COMESA CLEARING HOUSE

MOBILE FINANCIAL SERVICES AND PAYMENT SYSTEM DEVELOPMENT IN COMESA MEMBER COUNTRIES

March 2012

AGENDA

COMESA AT A GLANCE

BACKGROUND TO MFS & PAYMENT SYSTEMS

BENEFITS OF MFS & PAYMENT SYSTEMS

BASIC CONDITIONS FOR CROSS BORDER MOBILE PAYMENTS

PROGRESS

REPSS - OBJECTIVES, FEATURES, BENEFITS

PAYMENT & SETTLEMENT FLOWS

Q&A

COMESA MEMBERSHIP

COMESA AT A GLANCE

TOTAL AREA 12.8 MILLION SQ. KMPOPULATION 413 MILLIONMEMBERSHIP 19 COUNTRIES

20 CENTRAL BANKSFTA MEMBERSHIP 13 COUNTRIESAVERAGE GROWTH RATEOF REAL GDP 5.1%INTRA-COMESA TRADE $ 17.4 BILLION

BACKGROUND TO MOBILE FINANCIAL SERVICES & PAYMENT SYSTEMS

• ACCESS TO FORMAL FINANCIAL SERVICES LIMITED FOR MOST OF THE WORLD’S POOREST – 2.5 BILLION DO NOT USE THESE SERVICES

• POORER A HOUSEHOLD, STRONGER ITS NEED FOR FINANCIAL SERVICES – SAVINGS, REMITTANCES, CREDIT

• MOBILE & RETAIL PAYMENT SYSTEMS IN DEVELOPING COUNTRIES LAG BEHIND DEVELOPED COUNTRIES

• MOBILE PHONES NOW IN THE HANDS OF BILLIONS, EVEN AT LOW INCOME LEVELS

• PRESENTS A GREAT OPPORTUNITY TO GROW THE FORMAL ECONOMY

• THIS WOULD UNLOCK EFFICIENCIES IN MANY AREAS OF DEVELOPING ECONOMIES

• PAYMENTS SYSTEMS CHANGING FROM PAPER TO ELECTRONIC AT FAST PACE

• ELECTRONIC PLATFORMS GROWING

• CROSS BORDER PAYMENTS ARE BECOMING SIMPLIFIED

BENEFITS OF MFS• REDUCE RISK FOR FINANCIAL INSTITUTIONS

• REDUCE OPERATING COSTS

• IMPROVE ACCESS TO SERVICES

BENEFITS OF PAYMENT SYSTEMS (RETAIL & NATIONAL)• CONVENIENCE – EASY ACCESS TO FUNDS

• SAFETY - MORE SECURE THAN CASH

• PARTICIPATION IN REGIONAL AND GLOBAL ECONOMY - WIDER REACH

• COST EFFECTIVE - REDUCES COSTS OF CHEQUE AND TRADITIONAL BANKING

METHODS

• RISK REDUCTION - MOVEMENT OF FUNDS IS MONITORED & LIQUIDITY

MANAGED

• EFFICIENT – FASTER PAYMENTS WITH NOTIFICATIONS

BASIC CONDITIONS FOR CROSS BORDER PAYMENTS REGULATORY PROPORTIONALITY

• blend of different regulatory boundaries to allow a framework that provides room for innovation and safeguards against risks• legal act to address standard payment system issues • regulations, guidelines to address specific aspects • proportionate regulations for payment service providers • enable non-bank players to offer payment services

MARKET COMPETITIVENESS

• both the financial service sector and other related service providers need to offer cost effective solutions to encourage use of mobile payments

END-USER ACCESS • consumers must have a basic understanding of financial issues and no cultural or structural impediments to financial access. Thus financial literacy, financial empowerment and mobile penetration are key

BASIC CONDITIONS FOR CROSS BORDER PAYMENTS  MARKET CATALYSTS

• Government usage of mobile payments will provide certainty to private sector players to also use this channel• Increased demand for retail cross border trade promotes use of mobile payments• Robust data collection and monitoring points to areas where more effort will be channelled to promote cross border mobile payments

ICT INFRASTRUCTURE • Heavy investment in modern technology to attain interoperability, security and easy customisation of technology• Fosters creation of national payment networks • Fair and transparent access criteria for using infrastructure • Ensures cross network acceptance of payment instruments

PROGRESS ACHIEVED

COMESA REGION HAS MADE STRIDES IN ACHIEVING- Greater mobile financial service use;

- Liberalized financial sector; and

- Flow of trade and services across its borders

THIS HAS BEEN ACHIEVED THROUGH PROMOTING ENABLERS SUCH AS:

- Consumer protection

- Legal framework

- Infrastructure

- Risk management

COMESA - INDIA TRADE IN FIGURES 1997 - 2010 Value in US$ Millions

YEAR TOTAL EXPORTS TOTAL IMPORTS TOTAL TRADE

1997 139 813 952

1998 131 920 1,051

1999 197 824 1,021

2000 221 842 1,063

2001 323 975 1,298

2002 497 1,345 1,841

2003 635 1,192 1,826

2004 548 1,612 2,160

2005 693 2,131 2,824

2006 1,948 2,877 4,825

2007 1,854 3,565 5,419

2008 2,742 6,511 9,253

2009 2,401 5,365 7,766

2010 1,678 6,197 7,875

COMESA TOP TWENTY IMPORTS FROM INDIA IN 2010

Rank Products Value (US$ millions)

1 Petroleum oils and oils obtained from bituminous minerals (excl. crude… 1,406

2 Medicaments consisting of mixed or unmixed products for therapeutic or... 418

3 Boneless, frozen meat of bovine animals 287

4 Transmission apparatus incorporating reception apparatus, for radio-te... 143

5 Motor-cycles with reciprocating internal combustion piston engine cyli... 133

6 Floor coverings of polymers of vinyl chloride, whether or not self-adh... 76

7 Flat-rolled products of iron or non-alloy steel, of a width >= 600 mm,... 71

8 Single cotton yarn other than sewing thread of combed fibres, containi... 68

9 Transformers, other than liquid dielectric, having a power handling ca... 49

10 Flat-rolled products of iron or steel, of a width >= 600 mm, cold-roll... 37

11 Paper and paperboard, uncoated, in rolls or sheets as specified in not... 35

12 Motor cars and other motor vehicles principally designed for the trans... 32

13 Synthetic filament yarn, incl. synthetic monofilament of < 67 decitex,... 32

14 Cement clinkers 32

15 Structures and parts of structures, of iron or steel, n.e.s. (excl. br... 32

16 Semi-milled or wholly milled rice 31

17 Co-axial cable and other co-axial electric conductors, insulated 30

18 Tractors (excl. those of heading no 8709, pedestrian-controlled tracto... 28

19 Printed books, brochures and similar printed matter (excl. those in lo... 28

20 Polyethylene terephthalate, in primary forms 27

COMESA TOP 20 EXPORTS TO INDIA IN 2010Rank Products Value (US$ millions)

1 Petroleum oils and oils obtained from bituminous minerals, crude 1,011

2 Cotton, neither carded nor combed 110

3 Coke and semi-coke of coal, of lignite or of peat, whether or not aggl... 50

4 Commercial ammonium carbonate and other ammonium carbonates 31

5 Anhydrous ammonia 31

6 Natural calcium phosphates, natural aluminium calcium phosphates and p... 24

7 Leather of whole hides of bovine animals, with a surface area of =< 2.... 21

8 Diamonds, unsorted 16

9 Black fermented tea and partly fermented tea, whether or not flavoured... 14

10 Dried, shelled peas pisum sativum, whether or not skinned or split 14

11 Dried, shelled leguminous vegetables, whether or not skinned or split ... 13

12 Natural gas, liquefied 13

13 Natural calcium phosphates, natural aluminium calcium phosphates and p... 10

14 Alfalfa seed for sowing 10

15 Sheep or lambskin leather, without wool on, prepared after tanning, in... 10

16 Articles of asphalt or similar materials, e.g. petroleum bitumen or co... 9

17 Medicaments consisting of mixed or unmixed products for therapeutic or 9

18 Dried, shelled kidney beans phaseolus vulgaris, whether or not skinn... 8

19 Precious stones and semi-precious stones, unworked or simply sawn or r... 8

20 Waste and scrap, of copper (excl. ingots or other similar unwrought sh... 7

REGIONAL PAYMENT AND SETTLEMENT SYSTEM (REPSS)

• REPSS IS A MULTILATERAL NETTING SYSTEM WITH END-OF-DAY SETTLEMENT

• ALLOWS FOR SETTLEMENT IN A MULTICURRENCY ENVIRONMENT

• TRANSACTIONS ARE SETTLED AT SPOT T+0 VALUE T+1

• A SINGLE CURRENCY (US$ OR EURO) IS USED FOR NET SETTLEMENT;

• A SINGLE NOSTRO CORRESPONDENT FOR THE NET SETTLEMENT CURRENCY;

• THE COMESA CLEARING HOUSE (CCH) ACTS AS AGENT OF CENTRAL BANKS

REPSS Objectives

STIMULATE ECONOMIC GROWTH THROUGH AN INCREASE OF INTRA-REGIONAL TRADE

REDUCE COST AND DURATION OF CROSS BORDER TRANSACTIONS

HOMEGROWN SOLUTION, TO BE OPERATED BY THE COMESA COUNTRIES

SYSTEM TO BE RELIABLE, SECURE AND PREDICTABLE

LOW INVESTMENT AND OPERATIONAL COSTS

SETTLEMENT IN HARD CURRENCIES ($,€)

REPSS FEATURES

• SYSTEM IS CENTRALLY LOCATED

• LOCAL BANKS TO ACCESS SYSTEM THROUGH CENTRAL BANKS

• PAYMENT SYSTEM LINKING CENTRAL BANKS

• PAYMENTS TO BE EFFECTED THROUGH CLEARING (NOT REAL TIME)

• PRINCIPLE OF CREDIT PUSH (PRE-FUNDED ACCOUNT)

• COMPLIANT WITH BIS CORE PRINCIPLES

BENEFITS REDUCES NUMBER OF SETTLEMENT TRANSACTIONS

REDUCES FOREIGN CORRESPONDENT BANKING CHARGES

REDUCES COST OF INTRA-REGIONAL TRADE

REDUCES SETTLEMENT TIME PERIOD

GUARANTEES PROMPT PAYMENT TO EXPORTER

BUILDS TRUST AMONG TRADERS

SETTLEMENT FINALITY

LEVELS PLAYING FIELD FOR COMMERCIAL BANKS

EVENTUALLY ALLOWS TRADE ON OPEN ACCOUNT

PAYMENT & SETTLEMENT FLOWS

Co

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Delays

Traditional Cross Border Payment

7

T+0T+0 T+1

REPSS

REPSS Model

Q&A