The Central Bank of Kenya (CBK) yesterday officially joined the Pan African Payments and Settlement System (PAPSS). This is a step expected to ease trade and financial transactions between Kenyans and the rest of the continent.
Cabinet Secretary, Ministry of Investments, Trade and Industry Moses Kuria took to his X handle to share the news.
“I am pleased to announce that the Central Bank of Kenya has signed the instruments that have finally seen Kenya join the Pan African Payments and Settlement System (PAPSS). This means that Kenyan companies can trade with their peers from other African Member States using our local Currencies, a major boost for the African Continental Free Trade Area (AfCFTA)” wrote Moses Kuria.
The platform was developed in collaboration with the African Export-Import Bank (Afrexim Bank) 2 years ago. Its objective is to enhance trading under the Africa Continental Free Trade Area (AfCFTA).
CBK becomes the 10th African central bank to join PAPSS. The early adopters of the financial network are the Central Bank of Nigeria, Bank of Ghana, Central Bank of Liberia, Central Bank of Guinea, Central Bank of The Gambia, Bank of Sierra Leone, Central Bank of Djibouti, Reserve Bank of Zimbabwe, and the Bank of Zambia.
There is a deadline of 2024 for all African Central Banks to sign with PAPSS.
PAPSS Network of Commercial Banks
The bank network is expected to enhance cross-border payment across Africa by enabling instant payments.
With instant payment, participants no longer need to convert local currencies into hard currencies. Hence, one can send money through a bank in the PAPSS network and the recipient can withdraw in local currency.
Usually, sending money across the continent can entail the funds leaving Africa to be converted before being sent back again to the beneficiary bank. These steps add days to the transaction time. PAPSS enables a near-instant payment process within 120 seconds.
How it Works
- An originator issues a payment instruction in their local currency to their bank or payment service provider.
- The payment instruction is sent to PAPSS.
- PAPSS carries out all necessary validation checks on the payment instructions.
- The payment instruction is forwarded to the beneficiary’s bank or payment service provider.
- The beneficiary’s bank clears the funds to the beneficiary in their local currency.
By the end of 2025, all commercial banks in Africa are expected to sign with PAPSS. Currently, 28 commercial banks have signed up. West Africa has the most with 12 Ghanaian banks and 11 Nigerian Banks.
For banks that have operations in Kenya, there is Standard Chartered, Ecobank, and KCB. Ecobank and KCB signed up to PAPSS in June this year.
The platform was developed in collaboration with the African Export-Import Bank (Afrexim Bank). Its objective is to enhance trading under the Africa Continental Free Trade Area (AfCFTA).