Rwanda will soon put an end to the use of cheques, thanks to a new initiative by Central Bank of Rwanda to implement an Integrated Payments Processing System (RIPPS) worth Rwf2.1 billion.
The project, funded by World Bank will see the usage of cheques reduced to minimal levels. It is funded through the Competitiveness and Enterprise Development Project (CEDP). Part of the fund will be used to supply and install the system and the other will secure maintenance for a period of five year.
The new system involves Real Time Gross Settlement System (RTGS), an Automated Clearing House (ACH) and a Central Securities Depository (CSD).
It was revealed last week that Central Bank contracted CMA Small Systems, a Sweden based company for the provision of RTGS, ACH and CSD solutions. Officials also said that once implemented the National payment System (NPS) will conform to international standards.
RTGS are funds transfer system where transfer of money takes place from one bank to another on real time and on individual basis. ACH is an arrangement where the banks agree to offset their obligations arising from the aggregate total of payment instrument that have been exchanged between their clients.
CSD will act as a depository for all securities issued by both government and private equities traded at the Capital Market Authority.
Information from BNR indicates that the process of stopping the flow of the physical cheques will reduce production of 400,000 cheques per year. The project is expected to come into force between 9 to 12 months.
The Managing Director of CMA Small Systems Alexey Nazarov said the project is not just an IT project but it will require institutions to make procedural changes to implement the system.
He noted that in the first four months after the signing, his company will install the initial configuration, training staff to guarantee maintenance in the five year program of the project.
“The project does not only allow quick transfer but also has efficient tools to manage risks and liquidity,” Nazarov said.
Speaking at the signing ceremony, the Governor of the Central Bank Francois Kanimba said the project is milestone in the process of modernization of the Rwandan payment systems.
“The system will improve business environment reduce cheque-handling costs, improve risk management,” Kanimba said.
According to Kanimba it used to take between four and five working days to clear a cheque and later reduced to two days. After the project systems are implemented the process will take about 24 hours.
Any cheque deposited must be physically or manually transferred to the paying bank, which in turn also manually presents it to the Clearing House. The system is expected to benefit from the national fibre optic for faster transactions.
Kanimba said that the system will increase liquidity and the whole economy will benefit from increased speed and circulation of money in the banking system.
The system, will also help Rwanda trade with other countries in COMESA and East African Community (EAC) like Uganda, Tanzania and Kenya which already have the system operating.