EAC states urged to lower forex and money transfer charges to boost trade
NAIROBI, Kenya – The East African Business Council [EABC] has asked East African Community[EAC] states to lower the forex and money transfer charges as a way of stabilizing regional currencies and stabilizing the exchange rates within the region.
According to John Bosco Kalisa, CEO, of the East Africa Business Council. “We as the private sector players are particularly troubled by rising fees on mobile money transfers and the cost of remittances and payments. I urge EAC partner state governments to pursue initiatives to reduce currency exchange fees during transactions as an interim solution in the absence of a single currency.”
EABC pointed out that remittances, non-commercial transfer of money by foreign workers for household use, are especially important for low-income countries and account for nearly four percent of their GDP, compared with about 1.5 percent of GDP for middle-income countries.
Mr. Kalisa was speaking in Dar es Salaam last week during a webinar forum to discuss the harmonization of payment systems, where he also called for full interoperability of mobile money networks and cross-border transactions/payments at the EAC level.
The forum brought together central banks from the seven EAC partner states, participants asked ministries of finance to harmonize legal procedures to facilitate remittances.
“Within the EAC region an average fee for sending $200 — the benchmark used by authorities to evaluate cost — is $14. Both senders and receivers will be charged an equivalent of 29.7 percent of the amount sent. Besides, the amount received depends on the exchange rate. In the absence of a monetary union, regional currencies should be freely convertible to enable transactions without having to convert national currencies into dollars to enhance regional trade and lower transaction costs,” added Kalisa.
The EABC is calling for full interoperability of mobile money networks following a report by Africa RISE, a technical assistance facility funded by the European Union, which reveals that the East African Payment and Settlement System (EAPS) is currently operational in only four of seven EAC states.
Paul Baker –Africa Rise Representative “The payment system of South Sudan is under development, with support from the AfDB under the EAC Payment and Settlement Systems Integration Project (EAC PSSIP) project while the Democratic Republic of Congo is developing its national Payment System under development, with support from the World Bank.”
While the EAPS allows processing and settlement of transactions in local currencies, there is low uptake due to low volumes of intra-regional trade and stiff competition from banks with established correspondent bank relationships.
The report titled ‘Harmonization of Payment Systems in EAC’ and dated September 15, 2022, reveals that EAPS is currently operational between Kenya, Tanzania, Uganda, and Rwanda, linking their central banks’ Real Time Gross Settlement System (RTGS).
The report further pointed out that not all EAC states are using the payment system, making it difficult for their citizens to send money within the region.