THESADC COUNTRY PROGRESS REPORT ON LESOTHO NATIONAL PAYMENT SYSTEM FOR PERIOD APRIL 2011 TO MARCH 2012

Transcription

1 THESADC COUNTRY PROGRESS REPORT ON LESOTHO NATIONAL PAYMENT SYSTEM FOR PERIOD APRIL 2011 TO MARCH INTRODUCTION Lesotho continued in earnest to reform and modernise its national payments system during the reporting period that will conform to the international standards and best practice, a process which started in 1999 when the Central Bank of Lesotho (CBL) set up the Lesotho National Payment System (LNPS) Modernisation Project. The vision of the reform process is that By 2015 Lesotho will have a widely accessible, secure, reliable and efficient payment and settlement system. The system shall facilitate and support Lesotho s development objectives as outlined in the vision document. The milestone in this process started with the successful implementation in August 2006 of the Lesotho Wire, a Real Time Gross Settlement System (RTGS) for processing and settlement of large value, time critical payments. The Lesotho Automated Clearing House (LACH), which is the umbrella of various payment streams implemented on a secure, reliable and quick interbank payment platforms designed for users convenience has been established and the service Provider is Bankserv Africa. Electronic Funds Transfer (EFT) payment stream, designed to bring faster funds transfers by reducing the clearance cycle to same day/ 24hours was also implemented in February 2012; and official launch was on the 4 th April, This is a cost effective way of processing large value and small volumes payment transactions, whose individual value is not equal to or more than M100, The Payment Association of Lesotho (PAL) has initiated the implementation of automated cheque clearing system (CLC), which is planned to be in operation towards the end of 2013, to address the dissatisfactory lengthy period it takes to clear a cheque transaction. Currently cheques are processed manually in the Maseru Clearing and Settlement House. Both the RTGS and Maseru Clearing and Settlement House systems are currently operated by CBL. This report is 1

2 intended to review developments that took place between April 2011 and March Lesotho continues to undertake a number of initiatives intended to achieve the above-mentioned envisaged payment system. 2.0 Lesotho Wire Performance The Lesotho Wire system continued to operate satisfactorily with four participants, namely the three commercial banks and CBL as a participant, for the period under review. It is still the predominant mode of making wholesale payments as well as low value government payments. This is evident from the volume and value transacted through this system (Table 1). Table 1 Payment Volume Value (billion) Volume Value (billion) Percentage increase /decrease Volume (%) Value (%) CBL , % 5.20% Participant credit , % % Participant debit , % % Commercial Banks , % % Total , % -8.04% The total payment instructions processed by LSW for the period ended March 2012 stood at 49,557 transactions representing a large increase of 43% compared to 34,479 transactions in the previous year. The total value of the afore-mentioned transactions decreased slightly by 8.04% from M64.7 billion in 2011 to M59.49 billion in The Central Bank of Lesotho process both low and high value payments for the Government of Lesotho through RTGS as well as make Participant Debits and Credits on its behalf and other commercial banks. For the reporting period, the 2

3 volume of participant debits increased by 4.5% from 3466 to 3621 and participant credits increased by 38% from 4109 to 5684 in the year On the other hand, the volume of transactions processed by the commercial banks through the system increased by 17.9% from 7113 to 8383; and the monetary values decreased by 21.3% from M 22.1 billion to M17.4 Billion during the review period. This situation is encouraging as it indicates that the banks are using the system. It is advised that table 2 above differs with table 6.7 and 7.7 on the template previously submitted, because the above table excludes Government internal transfers. Furthermore, efforts are underway to interface the Government accounting system I that is Integrated Financial Management Information System (IFMIS) with the real time gross settlement system to allow for straight through processing. 2.1 Maseru Clearing and Settlement House (MCSH) Performance This is another systemically important payment system, which has rules and procedures to be adhered to. MCSH is mainly used for clearance of cheques and other small value retail payments. The Government of Lesotho through the Central Bank of Lesotho remains the major player in this system in terms of having more cheques cleared. According to Figure 1 below, more cheques were cleared in the peak months of, November and December of

4 Figure 1 40,000 MASERU CLEARING PERFORMANCE FROM APRIL 2011 TO MARCH 2012 (VOLUMES) 30,000 20,000 10,000 TOTALS - APR MAY JUNE JULY AUG SEPT OCT NOV DEC JAN FEB MAR Figure 2 250,000, ,000, ,000, MASERU CLEARING PERFORMANCE FROM APRIL 2011 TO MARCH 2012 (VALUES) 100,000, TOTALS 50,000, Figure2 above illustrates that in monetary terms, the month of December 2011 registered the highest at M217.7 billion, followed by November 2011 with M

5 billion and March 2011 at M193.9 billion. Generally, since the introduction of RTGS in August 2006, the number of cheques cleared in Maseru Clearing and Settlement House has drastically dropped Settlement System Settlement occurs in the Lesotho Wire system at CBL which hosts the commercial banks settlement accounts. The LSW system settles the net settlement positions from the Maseru Clearing and Settlement House as well as large value transfers between the participants. CBL participates on behalf of the Government of Lesotho as well as processing its own payments and it is the key user of the system as Government opts for more electronic means of making payments. Lesotho Wire (LSW) also processes the domestic / local leg of the foreign transfers for the commercial banks. Preparations are at an advanced stage to interface Lesotho Wire system with the Integrated Financial Management Systems for Government of Lesotho Accounting (IFMIS) system. The Lesotho Wire has been interfaced with the Central Securities Depository (CSD) 4.0 Current Developments 4.1 Automated Clearing House (ACH) Project Subsequent to live operation of LSW, Lesotho embarked on the implementation of the ACH project, which is the next strategy in the LNPS modernization project as stipulated in the Vision Document.. Lesotho ACH is defined as the retail payment system for processing small value, large volume transactions. It is an electronic clearing system in which electronic 5

6 payment instruments are exchanged among the participants, primarily via the electronic media, and handled by a clearing house operator centre. Therefore, Lesotho ACH aims at catering for retail or small value, high volume payments, as the Lesotho Wire (LSW) system process large value and time critical payments i.e amounts equal to M100, 000 and above. Objective of Lesotho ACH Implementation of ACH is expected to achieve poverty alleviation and stimulate economic growth; through improving commercial or economic activity by facilitating faster and secure payment instruments, that will increase the speed at which funds will be transferred by reducing the clearing cycle Progress As informed in the previous report, there will initially be four types of payment streams that will be processed and cleared through ACH namely: Electronic Fund Transfers (EFTs) debits and credits, automated Cheque Code Line Clearing (CLC), ATM cards and Debit cards, and Real Time Credits (RTC). The Lesotho ACH is up and running and is operated by the Bankserv Africa. EFT payment stream went live in February, 2012; and officially launched on the 4 th April, However, preparations to introduce the payment instruments that come with ACH are still being pursued, and initiatives have started to implement an automated cheque clearing system. The interface between the ACH and the Real Time Gross Settlement (RTGS) LSW is in place to facilitate EFT Settlement process. 4.2 Payment Association of Lesotho (PAL) Subsequent to a recommendation made by a consultant who designed business and implementation plans for the anticipated ACH, the Central Bank of Lesotho together with the commercial banks including Lesotho Post bank established the 6

7 Payment Association of Lesotho (PAL), a non-profit making organisation jointly owned by the commercial banks and CBL. PAL s mission is to provide safe and sound retail payment system services in Lesotho and to drive the modernisation of payment system by spearheading and developing strategies for influencing the introduction of new electronic payment instruments. PAL is the payment system management body and has an Operations Manager who is responsible for its daily operations. PAL is also responsible for general administration of the payment streams that will be incorporated into the ACH as well as designing of the rules and procedures for the same payment streams. PAL is governed by a Board of Directors made up of the Central Bank of Lesotho as the chairman and one representative from each commercial bank as well as one representative from the Lesotho Post bank. 4.3 E-Money and Mobile Banking Initiatives Smart Card In pursuit of the LNPS modernisation, smart card technology is being introduced through Lesotho Post bank and is funded by Millennium Challenge Account - Lesotho. Preparations are also at an advanced stage with this project and the plan is to launch a pilot stage before the end of the year. The smart cards will be used with the point of sale devices that will be installed at Lesotho Post bank offices throughout the country. The main objective of smart Card Technology is to expand access to financial services to the unbaked and rural poor Internet Banking: Internet banking is already employed by all three commercial banks in Lesotho. The rate of usage of this service depends on whether people have access to the internet or not. In Lesotho most individuals currently have no access to internet. 7

8 Two of the commercial banks have also introduced mobile/ Cell phone banking services which internet effectively and has expanded access to electronic banking to those who do not have access to internet. It is worth noting that internet banking transactions are currently without a switching facility. One of the commercial bankslaunched cellphone banking service in partnership with Vodacom Lesotho on the 3 rd June, This service allows Vodacom subscribers to perform banking transactions on their mobile phones without visiting banking halls, and is accessed in all areas where Vodacom network is available. The service is divided in two categories namely; full cell phone banking and cell phone banking lite. he former enables customers to check balances on their bank accounts on their mobile phones,purchase pre-paid phone airtime as well as allowing customers get their bank mini-statements. Another electronic payment streams in the pipeline with one of the banks are the e-commerce and e-wallet, planned to be operational towards the end of the year. One service provider has shown interest to introduce eco-cash money and their application is being evaluated by the CBL. 4.4 Legal and Regulatory Framework The National Payment System (NPS) Bill that was drafted in 2006 has not yet been passed by parliament as it is still with the Office Parliamentary Counsel for drafting. Efforts are being exerted to expedite the process, especially with the coming into operation of the ACH, as well as the SADC Payment System Integration Project SIRESS requirements prior to its implementation planned for February, Both the Lesotho Wire and Maseru Clearing and Settlement House systems are dependent on their respective rules that govern their operations. A consultant has been engaged to draft ACH rules and regulations. 8

9 5. Oversight issues Oversight of payment systems is one of the key functions of the Bank s responsibility for the stability of the financial system as a whole. The oversight framework has been approved. This framework forms the basis of CBL s oversight function. As part of the framework, a quarterly statistical return has been developed and is used to collect data used to monitor performance and developments in the payment system arena. The Oversight section undertook a comprehensive self assessment of the LSW to determine its compliance with the Core Principles for systemically important payment systems, National Payment System Rules and regulations and International Standards. It was concluded that the system largely complies with the Core Principles, International Standards, rules and regulations, safe from the fact that the National Payment System Bill has not yet been enacted. This delay has a negative effect on the overall assessment of the Lesotho payment system. 9