CBC-TDB digital financial inclusion high-level public-private dialogue, Kigali, Rwanda 20th – 21st January 2021
Towards the Comesa digital integrated common payment policy for Micro, Small and Medium Entreprises (MSMEs)
On 20th and 21st January 2021, Kigali will host a high-level public-private dialogue on the development of a low value retail common digital payment policy for COMESA. Convened by COMESA Business Council (CBC) and the Eastern and Southern Africa Trade and Development Bank (TDB), the meeting’s objective will be to validate and adopt the draft model COMESA digital integrated common payment policy for Micro Small and Medium Enterprises (MSMEs).
The event will bring together central bank governors, ministers of finance, ICT regulators, manufacturers, mobile network operators, commercial banks, Fintechs, microfinance institutions, and MSMEs, to consider and adopt the COMESA digital integrated common payment policy and framework for MSMEs. The outcomes of the meeting will underpin the development of a business model and infrastructure for a low-cost retail digital payment scheme for MSMEs within COMESA region.
“MSMEs play a critical role in contribution to gross domestic product (GDP) in COMESA. Cross border markets provide an opportunity for MSMEs to expand their enterprises, while simultaneously addressing unemployment and enhancing economic growth within the region,” cited Sandra Uwera, the Chief Executive Officer of CBC.
COMESA, a market with a population of 583 million people covering a geographical area of 12 million (sq km), presents the largest trade bloc in Africa. As at 2019, COMESA exported goods to the value of USD112 billion, imported goods worth USD212 billion, and had a trade deficit of USD76 billion. Intra-COMESA exports were worth USD10.9 billion, and intra-COMESA imports were worth USD11.2 billion. The total intra-COMESA trade stood at USD22.1billion in 2019. As part of the larger Continental Free Trade Area, COMESA has a prosperous market that can effectively lead in agricultural trade, manufacturing and professional services.
The region’s trade facilitation mechanisms however still require strengthening to ensure sustainable value chains and supply chains across borders with free movement of goods and services. “The impact of COVID-19 on conventional supply chain networks has created a sense of urgency in facilitating efficient local sourcing of inputs by SMEs. Frictionless transactions that are fast and low cost are therefore central to the enhancement of intra-regional trade and economic development,” said Mr. George Odhiambo, Managing Director of KCB Bank Rwanda Plc, and member of the CBC Digital Financial Inclusion Advisory Committee.
Judith Obholzer, Managing Executive for Legal and Regulatory Affairs at Vodacom Group, and also a member of the CBC Digital Financial Inclusion Advisory Committee noted, “enhancing the attractiveness of the digital payment solutions as they compare to their cash counterparts is pivotal to accelerating the uptake of digital financial services among MSMEs.” She further added, “tailoring of value-added services to the needs of growth enterprises, particularly given the region’s economic fallout from the pandemic, creates a clear value proposition for digital payments.” This will transform cash-based MSMEs into digital markets that enjoy affordable, interoperable, transparent and real-time financial transactions. The expected impact is increased volumes of cross border transactions, financial inclusion and increased participation of SMEs in regional trade.
The programme is currently in its first phase under which the developed Business Case Report has been validated by study’s pilot countries, namely Egypt, Ethiopia, Kenya, Malawi, Mauritius, Rwanda, Tanzania, Uganda and Zambia. The field missions were organised with the expertise and support of the CBC Digital Financial Inclusion Advisory Committee members made up of public-private stakeholders.
The two-day Kigali meeting will galvanise support for the design, development and deployment of an integrated digital financial services infrastructure that is low-cost, interoperable and fraud resistant to effectively serve MSMEs and the customers they transact with at the bottom of the financial pyramid.
The high-level public-private dialogue will inform the next steps towards actualisation of a harmonised digital common payment policy for MSMEs in Africa, with a specific focus on increasing competitiveness and sustainability of MSMEs within COMESA. This regional policy framework will also serve to increase intra-regional trade through the formalisation of cross-border traders, small-scale farmers and women entrepreneurs, by way of their uptake of digital financial services.
In addition, it will safeguard the interests of all individuals as well as micro to large enterprises and be instrumental in attracting a diversified, sustainable and expanding pattern of external capital flows.
Steps towards the draft model common payment policy
According to Mr. Marday Venkatasamy, Chairman of CBC, the technology already exists to support the seamless transmission of cross-border payments. What needs to be addressed is harmonisation of policy and regulatory frameworks that enable SMEs to carry out regional retail cross-border transactions with ease and confidence, that real time payments and affordability have been factored in as per their customer requirements.
In 2020, CBC has convened validation meetings of the Business Case Report with 9 countries and 6 sub-regional sectoral working groups namely, the Financial Services Regulators, ICT Regulators, Mobile Network Operators, Fintechs and non-banks, Manufacturers and SMEs. The meetings have adopted eight policy areas agreed upon for harmonization.
So far, the meetings have defined the requirements needed to develop a digital integrated regional common payment scheme that can facilitate bottom of the pyramid informal traders (cross border and domestic) to carry out digital transactions that are transparent, affordable, secured, and provide access to formal working capital. The model policy will capture and address: security and consumer protection, interoperability with various payment systems and distribution channels, and the ease of access especially to SMEs. The model policy will also address clearing and settlement issues, exchange rates convertibility and will rely on reasonable costs for its implementation. To address these issues, the model policy will build on, and complement existing national and regional systems, in line with national and regional financial services regulations such as anti-money laundering, data privacy, and Know Your Customer (KYC).
The program’s pilot countries are expected to enforce compliance with international principles and best practices. They should also ensure that all risks arising from any potential conflict of laws across jurisdictions are identified and mitigated. Furthermore, they have to enforce the finality and irrevocability of both payment and settlement, with payment finality following settlement.