Payment System
The National Payment System Overview
The Government of Tanzania enunciated the National Payment
System (NPS) Modernisation Project in 1996 to re-examine the country’s payment
systems with the aim of developing an efficient payment system.
The NPS Vision is to have in place an efficient customer centred payment
system by the year 2005. The
Project is spearheaded by the Bank of Tanzania.
The National Payment System involves all major payment
systems users, owners, providers, and managers of the national payment systems
defined as stakeholders who wish to improve the country’s payment systems.
These include Banks, and Financial institutions, Government, Capital and
securities Market Authority, the Stock Exchange, Infrastructure providers (e.g.
Telecomms, Post, Power, etc), and, Business/ Consumer representatives, and major
users (e.g. Pension funds, Insurance companies, etc).
The national Payment System council (NPSC) is the apex body
of payment system in the country. Members of NPSC are Chief Executives Officers
of major payment system stakeholder institutions (i.e Banks and Financial
Institutions). The Governor of the Central Bank is the Chairman of the Council.
The project activities are administered by the Bank of
Tanzania (The Central Bank). For the purpose of involving stakeholders in NPS
decisions and synchronisation of NPS activities the NPSC established
sub-committees responsible to look into specific matters concerning payment
system institutional arrangements. The committees analyse and recommend
amendments and NPS development activities. There are four committees namely
The Operations
Committee;
The
Legal Committee;
The Automation
Committee; and
The
Standards Committee;
NPS Modernization
Project Mission Statement is :
“To provide an
efficient customer centered payment system designed to meet the payment needs of
the country”.
The NPS Modernisation Project aims at developing efficient
payment systems in the country and to meet the broader needs of the economy.
The main objectives are:-
-
To
minimise payment, clearing and settlement risks and achieve reliable,
secure, convenient, cost effective, universal and integrated systems to meet
the needs of the economy.
-
To
improve microeconomic management capabilities of Bank of Tanzania by
supplying timely and accurate information on stock and flow of funds;
-
To
facilitate a faster the exchange and settlement of funds and securities in
order to reduce floats and improve efficiency on the circulation and
transmission of funds;
-
To
expand flexibility in the long term and allow the adoption of, and migrate
to modern modes of payment mechanisms at the same time be responsive to user
needs; and
-
To
establish an efficient and effective legal and institutional framework
capable of regulating new payment systems.
The execution of NPS Modernisation objectives adopted a
two-track approach. On one hand, to solve the current pressing needs in the
shortest time possible, while on the other hand to adopt a strategic phased
approach for long-term goals and objectives.
The short term objectives include the Automation of
Clearing Houses using MICR document processing, disk exchange mechanism, SWIFT
standards adoption and development of guidelines for introducing Auditable
Payment Schemes.
The long term implementation plans are divided into four
phases designed to achieve the following:-
Phase 1-Situational
Stocktaking Analysis Phase aims at
developing a common understanding of the current economic, financial, technical
and payment system traffic and structures in the country. The stocktaking
exercise was necessary to form an appropriate vision and to conceptualise
systems relevant to the country’s problems, opportunities and constraints;
Phase 2-Vision And
Strategic Framework phase aimed at formulating a vision and a conceptual
framework for future development work to be undertaken in order to address the
country’s short-term and long-term needs;
Phase 3-Physical
Design phase provides technical
specifications for systems to be developed as planned; and,
Phase 4-Construction
And Implementation phase
establishes regulations, facilitate procurement, development and implementations
by the stakeholders based on agreed strategies.
The Stocktaking phase was finalised and the Situational
Stocktaking document publicised in January 1998.
This
report concluded the first phase of the National Payment System (NPS)
modernisation project, which took about a year and involved banks, users,
regulators, providers and most parties with a stake in the country’s payment
systems. It was carried out through literature reviews, research, study tours,
interviews, surveys and workshops. The findings of this phase formed the base
for the work to be undertaken in subsequent phases of this project.
The
report focused on the major factors influencing payment systems in the country.
It includes the problems associated with NPS, background of the country’s
socio-political culture, economy and an outline of its vision;
The
infrastructure situation, the state of automation within and between bank
branches and their customers; the legal structures that affect payments, the key
institutional structures; the existing payment instruments, Inter-bank Clearance
and Settlement systems. he risks associated with Payments in the country and,
the country’s national payment system needs, vision and some preliminary
suggestions on the way forward. For
more details view the
Stocktaking Report.
As part of harmonization, the SADC Forum compiled each
member’s payment system status known as the SADC Payment System Green Book
which indicates the country's status in the payment system arena.
Green
Book tables of statistics can be obtained here:
- 2005 Green
Book statistics.
- 2003 Green Book
statistics.
The Bank of Tanzania in collaboration with the stakeholders
documented the NPS Vision and Strategic Framework which states the NPS Mission
and sets out the Payment needs of the country. It further sets out the payment
systems conceptional overview, vision and strategic framework for the year 2005
identifying the basic characteristics of a modernised payment system including
among others the structure, roles and responsibilities and the implementation
programs.
For more information visit the Year 2005 NPS Vision And Strategic Framework document.
In appreciation of initiative shown by various companies to
introduce card based electronic Money Schemes in the country, in January 2000
the NPS Project issued Guidelines, which shall be followed by any party wishing
to introduce electronic auditable payment schemes in the country. The aim is to
comply with the NPS objective of reducing cash usage and to promote non-cash
based instruments in the country. The
guidelines therefore serve as a safeguard measure to consumer interests as well
as having standardization, which will facilitate future cooperation and system
integration. See full document on Guidelines
for introducing of Auditable Card Payment Schemes in Tanzania
The Bank of Tanzania also participated in the development
of Guidelines for licensing and Regulating Electronic Money Products and Schemes
as agreed by the East African Countries. The
document provides guidelines, which will facilitate system’s future
integration of the three countries. See full document on Guidelines
for licensing and Regulating Electronic Money Products and Schemes.
Bank
of Tanzania in conjunction with Tanzania Bankers’ Association documented
Paper Instruments Standards which have been agreed by all payment system
stakeholders. The standards specify the requirements for the design of paper
instruments used for inter-bank payment in local currency between banks in
Tanzania. The standards were adopted in January 2000. Banks shall therefore
ensure full compliance with the specifications given. These standards shall be
read and applied in conjunction with the Tanzania Bankers Clearing-House
Regulations and Regulations. .
In the quest to achieve efficiency in the payments clearing
and settlement processing the Bank of Tanzania initiated efforts to automate the
clearing house operations in order to replace the manual processing. Automation
of Clearing Houses aimed at reducing time taken to clear an instrument and
reduction of errors and acts of fraud emanating from manual processing.
The NPS automation developments includes but not limited to:
A. Tanzania -bank
(TISS)
The Tanzania Inter-bank Settlement System (TISS)
is an on-line system that processes high value and time sensitive payments that
enables real time and gross settlement of payment instructions between banks.
The system facilitates settlement of inter-bank transfers and clearing
houses balances, money market and foreign exchange market transactions.
The system aims at improving efficiency in payment systems by eliminating
settlement lag for high value and time sensitive payment. It also
minimizes settlement risks. The System went live with 19 Participants and it has
been working properly since then, now the number of Participants has been
increased to 27. It is also extended to the Tanzania Revenue Authority
(TRA), where funds from specific Tax Payers are remitted and received by TRA on
Real Time basis
TISS went
live on 8th April 2004. Before the live date, the system went through hardware
procurement and installation; and software customization, installation,
integration and testing. System User training and User Acceptance Testing
(UAT) were conducted between February and March 2004, before the live date.
The Bank continues to provide Technical and
operations support to TISS Participants.
B. Electronic
Clearing House (BOTECH)
System
The Bank of Tanzania implemented the Electronic
Clearing House (BOTECH) System to facilitate inter-bank electronic debit clearing. The
system aims at promoting efficiency by enhancing processing speed, minimize
errors and acts of fraud in inter-bank transactions. Live running of the system
at the Dar es Salaam Clearing House was on 01/March/2002.
C. Implementation
of MICR
Members of the Dar es Salaam Clearing House have installed
the Magnetic Ink Character Recognition (MICR) equipment for processing paper
encoded payment instruments. The
equipment incorporates reader and sorter mechanism that facilitates automatic
data capturing and generation of electronic files and journals to be used by the
BOTECH system at the Dar es Salaam Electronic Clearing House. The Bank of
Tanzania acquired the MICR equipment that which has an image capturing facility
for automatic archiving electronic images of instruments passing through the
MICR system.
The introduction of the MICR payment instruments processing
aims at reducing of fraudulent
items passing through the banking system by providing instrument standards that
maintain a very high level of security features in conjunction with MICR
code-line having validation checksums present within each instrument.
D. Tanzania
Bankers’ Clearing House Paper Instrument Standards
MICR
System processes require that all paper instruments passing through the system
conform to specific agreed standards. In
this case the Bank of Tanzania documented
Paper Instruments Standards which have been agreed by all payment system
stakeholders. The standards specify the requirements for the design of paper
instruments used for inter-bank payment in local currency between banks in
Tanzania. The standards were adopted in January 2000. Banks should therefore
ensure full compliance with the specifications given. These standards are applied in conjunction with the Tanzania Bankers Clearing-House
Regulations and Regulations. The
Bank of Tanzania coordinates adherence by examining cheque samples submitted by
commercial banks against required standards prior to pressing orders from
printers.
E.
Electronic
Clearing House Rules and Regulations
As part of the Electronic Clearing House system
implementation process the Bank of Tanzania coordinated the review and adoption
of the new Clearing House Rules and Regulations. Changes from the old system
include reduction of clearing days for debit instruments from 5 days and 30 days
within the locality of clearinghouses and inter-regional clearing to 2 days and
7 days respectively. The current Dar es
Salaam Electronic Clearing House Rules and Regulations were adopted in January 2002.
F. NPS
Legal Developments
As part of the strategic developments, the Bank of Tanzania
has been working on the modernization and enhancement of the Legal and
Regulatory framework to ensure support of the National Payment System. Various
legislation relevant to the National Payment System were identified in the
Vision and Strategic Framework Document. The Bank of Tanzania Act, 1995 was
therefore amended by the Financial Laws (Miscellaneous Amendments), Act, 2003 to
grant the Bank of Tanzania enabling powers over the National Payment System.
This amendment is a mile stone in the regulatory framework in the national
payment system. The Bank of Tanzania is also working with the Government towards
the objective of ensuring that the county's legislations is supportive of the
National Payment System matters.
G.
Harmonisation
The Bank participates in various Payment System
harmonization forums under SADC, East Africa Community and COMESA auspices.
Following the globalization developments the Bank with other East African
Central banks and the SADC member countries, identified areas for harmonization
to have a common initiative to ensure currency stability, systems integrity and
cost effectiveness in payment systems.
In 1998, The Governors of the three East African Central
Banks formed the East African NPS Harmonisation Committee with a view to
co-ordinate and harmonise payment system developments within the region. The
overall objective of the East African Payment System harmonisation efforts is to
promote a sound regional payment system to further economic integration within
the East African region. Consequently,
the Committee reviewed the payment and settlement system developments and
identified the broad areas for harmonisation within the payment system area.
The identified minimum common features for harmonisation and cooperation
include:
¨
Automation of Clearing Houses
¨
Payment System Oversight and Risk Management Policies
¨
Legal Framework
¨
Electronic money products and schemes
¨
Cross border payment schemes
¨
Wholesale and retail payment systems,
Consequently in 1999 the three East African countries
adopted the following areas harmonization:
¨
Common Paper Payment Instruments Standards,
¨
Common Data Transfer Standards.
¨
Harmonisation of Payment System Oversight activities;
¨
Same-day High Value Clearing system;
¨
Formation of an East African SWIFT Technical Working;
¨
Incorporation of the Lamfalussy Standards and Core Principles for
Systemically Important Payment Systems;
¨
East African Payment systems risks Management Profile;
¨
The Implementation of Automated Clearing Houses in East Africa;
¨
Harmonisation of East African Payment Systems Concepts and
Definitions;
¨
Development of guidelines for licensing and regulation of e-money
schemes and products;
¨
Modalities to facilitate clearing of cross border instruments; and
¨
Development of an East African Harmonised Payment System Draft
Legal Framework.
¨
Minimum standards for Clearing and settlement systems.
CONTACTS
Location
The offices of the
Directorate of National Payment System (NPS) are located at 10 Mirambo street, 8th
Floor North Tower.
Postal Address:
Box 2939, Dar Es Salaam
Telephone:-
+255 22 2235433; 2235445; 2235440, 2235436-8; 2235499; 2235445/6
E-mail
address:
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