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World Bank – US Federal Reserve Training Course – November 3-7, 2 003. ACCESS to FINANCIAL SERVICES PAYMENT INFRASTRUCTURE REFORM Case Study Central Africa CEMAC / BEAC Charlie Garrigues The World Bank Cgarrigues@worldbank.org. World Bank Developmental objectives.

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world bank us federal reserve training course november 3 7 2 003

World Bank – US Federal ReserveTraining Course – November 3-7, 2003

ACCESS to FINANCIAL SERVICESPAYMENT INFRASTRUCTURE REFORMCase Study Central Africa CEMAC / BEAC

Charlie Garrigues

The World Bank

Cgarrigues@worldbank.org

world bank developmental objectives
World Bank Developmental objectives
  • Widening access to banking services to populationSocial and financial goals
  • To reach this objective implies:
    • Easy access to payment services by banks’ clients and non clients (through cooperation with Micro Finance Institutions and Post Office network for instance)
    • Timely clearing and settlement of operations (real time or within a day)
    • Finality : irrevocability of transfer of value to the beneficiary
    • Security and safety (errors, fraud, business continuity management)
    • Efficiency and low costs for all participants and clients
    • Observance of International standards
cemac region background
CEMAC region background

Countries

Commercial

Banks

Income/

Inhabitants

Inhabitant

US $

(2001)

(2001)

(2002)

CAMEROUN

15,5

10

62

8,9

REPUBLIQUE CENTRAFRICAINE

3,7

3

255

CONGO

3,1

5

924,8

GABON

1,23

6

3 729,7

GUINEE EQUATORIALE

0,5

3

4 609,4

TCHAD

7,4

6

206,2

Total CEMAC

31,43

33

10 354

One currency CFA , one Central Bank BEAC

cemac project one major issue
CEMAC project : one Major issue

How to measure and assess

the present situation and the GAP with development objectives ?

A few access indicators

a few access indicators
A few ACCESS Indicators
  • Number of accounts /inhabitant
  • Number of access points/population
  • Number of interbank transactions /inhabitant

=>Huge gap between countries and regions

bank accounts population
Bank accounts /population
  • % bank accounts /inhabitant

Europe: 150, Central Africa : 3 => objective : 10 in five years

+ 2 new millions clients having access to Banks services

access points population
Access points /population
  • Ratio: number of access /1000 000 inhabitants (2000)

Europe: branches 700, ATM: 600, POS 11000

CEMAC : 50, 3, 10

n on cash interbank transactions population
Non cashinterbanktransactions /population
  • Ratio: number of interbank non cash transactions / inhabitants / year (ECB)

Europe : 135 CEMAC (2000): 0. 03

To reach Europe activity

CEMAC would have to multiply present volumes by 4 500 !

project objective present volumes multiplied by 50 in five years

60000

50000

CEMAC

40000

Cameroun

Tchad

30000

RCA

Congo

20000

Gabon

10000

Guinée Eq

0

2004

2006

2008

Project ObjectivePresent volumes multiplied by 50 in five years

Interbank transactions number/ inhabitant /year

(thousand)

50 000 000

1 000 000

Success will require a huge effort by all stakeholders

uncertainty requires infrastructure flexibility
Uncertainty requires infrastructure flexibility
  • Huge changes means uncertainties : infrastructure should be fully adaptable and scalable
  • Flexibility is the key issue
    • To offer a full range of payment to various segments of customers
    • To transform any payment into electronic data as soon as possible in the process (electronic transaction normalization is required)
    • To process all payment through the same Electronic clearing System in order to optimize risk and liquidity
    • To manage risks and rights for all payment instruments regarding the client (negative and positive files)
cemac payment infrastructure
CEMAC Payment infrastructure

Payment Infrastructure

Main Layers

payment infrastructure
Payment infrastructure
  • 5 main layers
    • Settlement (central bank)
    • Interbank functions
      • Clearing
      • Card processing
      • Risk management (payment incidents )
    • Intra-bank functions (customer’s services)
    • Delivery channels (brick to virtual)
    • Clients (segmentation / range of services)
a single rtgs system for the region
A single RTGS system for the region

BEAC (head office)

Real time and Final Settlement in Bank’s accounts hold in BEAC Head office under the control of National offices

HQ Commercial Bank A

HQ Commercial Bank B

BEAC

VSAT network

Credit order

BEAC

National office

BEAC

National office

Main Objectives: security, finality, regional integration

one single bulk clearing system for all instruments in each country plus one regional system

Presenting BANK

Receiving BANK

Presenting BANK

Receiving BANK

Receiving BANKS

Send continuously files of electronic transactions

Receive continuously

files of electronic transactions

Continuous Clearing

Net Clearing System

Sorting/Routing

Balances calculation

Settlement

RTGS

MULTILATERAL BALANCES

Onesingle Bulk Clearing System for all instrumentsin Each country plus one regional system
slide17

International networks

Card holder accounts management

ATM and TPE management telecollection of ransactions

CPC Interbank functions

Standards, Routing,

Risk monitoring

Interbank fees calculation

SI banking system

IS

IS

IScard

IScard

? Bankwithout IS Card ?

SI

BANK A

BANK B

POS

ATM

BANK C

ATM

An open interbank card systems architecture

How to respond to various stages

of commercial banks’ card systems development

slide18

CPC IS card

IS

IScard

Bank C

IS

CPC private

BANK A

BANK C

ATM

POS

POS

ATM

Project : Two Card processing centres servicing all banks with « common and private » functions

  • Private functions:
  • Management of :
  • Card holders
  • Merchant,
  • POS and ATM,
  • Transaction collection,
  • Black list distribution
  • Card customization

Common functions:

A big challenge !

To agree to share investments with the objective

of reducing costs and maintaining competition

payment infrastructure reform
Payment infrastructure Reform

Payment Reform Process

payment infrastructure reform action plan
Payment infrastructure ReformAction plan
  • Open numerous customers’ accounts
  • Develop new payment instruments
  • Increase access points
  • Promote non cash transactions
  • Modernize intra-bank infrastructure
  • Build a comprehensive inter-bank infrastructure
  • Promote new culture and confidence in
    • Bank’s staff and network,
    • Government and administrations
    • Large companies (utilities),
    • Merchants,
    • Individuals
key partners
Key partners

GOVERNMENT

INDUSTRIES

CENTRAL BANK

PAYMENT

COUNCIL

SME’S

COMMERCIAL BANKS

INDIVIDUALS

MERCHANTS

participatory approach principles
ParticipatoryApproach Principles
  • Mobilisation of all parties for a candid diagnostic, user’s requirement analysis, conceptual design, project plan (experts, managers, project team and director)
  • Organization of seminars/ workshops largely open,in order to educate, share ideas, provide directions and validate main options
  • To hire a small team of experienced consultants to: prepare analysis and draft documents, carry out conceptual studies, analyse impacts regarding strategic business options, functional choices, architecture design, technical design options
slide23

Participatory Approach Seminar /

workshop organizational principles

80 to 100 participants: « experts » directly involved in the implementation and use of the architecture

  • Central Bank ( head and experts of departments involved)
  • Commercial banks (experts and project’s correspondents)
  • Governments (Ministry of Finance, Post et Telecom , …)
  • Consultants (legal, large value, bulk payment, cards, technology )
  • Experts from other « sister » Central Banks and International Institutions ( WB, IMF, BIS)
final result master plan of the reform
Final Result Master Plan of the Reform
  • Strategic vision of payment activity, evolution of the infrastructures to be build to support this vision
  • Action plan to reform the legal framework( laws, regulations, norms,…)
  • Comprehensive design of the Architecture and components to be installed
  • Detailed user’s requirement analysis and technical specifications of main components: (RTGS, electronic clearing for bulk transactions, dematerialization of paper instruments, cards, risk management systems)
  • Infrastructure et technical standards ( Information Systems and networks)
  • Budget, financing plan and business plan ( investments costs , running costs, incomes)
  • Project implementation plan (priorities, schedule, risks, )
  • Project management (centralized team and participants’ teams)
participatory reform approach lessons learned main difficulties
Participatory reform approach Lessons learned : Main difficulties
  • Project organization / management
  • Identification of (good) consultants / experts
  • Continuity of experts assigned by stakeholders
  • Level of knowledge of participants (heterogeneous)
  • Real work between workshops/seminars
  • Dissemination and awareness of seminar results
  • Conflicting interests (cooperation/competition)
  • Tight time schedule and limited human resources
payment infrastructure reform should cover many fields
Payment Infrastructure Reform should cover many fields

Beyond Procurement Process many areas should be covered in parallel

  • Legal framework: standards, norms, procedures and rules , international principles , laws and regulations
  • Promotion and marketing of new payment instruments
  • Security and safety of electronic processes
  • Modernization of organizations, administrative procedures, functionalities of Information Systems, networks and internal transaction flows by Participants and partners involved in Payment processby :
  • Commercial Banks, Central Bank, Government services, Utilities Companies and other Clients
where cemac s payment reform project stands november 2003
Where CEMAC’s Payment Reform project stands ( November 2003)
  • Strategic vision => Completed
  • Infrastructure design => Completed
  • User’s requirement => Completed
  • Procurement process => almost completed
  • Financing (World Bank Credit process) => Effective
  • Suppliers / Contract signatures => Dec 2003 /January 2004
  • Customization /test of systems => June / December 2004
  • Live operation => 2005/2006
lessons learned critical issues
Lessons learnedCritical issues
  • Project organization / management
    • BEAC decision process and human resources
    • Commercial banks team and adequate resources
    • Consultants quality
  • Consensus and awareness of main stakeholders
  • Availability of human resources
  • Resolution of Conflicting interests (cooperation/competition example: Card infrastructure)
  • Coordination of many actors/ actions
r eform approach conclusion
Reform approach Conclusion

ONE MAJOR KEY SUCCESS CONDITION

PERSONAL INVOLVMENT

OF HIGH LEVEL DECISION MAKERS