ0-003
• Approval date: 05/12/2012
• Start date: 05/12/2013
• Appraisal Date: 10/05/2012
• Status: ApprovedAPVD
• Implementing Agency: EAST AFRICAN COMMUNITY (EAC)
• Location: Burundi, Rwanda, Kenya, Tanzania Uganda

The EAC partner states are implementing the EAC-FSDRP whose overall objective is to lay the foundation for financial sector integration by broadening and deepening the financial sector services. Part of this agenda is the need to integrate the PSS among the EAC states. The proposed EAC-PSSIP will support the integration of PSS through components identified as complementary to the work co-funded by the World Bank through the six pillars of the EAC-FSDRP.

As a first step, EAC countries have decided to focus on modernizing and harmonizing their payment and settlement systems, which will facilitate the later transition to a single integrated financial system. Developing efficient and harmonized payment and settlement systems across the EAC zone will enable the processing and settlement of payment obligations in a timely manner, enhance accountability, minimize errors and facilitate the development of innovative financial products while better managing risk

The proposed project includes the following components:

(i) Integration of financial market infrastructure - to achieve its objective this component is expected to realize the integration of RTGS across the region and the centralization in a single database of all regional payment flows. It is expected that integration of existing systems will be substantially completed by 2014 and that the regional technological platform will be in place by 2016;

(ii) harmonization of financial laws and regulations; and

(iii) capacity building.

The project's overriding objective is to support, through an integrated PSS the broadening and deepening of the financial sector by establishing a single market in financial services among EAC Partner States, with a view to making a wide range of financial products and services available to all, at competitive prices.

The project aims specifically at:

(i) the convergence and regional integration of PSS and

(ii) strengthening a harmonized legislative and regulatory financial sector capacity in partner states.

The EAC member states have identified the integration of their payments and settlement systems as a priority in order to create a firm foundation that will ensure that payment obligations throughout the EAC are settled effectively and with certainty. The need to manage all risks associated with payment systems is a high priority and the mitigation of systemic risk remains paramount. A technological platform is desired that will not only accommodate existing payment systems streams but also provide a common foundation for the introduction and development of additional financial products and services in the future.

The EAC region is comprised of five partner states that currently maintain mixed levels of payment systems automation and standards. The levels of communications infrastructure remain very mixed and the continued expansion of the EAC communications "backbone" will prove a valuable element for the payment and settlement systems integration. Work has been undertaken within the region to date, through the offices of the EAC Secretariat and partner states, that has led to the establishment of a number of working groups to evaluate and initiate the integration process. Those member states having RTGS systems, namely Tanzania, Kenya Uganda, have started the process of integrating their RTGS systems as the initial project toward a comprehensive EAC regional payments and settlement systems integration. The overriding objective of the proposed EAC-PSSIP is therefore, to upgrade and integrate payment systems in all EAC partner states to ensure an elegant, effective and secured means of undertaking payments within the EAC region.

This proposed project is well aligned with Bank's The Bank's East Africa Regional Integration Strategy Paper (EAC-RISP) 2011 -2015 pillars 1 and 2, on Regional Infrastructure and Capacity Building respectively. Specifically it will support and contribute to two broad areas of focus of pillar 1 of the EAC-RISP namely;

(i) Trade Facilitation Infrastructure and

(ii) Information and Communication Technology; and one broad area of focus of pillar namely; Strengthening Institutions (RECs/IGOs, continental organizations, special utilities and national implementation units). The proposed EAC-PSSIP is also well aligned with the Bank's Financial Sector Policy (2003).

IJEH Samuel Chukwuka - OSGE2

Finance source	Amount
ADF	UAC 15,000,000
Delta	UAC 5,000,000
Total	UAC 20,000,000