Central banks in East Africa are working towards smoother currency conversion channels and integrated national payment systems in an effort to boost regional trade.

Governors of the region’s central banks, who recently met in Kampala, said implementation of designated currency accounts meant for handling varying currencies within the region and integration of official payment systems would remove the need for physical cash, reducing security risks among traders and thus encouraging more cross border trade.

Recent innovations like mobile money transfer services have significantly reduced the need for traders to carry physical cash. However the lack of interconnectivity among telecommunications firms has made it difficult for some users to transact on such platforms outside their national borders.

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Analysts say an integrated national payments platform covering the five member states would make cross-border transactions easier for both traders and professionals.

Under the financial convergence plan designated currency accounts for other East African Community member states will be maintained at each Central Bank to enable faster conversion of money. Individuals will not need to exchange their monies in commercial banks before making transactions.

Through the integration of national payment systems, Real Time Gross Settlement Systems (RTGS) of respective member states will be directly connected, leading to a single, safer, faster and cheaper transaction platform capable of remitting funds across various banks in the region.

“Trade can be constrained by a lack of currency convertibility. Therefore, we are looking at creating currency accounts in our respective Central Banks as this will tackle the problem effectively,” said Prof Njuguna Ndungu Governor of the Central Bank of Kenya.

Prof Ndungu emphasised that bilateral structures for currency convertibility would shorten transaction times and spur regional trade.

Besides integrating RTGS platforms, EAC Central Bank governors are keen on creating further connectivity using cutting edge electronic transaction channels like online banking, which is more convenient.

“The harmonisation of payment systems is not necessarily an end in itself but is meant to smooth trading activities by eliminating the physical movement of cash. This will help individuals make online transactions through mobile money transfers and credit cards,” observed Claver Gatete, Governor of the National Bank of Rwanda.

Some economists argue that member states with vibrant manufacturing sectors stand to benefit more from a harmonised payment system.

Local exporters appear optimistic about the rollout of a harmonised national payment system expected in the second half of this year.

“Using the RTGS platforms has helped us to speed up client transactions in places like Burundi where it used to take six-seven days to convert money through local money transfer channels,” said Joseph Kitone, marketing manager at Uganda Clays Ltd, an exporter of clay building materials to Rwanda, Burundi and South Sudan.

“Any attempt to integrate national payments systems will ultimately boost growth in the capital markets and intra-regional trade. But capacity to trade also matters in the context of promoting cross border trade. Those member states that possess high output levels in the manufacturing sector might see their traders benefit more from the harmonised payments system unlike those that are hindered by high tariffs imposed on re-exported items like motor vehicles,” argued Jared Osoro, Senior Research Economist at the East African Development Bank Head Office in Kampala.

Local exporters appear optimistic about the rollout of a harmonised national payments systems expected in the second half of this year. “Use of RTGS platforms has helped us to speed up client transactions in places like Burundi which used to take up to 6-7 days through local money transfer channels,” said Joseph Kitone, Marketing Manager at Uganda Clays Limited, an exporter of clay building materials to Rwanda, Burundi and South Sudan.