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Improving Efficiency of Payment Systems in Ethiopia

Project Development Objective (PDO)

The purpose of this project is to assist the National Bank of Ethiopia (NBE) to establish a payment systems oversight framework and to develop a retail payments sector in line with best practices. 

Background

The government of Ethiopia is currently implementing the Growth and Transformation Plan (GTP) for 2010/11–2014/15 to strengthen the financial sector and establish an accessible, efficient, and competitive financial system across the country. During the GTP period, greater emphasis will be placed on strengthening modern payment systems and developing regulations based on international standards.  

The NBE seeks to (a) develop a comprehensive retail payments strategy that ensures retail payments developments are coordinated and promote interoperability and wider access to payment services and (b) strengthen its oversight capacity of the payment system to contribute to financial stability in Ethiopia. 

Activities

The envisaged activities of this technical assistance are as follows:

1.  National Payment Systems oversight framework
The project team is reviewing the current departmental structure, the prevailing oversight arrangements, and the supporting legal and regulatory framework to (a) develop a comprehensive oversight framework covering, among other things, retail payment systems and (b) recommend an organizational structure. The project is also conducting a workshop with relevant stakeholders to communicate NBE’s policies on oversight.
 
2.  Retail payments strategy
The team is (a) assessing the retail payments landscape, (b) identifying impediments to the functioning of an efficient payment, and (c) delivering a detailed cash distribution report on the assessment of the current bottlenecks. The project is also assisting in drafting a comprehensive retail payments strategy in accordance with the agreed on fundamental principles and providing workshops with key stakeholders to obtain input into the strategy formulation process.

3.  Principles for financial market infrastructures application
The team is delivering (a) a presentation on the 24 principles for financial market infrastructures, (b) a session on how the principles are applied, (c) a session on the central bank’s responsibilities and how a framework for cooperation with other regulatory authorities can be designed, and (d) training in assessment methodology.

Expected Outcomes

The expected outcomes of the project are as follows: 

1.  Increasing knowledge of payment systems regulation and supervision and international
     standards 

2.  Increasing activities on the oversight of payment systems and introducing policies that support
     efficient noncash payment mechanisms and increase availability 

3.  Creating an environment that is conducive to the development of innovative payment
     mechanisms and the promotion of financial inclusion

4.  Developing a more transparent, efficient, and stable financial system that reduces systemic risk 

5.  Increasing financial inclusion in Ethiopia