The Central Bank of The Gambia has continued to work assiduously in concert with commercial banks in the country to expose people and businesses in The Gambia to a modern and world class means of making payment transactions through a set of instruments other than physical cash.
The Central Bank has embarked on this transformation path to abate numerous anomalies in the financial system of the country via a modernised payment systems procedure.
The bankers’ bank has therefore published an information brochure that gives a vivid and comprehensive highlight of payment systems procedure in The Gambia, which will soon be implemented for the good of all and sundry, especially for firms, enterprises, and entrepreneurs.
Payment systems are a set of instruments and means generally acceptable in making payments. It is precisely defined by the Committee on Payment and Settlement Systems of the Bank for International Settlements, Basle, as “a set of instruments, procedures and rules for the transfer of funds among system participants”.
Over the years, the Central Bank of The Gambia (CBG) has been part of a sub-regional project that aims at transforming the payments system in West Africa into a modern one void of too many stress, risks and economic glitches.
“In connection with the West African Monetary Institute under the West African Monetary Zone Monetary Integration Programme, the Central Bank of The Gambia (CBG) has embarked on the modernization of the Country’s payment, clearing and settlement system infrastructure,” the CBG manual states.
It noted further: “This is part of a regional payments system initiative and forms an integral part of the prerequisites for effective West African monetary integration.
“The initiative is also part of the Central Bank’s strategic vision of modernizing the payments and settlement system into a world class standard, comparable to the rest of the world. The system will lower costs, make payments and settlements more accurate and pave the way for increased financial innovations in the country.
“Central Bank is playing a key role in these reforms by virtue of its primary function of providing liquidity to the banking system and clearing interbank payments.”
Presently The Gambia remains a cash-based economy, with payments of large transaction requiring heavy movement of cash with its attendant risks. The continued dependence on cash payments also results to inefficiency and delays in cheque processing.
These and some other factors pinpointed by the CBG serve as the rationale behind introducing the payments system in The Gambia and, by extension, West Africa.
The cost of printing currency is quite high, the Central Bank also says, recommending that an increase in the use of plastic cards will help reduce the wear and tear of currency.
The apex bank’s brochure also states other reasons for the introduction of the payments system. It says: “The Central Bank currently operates a manual cheque clearing system, where commercial banks meet to physically exchange cheques and net balances settled through their current accounts with the Central Bank. This is time consuming and less efficient in detecting cheque frauds.”
The brochure continues: “The delay in confirmation of customer balances due to the lack of real time gross settlement systems results to the acceptance of cheques, which would otherwise be rejected outright. Some of these turn out to be dishonoured or bounced cheques for various reasons.”
The Gambia, it notes, has registered significant progress in her socio-economic development, with growth rates of GDP average between 5 and 6 per cent per annum. “These gains will be consolidated through the modernization of the payments system and the creation of a conducive environment for further growth.”
According to the brochure, the system, when fully functional, will help the Central Bank to eliminate or minimize risks associated with payments, clearing and settlement system; eliminate float size of individual consumers and banks as well as significantly reduce the float time for cheques with the possibility of reducing cheque clearance time from five days to one in addition to combating fraud and forgery; pave way for reducing high cash intensity and gradual migration to high usage of electronic modes of payment; bring efficiency to government receipts and payments and all other consumers and leverage them for financial deepening of the economy; comply with international principles and standards, especially the core principles for the Systematically Important Payments Systems (SIPs) of the Bank for International Settlement (BIS); and enhance the Central Bank’s monetary management capabilities.
There are also other aspects to the modernised payments system that take into account Cheque Imaging System, Real Time Gross Settlement System (RTGS), Securities Settlement System (SSS), and National Switch (GAMSWITCH). These will be further explained in the subsequent publication of this column. To be continued.
BIZFINANCE LEXICON
Early entrant: A firm that enters a market ahead of the majority. There is significant body of literature to support the view that pioneering firms that create a market or enter a market early have a substantial strategic advantage. However like any form of pioneering there are clearly risks attached.
Factoring: A business activity in which a company takes over the responsibility for collecting the debts of another. Typically, the client debits all its sales to the factor and receives immediate payment from it, less a charge of about 2 – 3 per cent and interest for the period of trade credit given to the customer.
General insurance: Insurance against fire, accident, theft, etc, as distinct from life insurance
Holding Company: A company that controls one or more other companies, normally by holding a majority of the shares of these subsidiaries. It is possible for a holding company to control a large number of companies with a combined capital very much greater than its own, since it needs to hold only half or even less of the shares of its subsidiaries.
Implicit contract: A commitment generally understood and agreed, but not written into a legally enforceable form. Implicit contracts are seen to play an important part in many business relationships, where legally binding contracts would be too inflexible, or too complicated to embrace all possible circumstances.
Joint and several liability: A liability that falls at the same time on each one of two or more parties, and on all together. A claimant can choose to sue one or more of the parties (severally), or all together (jointly).
Key performance measures (KPM): Measures used to assess the performance of something that is actively managed. Thus, if customer care is actively managed, relevant KPMs might be measures of customer satisfaction, number of complaints and repeat patronage.
Laundering: The conversion of money obtained illegally (e.g. from drug) into apparently legitimate bank account to determine the origin of funds deposited with them.
Macroeconomics: The study of whole economic systems, aggregating over the functioning of individual players within them. More specifically, it is usually the study of national economies and the determination of national income.
Market share: The sales of a brand relative to the rest of the market. Brand sales are expressed as a percentage of (volume or value) sales for the whole market. If 20 million DVD players are sold each year and Sony accounts for 5 million of these, Sony’s market share is 25 per cent.