NATIONAL PAYMENT SYSATEM TANZANIA 2

 National Payment System is defined as a
group of institutions and a set of instruments

and procedures, used to ensure the
circulation of money within a country
 Major-
✓ Bank of Tanzania; as the monetary authority
in Tanzania, fulfills a pivotal role in the
economy and, specifically, in the NPS.
✓ Financial Institutions: Commercial banks and
registered financial institutions under the
BOT act
 Others
✓ Infrastructure Providers e.g.
Telecommunication companies.
✓ Payment service providers e.g. Swift, Card
Operators.
✓ Payment System End-Users: e.g. Individuals,
corporate businesses and government.
✓ Regulatory authorities e.g. Dar es salaam
Stock Exchange (DSE), Capital Markets
Authority Government.
✓ Regional Monetary Authorities and Regional
Arrangements e.g. the East Africa
Community.
✓ International Monetary Authorities .;These
bodies include IMF, World Bank.
To have a payment system characterized by the
following features:-
• Risks related to Payment Systems will be well
understood and managed by all stakeholders.
• The Payment System shall be self-regulated.
• Settlement of all domestic inter-bank
exchanges on the value date of the
settlement instruction.
• Open for all parties, both domestic and
foreign who wish to provide payment
services.
 Easily accessible to both urban and rural
consumers to effect both domestic and
international transactions.
 Efficiency and lack of duplications as shared
payment infrastructure will be encouraged.
 Basic NPS features well understood by all
including the rural populace.
 The Payment System will support electronic
trading in both the securities and foreign
exchange markets.
 The Payment System will be compliant with
international standards, practices and
compatible with other international payment
systems.
 Cash
 Paper-based instruments – these include
payment orders, bills of exchange,
promissory notes and cheques. Automated
credit transfers and direct debits are included
in this mode of payment.
 Plastic cards-these include, credit cards,
debit cards / ATM cards and prepaid cards.
 Electronic Funds Transfers (EFTs)-
✓ With the application of computers and
communication technology, a number of
paper-based payments have evolved into
electronic forms, especially for large value
transactions. EFTs are used for transferring
value between banks on behalf of customers.
• As a user of Payment Systems: A central bank has
its own transactions to carry out requiring the
movement of funds e.g. settlement of
government securities.
• As a member of Payment Systems: The central
bank can make and receive payments on behalf
of its own customers for example government
departments and other central banks.
• As a provider of Payment Systems: The provision
of settlement account to both the government
and the commercial banks operating in the
payment systems.
• As a guardian of public interest:
✓ Acting as payment system regulator, acting as a
supervisor of system members, providing
administration and planning for the payment
systems, arbitrating in the event of complaints and
handling compensation procedures.
• As an overseer of the Payment system:
✓ to promote the smooth functioning of payment
systems and to protect the financial system from
possible “domino effects”.
• As a guarantor of daily settlement: By providing
collateral intraday liquidity, availing funds to
commercial banks in times of liquidity constraint,
acting as a lender of last resort and rediscounting for
government securities.
 Following technological advancements and
contemporary business dynamics, previous
clearing houses were deemed inefficient.
 The growing need to have a clearing
mechanism to cater for the changes in
payment systems that necessitated the
implementation of the Tanzania Automated
Clearing House.
✓ Bank of Tanzania Electronic Clearing House
(BOTECH) System - facilitate inter-bank
electronic debit clearing. The system aims at
promoting efficiency by enhancing processing
speed, minimize errors and acts of fraud in
inter-bank transactions.
 Magnetic Ink Character Recognition (MICR)-
equipment for processing paper encoded
payment instruments.
o It incorporates reader and sorter mechanism
that facilitates automatic data capturing and
generation of electronic files and journals to
be used by the BOTECH system.
 Its a virtual clearing house responsible for
calculation of mutual position within a group of
participants or users to facilitate the settlement of
their obligations on a net basis.
 It facilitates clearing of interbank payment
instruments. TACH offers the following;
➢ Clearing services which enables Payment
Instructions (Direct Debits, Direct Credits and
Cheques) to be exchanged among participants
➢ Generation of a multilateral net positions and
submission of a Net Settlement Instruction (NSI) to
TISS.
 TACH membership shall be open to any
financial institution licensed by the Bank and
operating in the United Republic of Tanzania
which meets the following eligibility criteria:
(i) must be a participant in the Tanzania
Interbank Settlement System (TISS); and
(ii) must maintain government securities or cash
reserves to be used as collateral.
 Tanzania Inter-bank Settlement System
(TISS) - an on-line system that processes
high value and time sensitive payments that
enables real time and gross settlement of
payment instructions between banks.
 A system which processes multicurrency
payment instructions between participants in
real time and gross basis.
 The system facilitates settlement of interbank
fund transfers, cheques and electronic funds
transfer clearing obligations, payment card
switch balances and money market
transactions.
 The system is owned and operated by the
Bank of Tanzania.
 TISS participants are also members of SWIFT

 SWIFT” (Society for Worldwide Inter-bank
Financial Telecommunications), means an
organization that operates a network which
facilitates exchange of payments and other
financial messages between participants.
 Electronic Funds Transfer is an authorized
transmission of funds from or to accounts
through the Automated Clearing House.
 EFT refers to any transfer of funds initiated
through an electronic terminal, including
debit card, credit card, ATM and point-of-
sale (POS) transactions.
 It is used for both credit transfers, such as
payroll payments, and for debit transfers,
such as mortgage payments.
 Discuss the advantages of TISS and SWIFT
 Describe how Mobile phone payment
schemes work.
 Describe at least three online payment
services/platforms.
▪ Mobile banking
▪ Mobile Payment services
▪ Mobile Network operators
Question
 Discuss the development of mobile financial

services in Tanzania
 Discuss the advantages of TISS and SWIFT
 Describe how Mobile phone payment
schemes work

NATIONAL PAYMENT SYSATEM TANZANIA 2

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NATIONAL PAYMENT SYSATEM TANZANIA 2

Uploaded by

Copyright:

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 National Payment System is defined as a

group of institutions and a set of instruments

 TISS participants are also members of SWIFT

 Discuss the development of mobile financial

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