What you need to know:
- Absence of a single currency for the seven nation bloc and failure to harmonise the payment system are among the factors behind the high currency exchange fees during crossborder payments
Arusha. High currency exchange fees during cross border transactional payments are impacting regional trade, business analysts have said.
Absence of a single currency for the seven nation bloc and failure to harmonise the payment system are among factors behind the drawback.
This emerged during AfricaRise Webinar organised by the East African Business Council (EABC) in collaboration with the East African Community (EAC) and the European Union (EU) over the weekend.
“An interim solution lies with reduction of currency exchange rates,” insists Mr John Kalisa, the EABC executive director.
He called for “full interoperability” of mobile money networks and cross border transaction/payments at the EAC level.
He further urged the EAC partner states to pursue initiatives to reduce currency exchange fees during transactions as an interim solution in the absence of a single currency.
According to him, Tanzania’s mobile money market reached a value of $54.5 billion in 2021 while Rwanda recorded $10 billion in mobile transactions in the same year.
Mr Kalisa was categorical that high transaction costs and currency exchange rate volatility hinders the growth of intra-EAC trade.
According to the World Bank’s Remittance Price Worldwide Q4/2020, it costs an average of 6.5 percent to send $200 globally, 4.88 percent to South Asia, 6.58 percent to the Middle East and North Africa and 8.19 percent to sub-Saharan Africa.
Mr Paul Baker from Africa (Reform for Investment and Sustainable Economies) (Rise) said integrated payment systems were crucial for the realisation of the EA Monetary Union as they facilitate the payments for goods and services, the cross-border flows of capital as well as remittances within the region.
He expounded that the East Africa Single Digital Market (SDM) supports the region to become a more deeply integrated and dynamic digital investment, innovation, and growth hub.
Digital payments are one of the core elements for the single online market layer to enable East Africa to pay for domestic and international services, he pointed out.
Africa Rise is a technical assistance facility funded by the European Union and implemented by a consortium led by Landell Mills.
It aims to promote business development and improve the investment climate in Eastern Africa, Southern Africa and the Indian Ocean in support of inclusive and sustainable growth, job creation and decent housing.