The Central Bank of Kenya (CBK) has officially joined the Pan African Payments and Settlement System (PAPSS), enabling firms in Kenya to execute all trade and financial transactions with others in the rest of Africa. CBK becomes the 10th African central bank to join PAPSS.
PAPSS is a digital centralized payments and settlement system that allows firms in Africa to settle their intra-African trade transactions in their own currency, thus reducing the cost of trade transactions.
Benefits of PAPSS for Kenya
PAPSS offers a number of benefits for Kenya, including:
- Reduced costs of cross-border trade: PAPSS eliminates the need for foreign exchange conversions, which can save businesses a significant amount of money.
- Faster settlement times: PAPSS offers instant settlement, which means that businesses can receive their payments much faster than traditional methods.
- Increased transparency and security: PAPSS is a highly secure and transparent system, which can help to reduce the risk of fraud and corruption.
- Boosted trade within Africa: PAPSS can help to boost trade within Africa by making it easier and cheaper for businesses to trade with each other.
Impact of PAPSS on the African Continental Free Trade Area (AfCFTA)
PAPSS is expected to play a major role in the success of the African Continental Free Trade Area (AfCFTA). The AfCFTA is a trade agreement between 55 African countries that aims to create a single market for goods and services. By making it easier and cheaper for businesses to trade with each other, PAPSS can help to boost intra-African trade and accelerate the implementation of the AfCFTA.
The Central Bank of Kenya’s decision to join PAPSS is a positive step for businesses in Kenya and across Africa. PAPSS can help to reduce the costs of cross-border trade, speed up settlement times, and increase transparency and security. It can also play a major role in the success of the African Continental Free Trade Area.
It was launched in January 2022 and is supported by the African Export-Import Bank (Afreximbank). Currently, 28 commercial banks in Africa have signed up to PAPSS, including 12 Ghanaian banks and 11 Nigerian banks. All African central banks are expected to onboard the PAPSS network by 2024.
The launch of PAPSS is a significant milestone for the development of the digital economy in Africa. It has the potential to revolutionize the way businesses trade across the continent.