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AFRICAN DEVELOPMENT FUND
MULTINATIONAL - EAST AFRICAN COMMUNITY (EAC)
Payment and Settlement Systems Integration Project
COUNTRIES: Burundi, Kenya, Rwanda, Tanzania, and Uganda
__________________________________________________
PROJECT APPRAISAL REPORT
October 2012
OSGE DEPARTMENT
Appraisal Team
Sector Director: I. LOBE NDOUMBE, Director, OSGE
Regional Director: G. NEGATU, Director, EARC
Sector Manager: J. MUKETE Manager , OSGE.2
Team Leader: C. IJEH, Chief Financial Economist OSGE.2
TABLE OF CONTENTS
Acronyms and Abbreviations
Currency Equivalents
Fiscal Year
Weights and Measurement
Client’s Information
Project Summary
Results-based Logical Framework
Project Timeframe
I - STRATEGIC THRUST AND RATIONALE
1.1 Project Linkages with Regional Strategy Objectives
1.2 Rationale for Bank’s Involvement
1.3 Donor Coordination
II – PROJECT DESCRIPTION
2.1 Project Components
2.2 Technical Solution Retained and other Alternative Explored
2.3 Project Type
2.4 Project Cost and Financing Arrangements
2.5 Project’s Target Area and Beneficiaries
2.6 Participatory Process for Project Identification, Design and Implementation
2.7 Bank Group Experience, and Lessons Reflected in Project Design
2.8 Key Performance Indicators
III – PROJECT FEASIBILITY
3.1 Economic and Financial Performance
3.2 Environmental, Social and Other Impacts
IV - IMPLEMENTATION
4.1 Implementation Arrangements
4.2 Monitoring Arrangements
4.3 Project Governance
4.4 Project Sustainability
4.5 Key Risks and Mitigation Measures
4.6 Knowledge Management
V – LEGAL INSTRUMENTS AND AUTHORITY
5.1 Legal Instrument
5.2 Conditions Associated with Bank’s Intervention
5.3 Compliance with Bank’s Policies
VI – CONCLUSIONS AND RECOMMENDATIONS
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Appendices
Appendix 1. EAC: Selected Macroeconomic Indicators
Appendix 2. Bank Public Sector Portfolio in EAC Partner States
Appendix 3. Map of the East African Community Region
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ABBREVIATIONS AND ACRONYMS
ACH Automated Clearing House
ACP Automated Check Processing
ADB African Development Bank
ADF African Development Fund
AML Anti-Money Laundering
ATM Automated Teller Machine
BCEAO Central Bank of West African States
BIS Bank for International Settlements
CBA Core Banking Applications
CFAA Country Financial Accountability Assessment
CMIPC Capital Markets, Insurance and Pension Committee
CPAR Country Procurement Assessment Review
CPIA Country Policy and Institutional Assessment
CPPR Country Portfolio Performance Review
CPSIPS Core Principles for Systemically Important Payment Systems
CPT Core Project Team
CSD Central Securities Depository
CSP Country Strategy Paper
DFID Department for International Development
DNS Deferred Net Settlement
DPs Development Partners
DS Development Strategy
EAC East African Community
EAC-FSDRP East African Community Financial Sector Development and Regionalization
Project
EACJ East African Court of Justice
EALA East African Legislative Assembly
EAC-PSSIP EAC Payment and Settlement Systems Integration Project
EAPS East Africa Payment System
EFT Electronic Funds Transfer
EU European Union
FDI Foreign Direct Investment
FPAC Finance and Public Accounts Standing Committee
FSVC Financial Services Volunteer Corps
GDP Gross Domestic Product
GFS Government Financial Statistics
IFAD International Fund for Agricultural Development
IFMIS Integrated Financial Management Information System
IGOs Inter-Governmental Organizations
IMF International Monetary Fund
IOSCO International Organization of Securities Commissions
IPSAS Institute for International Public Sector Accounting Standards
JAS Joint Assistance Strategy
KYC Know Your Customer
LAN Local Area Network
MAC Monetary Affairs Committee
MFI Microfinance Institution
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Mobile Money Mobile (cell phone) money transfer system
MOU Memorandum of Understanding
MTR Mid-Term Review
NBFI Non-Bank Financial Institution
NPS National Payment Systems
OMO Open Market Operations
PAD Project Appraisal Document
PAR Project Appraisal Report
PCR Project Completion Report
PCN Project Concept Note
PCU Project Coordinating Unit
PD Presidential Directive
PIU Project Implementation Unit
POS Point Of Sale
PRSP Poverty Reduction Strategy Paper
PSS Payment and Settlement Systems
RECs Regional Economic Communities
RISP Regional Integration Strategy Paper
ROs Regional Operations
RPG Regional Public Good
RTGS Real Time Gross Settlement
SBD Standard Bidding Document
SIDA Swedish International Development Cooperation Agency
TA Technical Assistance
UA Unit of Account
UEMOA Economique et Monétaire Ouest Africaine
USAID United States Agency for International Development
USD United States Dollars
SIDA Swedish International Development Agency
SMEs Small and Medium Size Enterprises
SWITCH Computer system for the management of cards (ATM / POS)
WAEMU West Africa Economic and Monetary Union
WAMZ West Africa Monetary Zone
WB World Bank
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Currency Equivalents
As of October 2012
Currency Unit = Burundi (BIF)
Kenya (KES)
Rwanda (RWF)
Tanzania (TZS)
Uganda (UGX)
1 Unit of Account (UA) = 2239.70 BIF
1 Unit of Account (UA) = 128.337 KES
1 Unit of Account (UA) = 935.258 RWF
1 Unit of Account (UA) = 2385.30 TZS
1 Unit of Account (UA) = 3818.00 UGX
1 Unit of Account (UA) = 1.54219 USD
EAC Fiscal Year
1 July – June 30
Weights and Measures
1metric tonne = 2204 pounds (lbs)
1 kilogramme (kg) = 2.200 lbs
1 meter (m) = 3.28 feet (ft)
1 millimeter (mm) = 0.03937 inch (“)
1 kilometer (km) = 0.62 mile
1 hectare (ha) = 2.471 acres
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Client’s information
BENEFICIARY: EAC - Burundi, Kenya, Rwanda, Tanzania, and Uganda
EXECUTING AGENCY: EAC Secretariat (Core Project Team)
Financing plan
Source Amount (UA) Instrument
ADF (Regional Operation)
15.0 million
Grant
Timeframe - Main Milestones (expected)
Preparation
May/June 2011
Appraisal May 2012
Negotiation 30 October 2012
Project approval 05 December 2012
Effectiveness December 2012
/January 2013
Mid-term Review November 2014
Project Completion Date December 2016
Last Disbursement June 2017
Project Completion Report December 2017
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PROJECT SUMMARY
Paragraph Topics covered
Project Overview
Program Name: EAC Payment and Settlement Systems Integration Project
Geographic Scope: The following five East African Countries constituting the “East African
Community” (EAC): Burundi, Kenya, Rwanda, Tanzania and Uganda.
Expected Project Outputs: Well-functioning and integrated Real Time Gross Settlement (RTGS) systems
and retail payment and settlement systems, Central Securities Depositories and Core Banking Platforms
in the region; Supporting infrastructure including business continuity and disaster recovery platforms
that function satisfactorily; Harmonized national legislation; regulations and policies that ensure
adequate supporting pillars for the payment and settlement systems to be integrated throughout the EAC
in order to protect payment flows. Including, but not limited to; adoption of common “Failure to Settle”
arrangements, “Oversight Framework and Policy”, on site-inspection format in line with BIS CPSIPS,
regulatory arrangements for payment instruments and collateral levels; enhance capacity and supporting
skill sets for specific areas of payment and settlement systems for the EAC-CPT, the National Central
Banks, the Commercial Banks, Judges and other stakeholders and regulators.
Expected Project Outcomes: Sound national and Integrated Regional wholesale and retail payment and
settlement systems that will strengthen the efficiency of cross-border funds transfers within the five EAC
countries; together with strengthening of the financial sector regulatory and legislative capacity in the
EAC Partner States.
Implementation Timeframe: January 2013 to December 2016
Grant Amount: UA 15 million
Project Direct Beneficiaries: The EAC will be the recipient of the grant. The direct beneficiaries of the
project will include the National Central Banks of the EAC Partner States, Commercial Banks, other
financial institutions, and the judiciary, including the East African Court of Justice (EACJ) and members
of the East African Legislative Assembly (EALA). This will also include the Office of the Counsel to the
Community. This is the EAC Secretariat Legal Office
Needs Assessment
The EAC Partner States have identified the integration of their payments and settlement systems as a
priority in order to create a firm foundation that will ensure that payment obligations, throughout the
EAC, are settled effectively and with certainty. The need to mitigate risks associated with payment and
settlement systems is a high priority with the mitigation of systemic risk paramount. A technological
platform is desired that will not only accommodate existing payment systems streams but also provide a
common foundation for the introduction and development of additional financial products and services
in the future. This project is an integral element of the overall infrastructure, and technological platform
required to support the proposed East African Monetary Union to function effectively and will contribute
to managing the convertibility of the EAC Partner States’ currencies in the region. The Project will also
contribute to implementation of the Common Market Protocol, particularly the free movement of capital.
The proposed project will provide a sound platform aimed at enhancing payment and settlement systems
in the EAC Partner States as a prelude to the successful introduction of the East African Monetary
Union.
Bank’s Added Value
The Bank’s intervention will catalyze the process of financial integration in the EAC leading to the
effective introduction of the proposed East African Monetary Union by ensuring that there is
coordination of the process through the EAC Secretariat. The Bank has comparative experience of a
similar regional payment and settlement integration project which contributed to the design of the
proposed EAC project. The Bank’s cumulative experience in the implementation of other payment and
settlement systems projects would therefore, be valuable to the beneficiaries in the establishment and,
implementation of the proposed project.
Knowledge
Management
The implementation of the PSSIP will result in the development of skills and knowledge in specific areas
of payment and settlement systems operations and functions for the EAC Secretariat, National Central
Banks, and Commercial Banks. This knowledge will be disseminated through seminars and workshops
organized by the National Central Banks and Bankers’ Associations. Also, the implementation of the
capacity building component of the project will result in knowledge building for Judges and judicial
officers at the EACJ and national courts, as well as members of the EALA. This knowledge will be
disseminated through applications of the knowledge, law of precedence, and seminars and workshops.
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RESULTS BASED LOGICAL FRAMEWORK Country and project name: EAC - Payment and Settlement Systems Integration Project Purpose of the project: To contribute to the modernization, harmonization and regional integration of payment and settlement systems; ensure common standards for the
instruments together with appropriate regulatory practices.
RESULTS CHAIN
PERFORMANCE INDICATORS MEANS OF
VERIFICATION
RISKS/MITIGATION
MEASURES Indicator
(including CSI) Baseline
Target Indicator (including CSI)
2014 2016
I
M
P
A
C
T
Impact
Financial
Inclusion and
Improved trade and Deeper
financial sector
integration in the EAC region.
1. Financial Depth
as measured by broad money supply
(M2) as a
percentage of GDP
2. The share of
intra-regional trade to total trade among
EAC Countries.
3. Proportion of
regional
population’s access to formal banking
services
Level of
financial depth as measured by
broad money
supply (M2) as a percentage of
GDP was 30% in
2010
7.9% in 2010
22% in 2010
Level of
financial depth as measured by
broad money
supply (M2) as a percentage of
GDP increases to
35% in 2014
9% in 2014
27% in 2014
Level of
financial depth as measured by
broad money
supply (M2) as a percentage of
GDP increases to
40% in 2016
12% in 2016
35% in 2016
1.EAC Economic Surveillance
Reports
2. Reports of
National Central Banks and EAC
Secretariat
O
U
T
C
O
M
E
S
Outcome 1
Improved and
Integrated Regional
payment and
settlement systems and
Improved
efficiency of funds transfer
across the five
EAC countries
1. Growth in inter-bank fund transfers
2. Longest clearing
cycle in number of days of local and
upcountry cheques.
The volume of high value funds
transfers in the
five EAC countries in 2010
was US$279
billion
T+10 days in 2011.
The volume of high value funds
transfers in the
five EAC countries in 2014
should grow to
US$340 billion
T+5 days in 2014
The volume of high value funds
transfers in the
five EAC countries in 2016
should grow to
US$420 billion
T+3 days in 2016
1. EAC Economic
Surveillance Reports
2. Reports of National Central
Banks and EAC
Secretariat
Risk 1: Full functionality of the integrated systems if the new
systems are not fully implemented
at national levels.
Mitigation: This risk is mitigated
by continued commitment and ownership of the new systems by
the Central Banks. In fact, they
have also initiated investments that are complementary to the
components being provided by the
proposed project. The proposed project is therefore intended to fill
the gap.
Risk 2: Possible lack of
commitment of the Commercial
Banks to the new payment systems.
Mitigation: This risk is mitigated given the commercial benefits that
the new systems would provide to
the Commercial Banks. The Commercial Banks have been
placing demands on the NCBs
regarding the need to modernize and integrate the national payment
systems. They have also initiated
investments to upgrade their
infrastructure in anticipation of
new payment systems. The
arrangements for project implementation also ensure that
the Commercial Banks are fully
involved in its implementation as members of the NPSCs.
Outcome 2
Adequate and harmonized
legislation and
policy supporting payment and
settlement
systems.
1. Adequate
legislative support
and harmonized rules and
regulations for
payment and settlement systems
Very limited
support and no
harmonization of payment and
settlement
systems rules and regulations in
2011
Promulgated
legislative
support for National
Payment
Systems, CSD laws and ACH
in Uganda,
Burundi and Tanzania,
respectively by
2014
Harmonized
rules and
regulations for RTGS and
National
Payment Systems approved by the
Monetary Affairs
Committee and promulgated by
the EAC
Assembly by the end of 2016
1. Progress reports
from NCBs and
EAC.
2. Structured
promulgation by EAC Assembly
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RESULTS BASED LOGICAL FRAMEWORK Country and project name: EAC - Payment and Settlement Systems Integration Project Purpose of the project: To contribute to the modernization, harmonization and regional integration of payment and settlement systems; ensure common standards for the
instruments together with appropriate regulatory practices.
RESULTS CHAIN
PERFORMANCE INDICATORS MEANS OF
VERIFICATION
RISKS/MITIGATION
MEASURES Indicator
(including CSI) Baseline
Target Indicator (including CSI)
2014 2016
O
U
T
P
U
T
S
Component 1
Integration of
RTGS
Centralized
database for
capturing payment flows
within the region
1. Number of EAC
Partner States with inter-operable and
integrated RTGS
2. Technological
platform to deliver full regional
integration
Three (3)
countries currently
implementing the
East African Payment System
(EAPS) Project.
2011 - Full
integration not in
place.
2011 platform
not in place
At least, 4
countries having implemented the
East African
Payment System (EAPS) Project
by 2014
All 5 countries
having implemented the
East African
Payment System (EAPS) Project
by 2016
2016 - Full
integration
completed
Regional
technological platform in place
2016.
Payment system and settlement
systems
integration established
Risk 3: Systems failure and
systemic risk posed by having EAC Partner States with mixed
levels of readiness and payment
systems automation and standards.
Mitigation: Business continuity
and disaster recovery plans are in place in all the NCBs. Also, as a
further mitigation measure, the
business continuity arrangements in Burundi and Kenya and disaster
recovery arrangements in
Tanzania and Rwanda would be further strengthened.
Risk 4: Technical Solutions may not be sustained
Mitigation: This risk is mitigated because the technologies to be
employed for component 1 of the
project are standard industry technologies that have been well
tested and deployed worldwide.
Moreover, Capacity building is a key component of the project, and
will ensure that participant’s staff
is adequately trained and that they receive regular skills upgrades
when necessary.
Risk 5: Possible constraints of
required project implementation capacity which could delay project
implementation.
Mitigation: The project has
provided for the recruitment of a
“Payment and Settlement Systems Specialist, a Procurement Expert
and an Accountant to strengthen
the implementation capacity of the EAC Core Project Team. In
addition, the NCBs shall provide
the necessary technical expertise throughout the procurement
process thereby reducing any
residual risk. The project also provides for trainings and
workshops.
Component 2
Drafting and
adoption of regulations of
corporate
governance for banking
institutions
1. Casting of overarching
legislation.
2. Drafting of
“Directives and
Determinations”
No regional legislation in
place 2011
Limited national
legislation in place
In place by- 2016
In place 2016
Submission of Bills to the
Assembly or
Council Directives.
“Directives and Determinations”
adopted
Component 3
Capacity
Building for
Structured implementation
and coordination
of project
activities, and
Strengthened Judicial Capacity
in PSS.
1. Number of EAC
Secretariat, NCBs and other
stakeholders
Trained in PSS.
2. Number of
Judges and Legal Officers Trained in
PSS
3. Progress reports
and audits of
projects produced in a timely manner
Limited expertise
in PSS in the EAC region 2011
None in 2011
Core Project
Team established
in 2011
Raise levels of
expertise by training at least
50, of which at
least 15 should be women, by
2014
At least 50, of
which at least 15 should be
women, by 2014
Progress reports
and financial
statements submitted to the
Bank on a
quarterly basis.
Raise levels of
expertise by training at least
120, of which at
least 45 should be women, by
2016
At least 100, of
which at least 35 should be
women, by 2016
Progress reports
and financial
statements submitted to the
Bank on a
quarterly basis.
Workshops,
trainings, and assessment.
Workshops,
trainings, and
assessment.
Structured
reporting to EAC and the Bank of
progress and
impediments
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COMPONENTS INPUTS
Component 1: Support for Integration of Financial Market Infrastructure
Component 2 : Support for Harmonization of financial laws and regulations
Component 3: Support for Capacity Building for member states and EAC in PSS; Support for establishment, support for effective project implementation and management, capacity building for key
legal, judicial and financial institutions.
ADF Grant = UA 15 million; Central Banks =
UA 3.5 million; Commercial Banks = UA 1.5 million
Missions: Appraisal, supervision, MTR and donor coordination
Capacity building by ADB and other DPs (i.e. World
Bank)
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PROJECT TIMEFRAME
EAC: PAYMENT AND SETTLEMENT SYSTEMS INTEGRATION PROJECT
Activities/Years
2012 2013 2014 2015 2016 2017 Action by
Q3/4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Project Processing and Management
Grant approval AfDB
Signing Protocol of Grant Agreement AfDB/EAC
Project Effectiveness and Launching AfDB /EAC/NCBs
Procurement of Goods and Services
Training Programmes
Supervision and Monitoring AfDB /EAC/NCBs
Submission of Annual Audit Reports
Mid-term Review AfDB /EAC/NCBs
Project Completion Date AfDB /EAC/NCBs
Last Disbursement
Project Completion Report AfDB /EAC/NCBs
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Report And Recommendation Of The Management Of The ADB Group To The Board Of
Directors For A Proposed Grant To The EAC - Burundi, Kenya, Rwanda, Tanzania, And
Uganda In Support Of The EAC Regional Payment And Settlement Systems Integration
Project
Management submits the following Report and Recommendation for a proposed Grant of UA
15.0 million to the EAC – Burundi, Kenya, Rwanda, Tanzania, and Uganda from the Regional
Operations envelop for ADF-12 to finance the EAC Regional Payment and Settlement Systems
Integration Project (EAC-PSSIP).
I. STRATEGIC THRUST AND RATIONALE
1.1 Project Linkages with Regional Strategy and Objectives
1.1.1 This proposed project is closely aligned with Bank’s Eastern Africa Regional
Integration Strategy Paper (EA-RISP) 2011-2015 pillars 1 and 2, on Regional Infrastructure and
Capacity Building respectively. The proposed EAC-Payment and Settlement Systems
Integration Project (EAC-PSSIP) is also closely aligned with the Fourth EAC Development
Strategy, 2011/12-2015/16, and the EAC Common Market Protocol, which emphasizes trade
facilitation, establishment of a single market in financial services, establishment of the EAC
Monetary Union, and integration of Information and Communication Technology (ICT) into
regional development initiatives, amongst others. Table 1.1 illustrates the alignment of the EAC
Payment and Settlement Integration Project with both the Fourth EAC Development Strategy
and the Bank’s EA-RISP, 2011-2015.
Table 1.1: Linkage of the EAC-PSSIP with the 4TH
EAC DEVELOPMENT STRATEGY and AfDB - EA RISP
4TH EAC DEVELOPMENT STRATEGY AfDB – EA RISP EAC PSSIP Strategic Objective
The 4th EAC Development Strategy focuses on
consolidating the benefits of a fully-fledged Customs
Union, full implementation of the Common Market and laying the foundation for the Monetary Union and
the Political Federation
Strategic Objective
To create a well-connected, economically prosperous
and peaceful region by providing support to: (a) the
public sector to implement measures that facilitate the flow of capital, goods, and services across the East
African Market; and (b) to the private sector, which
invests in and finances economic activities and infrastructure across the region.
Program objective
To contribute to the modernization, harmonization
and regional integration of payment and settlement
systems; and ensure common standards for the instruments together with appropriate regulatory
practices.
Regional Priorities/Pillars
i. Consolidation of the benefits of a fully-fledged
Customs Union ii. Full Implementation of the Common Market
iii. Establishment of the EAC Monetary Union
iv. Laying the foundation of a Political Federation v. Development of Regional Infrastructure
vi. Development and Strengthening of the Regional Productive Sectors
vii. Strengthening of EAC Organs and Institutions
viii. Wide stakeholder participation
AfDB – EA RISP Strategic Pillars
i). Regional Infrastructure:
(a) Regional Transport/Trade Facilitation Infrastructure
(b) Regional Energy Development
(c) Information and Communications Technology Development of Shared Water Resources
ii) Capacity Building: (a) Support to the CES Tripartite Arrangement
(b) Support to trade facilitation, statistical and
regulatory and institutional framework (c) Strengthening institutions (RECs/IGOs, continental
organizations, special utilities and national
implementation units (d) Enhancing financial and technical capacity of
regional multilateral institutions and agencies that
invest in infrastructure and private enterprises RPGs/Cross-cutting Issues:
(i) Regional Public Goods, Climate Change,
Management of Shared Water Resources and Trans-boundary Animal Diseases Control, political risk
mitigation services, (ii) Cross-cutting Issues: Gender
and Environment, and (iii) Knowledge Management and Networking
1. EAC PSSIP Components:
(i). Support for Integration of Financial Market
Infrastructure (ii) Support for Harmonization of financial laws
and regulations
(iii) Support for Capacity Building for member states and EAC in PSS.
2. Linkages with EAC and AfDB Strategies: (i) Financial Inclusion and improved trade
facilitation
(ii) Deeper financial sector integration in the EAC region.
(iii) Integration of RTGS systems, together with
retail payment streams, and Centralized database for capturing payment flows which is critical for the
effective operation of the proposed East African
Monetary Union (iv) Improved and Integrated Regional payment and
settlement systems
(v) Improved efficiency of funds transfer across the five EAC countries.
(vi) Adequate and harmonized legislation and policy
supporting payment and settlement systems. (vii) Capacity Building for Structured
implementation and coordination of project
activities. (viii) Strengthening Institutions (RECs/IGOs,
continental organizations, special utilities and
national implementation units) through the strengthening of capacity at the EAC Secretariat,
strengthening of capacity of oversight institutions,
harmonization of financial laws and regulations.
Priority Areas Relevant to the EAC PSSIP
i. Trade Facilitation
ii. Establishment of a Single Market in Financial Services
iii. Establishment of the EAC Monetary Union
iv. Support to integration of ICT into regional development initiatives.
Focus Areas Relevant to the EAC PSSIP
(i) Trade Facilitation Infrastructure
(ii) Information and Communication Technology (iii) Support to trade facilitation, statistical and
regulatory and institutional framework
(iv) Strengthening Institutions (RECs/IGOs, etc.)
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1.2 Rationale for Bank’s Involvement
1.2.1 The EAC region is comprised of five Partner States1 that currently maintain mixed
levels of payment systems automation and standards with implications on the ability to integrate
the payment and settlement systems at a regional level. The requirement to maintain a secure
and accessible payment and settlement systems infrastructure remains an important element in
the overall ability to effectively integrate the payment systems within the EAC. However, the
continued expansion of the EAC communications “backbone” proves a valuable element in the
regional payment and settlement systems integration. Those member states having RTGS
systems, namely Tanzania, Kenya and Uganda, have started the process of integrating their
RTGS systems as the initial project toward a comprehensive EAC regional payments and
settlement systems integration. The first phase of this process commenced live operations in
May 2012.2 Table D.1 in the Technical Annexes provides a broad overview of the national
payments systems (NPS) currently in place in the EAC Partner States. Also, NPS legislation and
regulations remain variable and inconsistent with the desire to establish an integrated regional
payments system. Examples include, in some cases, no NPS Legislation that acts as a supporting
pillar for the NPS; the Law of Evidence is mixed, and does not provide for the submission of
electronically stored data to be accepted as “Prime Facie” evidence in a court of law; and clear
“Oversight” regulatory frameworks are not complete in all member states.
1.2.2 The EAC Partner States have identified the integration of their payments and
settlement systems as a priority in order to create a sound foundation that will ensure that
payment obligations throughout the EAC are settled effectively and with certainty. The need to
manage risks associated with payment and settlement systems is a high priority with the
mitigation of systemic risk paramount. A technological platform is required that will not only
accommodate existing payment and settlement systems streams but also provide a common
foundation for the introduction and development of additional financial products and services in
the future. The overriding objective is to develop a sound payments and settlement mechanism
that will facilitate the integration of member states national economies into a single monetary
area and efficient means of undertaking payments within the EAC region. Details of the
Regional, Sectoral and Institutional Context are presented in the Technical Annexes A, while
the identified issues, constraints and challenges of the current payment and settlement systems
landscape in the EAC region are presented in the Technical Annexes, D.1 to D.6.
1.2.3 This project is considered a Regional Public Good (RPG) as it will yield direct utility
by accelerating the convergence and regional integration of payment and settlement systems.
The project, which was selected by OpsCom during the July 2011 Selection and Prioritization
exercise for ROs, will strengthen commercial activities within the region by contributing to
more secure, efficient, safe and timely transfer of funds among the EAC Partner States thereby
stimulating trade in goods and services and the free movement of capital within the region.
Furthermore, the technological platform which the project will provide will encourage more
people within the region to enter the formal banking system to undertake retail funds transfers. It
will also provide expanded financial inclusion. In the period leading to the desired state of full
financial sector integration and Monetary Union, there is a need to ensure that integrated
payment and settlement systems are adequately supported throughout the EAC Partner States
with a view to accelerating convergence and regional integration of payments and settlement
systems thereby contributing to facilitating the conduct of centralized monetary policy within
the Union. The project is also expected to have a positive impact on the private sector,
1 Kenya, Tanzania, Uganda, Rwanda and Burundi.
2 Kenya, Tanzania and Uganda
3
especially the SMEs, which would benefit from an integrated and sound regional payment and
settlement systems.
1.2.4 The project is of broad public regional interest and benefit that would promote greater
trade facilitation and financial inclusion. It engenders both national and regional benefits. The
project components are well distributed over all the EAC Partner States with the implication that
all EAC Partner States will share its costs and benefits. The project requires effective cross-
border collective and cooperative action. The missing elements identified for Burundi, Uganda
and Rwanda under component 1, are critical and indispensable for the successful realization of
the project. Without the commitment and participation of all EAC Partner States, the objectives
of the project of ensuring regional interoperability of RTGS systems, ACHs, ATM/POS
switches at national and regional levels together with the establishment of a sound technological
platform to deliver regionally integrated payment and settlement systems cannot be realized.
The proposed EAC-PSSIP is a pivotal part of the infrastructure required by the proposed East
African Monetary Union to operate effectively and manage the convertibility of the EAC
Partner States’ currencies. Each participating country will contribute, proportionately, to the
financing of the project through their respective National Central Banks and Commercial Banks.
The commercial banks’ contribution represents the investments that they have to make to
interface with the new payment systems in order for the systems to operate effectively and
ensures they do not get a free-ride. The Bank’s intervention will therefore, catalyze the process
of financial integration and inclusion in the EAC and support the effective operations of the
proposed East African Monetary Union by ensuring that there is coordination in the process
through the EAC Secretariat. The Bank’s intervention will also ensure that the free-rider
problem is eliminated. See Technical Annex B for a detailed check-list of criteria for financing
Regional Public Goods (RPGs).
1.2.5 The Bank has comparative advantage and experience in similar operations which has
been useful in the design of the proposed project. The Bank’s cumulative experience in the
implementation of other payment and settlement systems projects would therefore, be valuable
to the beneficiaries in the establishment and implementation of the proposed project. Examples
include; a Bank financed project to reform systems and means of payment in WAEMU
countries through an ADF loan of UA6.20 million to BCEAO which has been successfully
completed. Also, implementation of the WAMZ Payment and Settlement Development System
Project3 financed by the Bank, with an ADF grant of UA 19 million which remains on-going.
See Table 2.9, for a summary of lessons learnt from previous regional operations. The Bank’s
cumulative experience in the implementation of payment and settlement systems projects would
therefore, provide significant benefits to the beneficiaries in the implementation of the proposed
EAC project.
1.3 Donors Coordination
1.3.1 The proposed EAC-PSSIP is an integral part of the objective of the East African
Community Financial Sector Development and Regionalization Project (EAC-FSDRP) which is
being funded by the World Bank. The overarching objective of the EAC-FSDRP is to establish a
single market for financial services among EAC Partner States. The EAC-FSDRP seeks to build
the foundation for financial sector integration among EAC Partner States upon the six following
pillars: (i) Financial Inclusion and Strengthening of Market Participation; (ii) Harmonization of
Financial Laws and Regulations Against Common Standards; (iii) Mutual Recognition of
Supervisory Agencies; (iv) Integration of Financial market Infrastructure; (v) Development of
the Regional Bond Market; and (vi) Capacity Building
3 The Gambia, Guinea, Liberia and Sierra Leone
4
1.3.2 The proposed EAC Payment and Settlement Systems Integration Project (EAC-
PSSIP) being an integral part of the objectives of the EAC-FSDRP, is aimed at complementing
the integration of the regional Financial Market Infrastructure to facilitate the undertaking of
cross border funds transfers in support of the economies of the region as a whole, together with
providing outreach to rural areas, to encourage greater participation in the formal financial
sector. The Bank’s support will focus on the provision of funding in pillars 2, 4, and 6, of the
EAC-FSDRP where it is felt, and agreed, that strengthening of these component areas would
prove to be the most beneficial in the overall progression of the payment and settlement systems
(PSS) in the EAC under Phase I (2011-2014) of the EAC-FSDRP. All the donor activities will
be coordinated by the EAC Secretariat. This will strengthen client ownership of the project. In
view of the foregoing, the preparation and appraisal of the proposed project was coordinated
with the World Bank with a view to ensuring that activities that are currently funded under the
EAC - FSDRP are not duplicated in the proposed project. It was also agreed that during
implementation, coordination between the two institutions will continue and that the project
documents for both the EAC-FSDRP and the proposed EAC-PSSIP should be seen as living
documents to accommodate the changing needs of the Partner States and to ensure that
activities, especially in the areas of capacity building and harmonization of financial laws and
regulations, are not duplicated.
II. PROJECT DESCRIPTION
2.1 Project Components
2.1.1 Project Objectives: The objective of the proposed project is to develop a robust
environment for both, wholesale and retail payment and settlement systems and to facilitate
market integration, support effective application of monetary policy and financial markets aimed
at enhancing safety and efficiency in the overall payment and settlement systems. This will
contribute to the pursuit of sound macroeconomic policies and improved functioning of regional
integrated financial markets. The project would support, through integrated Payment and
Settlement Systems (PSS), the broadening and deepening of the financial sector by establishing
a single market in financial services among EAC Partner States, with a view to providing a wide
range of financial products and services to all, at competitive prices. The project aims
specifically to: (i) contribute to establishing an infrastructure that is sound, efficient and
compatible at the regional level; (ii) assist the EAC to redress weaknesses in the legal and
regulatory arrangements in banking and PSS which are critical to achieving the effective
functioning of a single common market in financial services; and (iii) provide capacity building
in the area of payment and settlement systems at both the national and regional level.
2.1.2 Project Components: The proposed project includes the following components: (i)
integration of financial market infrastructure - to achieve its objective this component is
expected to realize the integration of RTGS systems and retail systems across the region; (ii)
harmonization of financial laws and regulations; and (iii) capacity building. It is expected that
integration of existing systems will be substantially completed by 2014 and that the regional
technological platform will be in place by 2016. The major activities are summarized in table
2.1 while the detailed description of project components and costs is presented in the Technical
Annex C1.
5
Table 2.1: EAC Payment and Settlement Systems Integration Project-Project Components
Components Est. Cost
(UA mil)4
Component Description
Component 1:
Integration of
Financial
Market
Infrastructure
13.50
(i) Supporting the integration and upgrading of Real Time Gross Settlement (RTGS) systems including:
(a) Purchase of a Real Time Gross Settlement System (RTGS) and Central Securities Depository (CSD) for Burundi and
Integration of the Burundi RTGS with EAPS;
(b) Upgrade of the Uganda RTGS to interface with the accounting system; and
(c) Support to Uganda to complete the interface between RTGS and the Core Banking System.
(ii) Support to Retail Payment System Automation in Uganda and Rwanda through the upgrade of their clearing systems;
(ACHs) to accommodate cheque truncation and ATM/POS reciprocity;
(iii) Support for SWIFT Connectivity to integrate to the EAPS for Rwanda;
(iv) Support for Business Continuity arrangements for Kenya and Burundi;
(v) Support for Systems Upgrade and Disaster Recovery arrangements for Tanzania5; and
(vi) Support for Network Upgrade and Disaster Recovery arrangements for Rwanda6.
Component 2:
Harmonization
of financial
laws and
regulations.
3.50
(i) The proposed project will provide consultancy support to the EAC Secretariat in the drafting of legislation and policy
to ensure that the payment and settlement systems are adequately supported and integrated throughout the EAC in order
to protect payment flows. More specifically, the project will, amongst others, help to: (a) adopt common “Failure to
Settle” arrangements; (b) agree “Oversight Framework and Policy”, on site-inspection format in line with BIS CPSIPS;
(c) agree regulatory arrangements for payment instruments and collateral levels; (d) drafting of regional payment systems
legislation; and (e) Support for the development of an EAC oversight framework.
(ii) At the national level, support is required for, but not limited to: (a) Development of rules, regulations and procedures
to enable the National Payments Systems (NPS) Act in all EAC Partner States; (b) Drafting of the Central Securities
Depository7 (CSD) law and enabling regulations in Burundi; (c) Support for the development of enabling regulations and
the NPS Act in Uganda; and (d) Drafting and implementation of rules and regulations for ACH for Tanzania.
Component 3: 8
Capacity
Building
2.00
(a) Training and skills improvement support to strengthen the capacity of the EAC Core Project Team (CPT), National
Central Banks, Commercial Banks and other stakeholders in the area of Payment and Settlement Systems;
(b) Training judges and judicial officers at the EACJ and members of the EALA in the legislative support required for
payment and settlement systems, commercial law, enforcement of collateral, acceptance of electronic evidence as “prima
facie” evidence, and the resolution of contractual disputes, especially in relation to payment and settlement;
(c) Training of legal officers at the National Central Banks and Commercial Banks in the legal aspects of payment and
settlement systems;
(d) Sensitization of the population on retail payment systems and use of electronic means of payment, by means of
seminars and workshops and media to explain the new payment systems to stakeholders;
(e) Study tour for Payment Systems Experts in the EAC Secretariat and the region to strengthen their capacity in
payments systems oversight, including exchange programs between the NCBs to exchange expertise and experience; and
(f) Support to the Regional Association of Bankers.
Project
Management
1.00
(a) Support to the EAC Core Project Team by providing:
(i) Payment Systems Specialist/Project Manager
(ii) Procurement Specialist
(iii) Accountant
(iv) Project Administration Assistant
(b)Project operational costs for the Core Project Teams in the EAC and the NCBs
(c) Logistical support for the National Payment Systems Committees
(d) Cost of the annual audits during project implementation
Total Cost 20.00
2.2 Technical Solution Retained and other Alternatives Explored
2.2.1 Large value/time critical systems are not in place in all EAC Partner States. There is a
need to implement and integrate national RTGS systems in Partner States to develop a regional
cross-border large value/time critical funds transfer system. Integration to the SWIFT network is
a prerequisite for all member states to access the EAPS “high value” system. While Tanzania,
Uganda and Kenya have integrated their RTGS systems to establish the foundation of the “East
African Payment System” (EAPS), Rwanda and Burundi are yet to do so, with Burundi
requiring the acquisition and implementation of an RTGS system. The solution retained
therefore is a regional RTGS system with interface to SWIFT, using the SWIFT “FIN-Y” copy
4 All figures include price and physical contingencies.
5 See technical annexes Table C.3.11 (A) for details.
6 See technical annexes Table C.3.11 (B) for details.
7 Securities Act
8 The Commercial Banks will be required to sponsor their staff and cover the full cost of their participation in
the training programs to be provided under this component.
6
platform which utilizes sound SWIFT “Closed User Group” (CUG) conventions. This would
ensure an efficient and secured funds transfer mechanism within the region. This could be
extended, in the future, to accommodate the settlement of cross-border clearing house and
ATM/POS Switch operations for retail payments, enhance financial inclusion, and stimulate
trade among the EAC Partner States.
2.2.2 An alternative solution considered during the design of the project and reasons for its
rejection is presented in the table below.
Table 2.2: Project Alternatives Considered Alternative Brief Description Reasons for Rejection
Interface of
Regional RTGS to
an Independent
Virtual Private
Network (VPN)
Establishment of
an EAC centric
VPN
The establishment of an EAC centric VPN would not be cost effective and efficient.
Global best practice for such systems would be the SWIFT service as the “de facto” global
standard for such systems.
Any other alternative to SWIFT could create further delays in the transfer of funds and
integration of payment and settlement systems among the EAC Partner States.
2.3 Project Type
2.3.1 The proposed operation is a technical and institutional support project, financed by a
grant under the Regional Operations Envelope of ADF-12. The project involves the
improvement and integration of the payment systems in Burundi, Kenya, Rwanda, Tanzania,
and Uganda. It focuses on three areas: (a) Integration of Financial Market Infrastructure; (b)
Harmonization of financial laws and regulations; and (c) Capacity Building. The project will
contribute to the modernization, harmonization and regional integration of payment and
settlement systems in the EAC Partner States, and develop common standards for instruments
together with appropriate regulatory and legislative practices.
2.4 Project Cost and Financing Arrangements
2.4.1 The total cost, net of taxes and duties, of financing the implementation of the Payment
and Settlement Systems within National Central Banks, covering regional dimensions for the
first four years (2013-2016) is estimated at UA 20 million. Of this amount, UA 15 million,
representing 75.0 percent of the cost of the project, is the proposed ADF Grant to the EAC. The
countries collectively, will contribute UA3.5 million, representing 17.5 percent of the cost of the
project through their respective National Central Banks (NCBs). The contribution of each
participating NCB will be proportionate to the financing it is receiving under component 1 of
the project. The Commercial Banks will be required to contribute UA1.5 million representing
7.5 percent of the project. The commercial banks’ contribution represents the investments that
they would be required to make in their respective offices in order for the new payment systems
to operate effectively. In addition, for the Commercial Banks to benefit from the training
programs, which shall be undertaken under component 3 of this project, they will be required to
sponsor their staff and cover the full cost of their participation in the programs. Details of the
fees for participation of Commercial Banks would be determined by the EAC-CPT in
conjunction with the training providers. The contribution of the Commercial Banks ensures their
commitment and involvement. Incorporated in the cost estimates is a 4 percent physical
contingency factor and 4 percent for price escalation on local and foreign currency. At the end
of this investment and the initial operation period, the systems will become fully sustainable.
2.4.2 Tables 2.3 and 2.4 below present estimated project costs by category of expenditure
and component while Tables 2.5 (a and b) and 2.6 show financing by source and schedule of
expenditure. Costs have been estimated on the basis of data obtained during the Appraisal
Mission. Details of the project cost by component and expenditure category are presented in
Technical Annex C1.
7
Table 2.3: Project Cost by Category of Expenditure (in million UA)9
CATEGORIES OF EXPENDITURE (USD$ Million) (UA Million) % Total Cost
Local Foreign Total Local Foreign Total
A. Goods 2.87 9.44 12.31 1.85 6.09 7.94 39.7%
B. Services 0.46 10.48 10.94 0.30 6.76 7.06 35.3%
C. Operating Costs 6.86 0.89 7.75 4.43 0.57 5.00 25.0%
Total Cost 10.20 20.80 31.00 6.58 13.42 20.00 39.7%
Table 2.4: Project Cost Estimates by Component (in million UA)10
(USD$ Million) (UA Million)
COMPONENT Local Foreign Total Local Foreign Total
Integration of financial market infrastructure 9.02 10.36 19.38 5.82 6.68 12.5
Harmonization of financial laws and
regulations 0.00 5.02 5.02 0.00 3.24 3.24
Capacity building 0.14 2.73 2.87 0.09 1.76 1.85
Sub-total 9.16 18.11 27.27 5.91 11.69 17.60
Project Management 0.29 1.15 1.44 0.19 0.74 0.93
Total Base Cost 9.45 19.26 28.71 6.09 12.43 18.52
Physical contingencies 0.38 0.77 1.15 0.24 0.50 0.74
Price contingencies 0.38 0.77 1.15 0.24 0.50 0.74
Total Project Cost 10.20 20.80 31.00 6.58 13.42 20.00
Table 2.5 (a): Sources of Financing (in million UA)
Sources of Financing Foreign Currency costs Local Currency cost Total % of total
ADF 12.85 2.15 15.00 75.00%
Central Banks 0.57 2.93 3.50 17.50%
Commercial Banks 1.50 1.50 7.50%
Total Cost 13.42 6.58 20.00 100.00%
Table 2.6: Expenditure Schedule by Component (in million UA) (ADF financing)
COMPONENTS 2013 2014 2015 2016 Total
Integration of Financial Market Infrastructure 9.45 2.02 1.35 0.67 13.50
Harmonization of Financial Laws and Regulations 0.88 0.88 0.88 0.88 3.50
Capacity Building 0.50 0.50 0.50 0.50 2.00
Sub-total 10.82 3.40 2.72 2.05 19.00
Project Management 0.25 0.25 0.25 0.25 1.00
Total Cost 11.07 3.65 2.97 2.30 20.00
2.5 Project’s Target Area and Beneficiaries
2.5.1 While the EAC will be the recipient of the grant, the project will be implemented in
the territories of the five EAC Partner States. The direct beneficiaries of the project will include
the NCBs of the five countries, the Commercial Banks, other financial institutions and the
judiciary, including the EACJ and members of the EALA. However, given the expected
improvements to the efficiency of payments processing and funds transfers in the countries, the
ultimate beneficiaries would be businesses (especially SMEs) and all users of banking services
(including women which constitute the majority of the population) through increased
participation and inclusion in the formal financial sector. The efficiency and reliability to be
delivered, and expanded financial intermediation, will result in the strengthening and integration
of the national payment systems in the five countries designed to encourage a greater proportion
of the population to migrate into the formal financial sector. The project would also create an
enabling environment for the private sector. As a Regional Public Good, the strengthening of the
payment and settlement systems will enhance regional integration and financial governance.
9 Including contingencies
10 1UA = 155USD as of May 20th 2012
8
2.6 Participatory Process for Project Identification, Design and Implementation
2.6.1 The Bank and the EAC Secretariat, in collaboration with the Central Bank of Rwanda and
other development partners, held a workshop on Payments and Settlement Systems Development
and Integration in the EAC in Kigali in December 2010. The objective of the workshop was to
review the requirements to establish regional payment clearing and settlement systems in the EAC.
It brought together policy-makers, central bankers, bankers associations, regulators, and private
sector mobile network operators, technology companies, and independent service providers and
other experts to discuss key payment and settlement systems issues facing the EAC. The Conference
developed a draft “Road Map” that the EAC Governments, NCBs and Regulators will follow to
undertake the development and subsequent integration of their respective payment and settlement
systems. The Road Map was presented to, and adopted by, the Monetary Affairs Committee (MAC)
of the EAC during its 13th Meeting held in Zanzibar on 16th December 2010. The Bank undertook a
preparation mission jointly with the EAC in May/June 2011, to objectively review the road map and
propose areas where the Bank could consider providing support and assistance in the development
and integration of payment and settlement systems and a “mapping” exercise that highlighted the
areas that the Bank could offer support was undertaken. In addition, the Appraisal Mission, which
took place in May 2012, consulted with all the National Central Banks of the five EAC Partner
States, representatives of the Commercial Banks in all EAC Partner States (including Bankers
Associations), selected private sector ICT and mobile service providers, as well as the World Bank
which is currently implementing the FSDRP in the region. As part of the implementation of the
project, sensitization of the population on retail payment systems and use of electronic means of
payment would be undertaken by means of seminars and workshops and media to explain the new
payment systems to stakeholders.
2.7 Bank Group Experience, and Lessons Reflected in Project Design
Table 2.9: Lessons learned from the previous Payment Systems and other Regional Projects
Lessons learned Actions taken to integrate lessons into the PAR
1. Regional Economic Community Secretariats lack experience
as the executing agency for payment and settlement systems
projects. Moreover, payment and settlement systems integration
projects are complex and multifaceted, due to the number of sub-
components/sub-projects that are commonly implemented
concurrently. Given these factors, the timeframe proposed for the
implementation of the UEMOA project which addressed the
reform of the payment systems turned out not to be feasible.
The appraisal team for the proposed project took all necessary steps to
ensure, as much as possible, that prior to the signing of loan agreements,
the conditions precedent to first disbursement would be met to ensure that
the timeframe agreed with the client for the implementation of the project
would be feasible. The EAC Secretariat will also initiate the process of
recruiting the Payment and Settlement Systems Specialist and other skills
required ahead of project approval.
2. In the case of the Union Economique et Monétaire Ouest
Africaine (UEMOA) project, there was weak collaboration
between the implementing agency, the project beneficiaries and
users. For instance, after the completion of the RTGS component
of the project it took a long time before it was launched thereby
delaying the use of the systems.
In the case of the proposed project effort would be made to ensure close
collaboration between the implementing agency and the beneficiaries of
the project. During the appraisal mission extensive consultations were held
with the beneficiaries of the project that include both National Central
Banks and Commercial Banks. The role of the NPSCs which would be
established as part of the project would also ensure sustained consultations
with stakeholders throughout the implementation of the project.
Component 3 of the project provides for sensitization of the population on
retail payment systems and use of electronic means of payment, by means
of seminars, media awareness and workshops to explain the new payment
systems to stakeholders.
3. In many cases, there is a lack of or insufficient capacity of
local contractors and service providers to implement projects of
regional dimensions. This has been found to be a limiting factor
which has subsequently proved difficult to correct during project
implementation.
During the appraisal mission consultations were held with local service
providers to assess their capacity to provide the requisite goods and
services. While in two the capacity was weak, there was adequate capacity
in the remaining three countries. The mission therefore concluded that, on
a regional basis, there is adequate capacity to provide the required goods
and services.
4. In many instances, regional organizations are not familiar with
Bank rules and procedures which caused undue delays to project
start-up and implementation.
The Bank will undertake training on its rules and procedures to build the
required capacity at the EAC Secretariat, the EAC-CPT and the CPT at the
National Central Banks in the application of the Bank’s rules and
procedures.
5. It is important that in the formulation of conditions that the
Bank ensures that the conditions are realistic and achievable
within a reasonable time. This will help to avoid lengthy delays
in fulfilling effectiveness and first disbursement conditions.
The appraisal team has taken all steps to ensure that the conditions
precedent to first disbursement specific in this report is achievable within a
reasonable timeframe.
9
2.8 Key Performance Indicators
2.8.1 The key performance indicators identified and the expected outcomes, at project
completion, are presented in the results-based logical framework (page vi). The first expected
outcome is an improved and integrated regional payment and settlement system and improved
efficiency of funds transfer across the five EAC countries. The performance indicators under
this outcome are:
(i) Growth in inter-bank high-value funds transfers growing from US$279 billion in 2010 to
US$ 340 billion in 2014 and US$420 billion in 2016; and
(ii) Improvement in the longest clearing and settlement cycle for local and upcountry
cheques within the region from T+10 days in 2011 to T+5 days in 2014 and T+3 days in
2016.
2.8.2 The second expected outcome is; Adequate and harmonized legislation and policy
supporting payment and settlement systems. The main performance indicator under this
outcome is:
(i) Improvement from the current state of, very limited regional legislative support for
payment and settlement systems to the promulgated legislative support for National
Payment Systems, CSD laws and ACH in Uganda, Burundi and Tanzania, respectively
by 2014 and the approval of harmonized rules and regulations for RTGS and National
Payment Systems by the Monetary Affairs Committee and promulgation of the laws by
the National Assembly by the end of 2016.
III. PROJECT FEASIBILITY
3.1 Economic and Financial Performance
3.1.1 The proposed project is an Institutional Support Operation and, as such, is not
amenable to credible and rigorous cost-benefit and financial analyses. While the costs of the
proposed project are quantifiable (section 2.4), the benefits are indirect and realizable through
the integration of the region’s wholesale and retail payment and settlement systems which will
provide seamless transmission of funds at both the commercial and individual level throughout
the EAC Partner States thereby providing an enhanced platform to facilitate expansion of intra-
regional trade and attract greater local and foreign direct investments. The economic
justification of the proposed project includes its contribution to the facilitation of the migration
to a common currency and the facilitation of the progress to EAC monetary union resulting in an
expanded regional market. In addition, the project is expected to improve financial security of
inter-bank flows, within the region, by reducing the use of cash. It will also contribute to
increasing financial system stability as “float” at all levels can be reduced, together with the
mitigation of systemic risk. Furthermore, fraud associated with high value sums paid through
cheques is mitigated by encouraging the use of RTGS systems. It will also contribute to the
reduction of clearing and settlement delays by banks to their customers thus making funds
transfer more efficient. The consequent efficiency gains that would result from the above
benefits and the accelerated means of undertaking payment for goods and services would
contribute to an expansion of the regional economy and GDP growth within the region. In
general, it is expected that the economic and financial benefits from the proposed project will be
much higher than UA 15.0 million. Other economic and social benefits of the project are
discussed in section 3.2 below.
10
3.2 Environmental, Social and Other Impacts
3.2.1 Environment: The project has been classified as Category 3 by ORQR and will
therefore have no adverse effect on the environment.
3.2.2 Gender: As indicated above, the proposed project would promote cross-border trade;
and since women are the most active participants in cross-border trade, particularly at the retail
level, the project will have positive social impact on women in the EAC. The project will
promote gender inclusiveness through other benefits that it will confer on the population of the
region, the majority of which are women. Some of these benefits include, the potential for the
project to play a key role in facilitating greater access to finance to the population, contribute
significantly in facilitating financial inclusion and expansion of financial services “access
points” to the citizens of the EAC region, within a well regulated and legislative framework. The
provision of extended “access points” coupled with “agency banking” arrangements that are
“bank-driven” which will result from the project is also expected to provide outreach to the un-
banked, and improve financial deepening as more people are encouraged to move from the
informal economy to the formal sector as financial services become less complex, more
accessible and more reliable specifically reaching the female population.
3.2.3 Social: The availability of modern and harmonized payment systems among the
countries of EAC would ease interbank fund transfers within the region, thereby reducing the
necessity for carrying large amounts of physical cash by traders, which exposes them to risks of
theft and harm. The expected increase in regional trade that would be facilitated by the project
together with the consequent expansion of the regional economy and GDP growth is also
expected to lead to increased income for the poor, especially women active in cross-border
trade, thereby improving their economic and social well-being.
3.2.4 Regional Integration: Through its impact on the acceleration of convergence of
payments and settlement systems, and the strengthening of regional Common Market
commercial activities, the project will contribute to the attainment of EAC’s regional integration
objectives. Moreover, the negotiations of all the provisions of the EAC Monetary Union
Protocol have been completed and awaiting signature by the Summit. The project is a critical
element that would contribute to its effective operation.
3.2.5 Private Sector Development: The project is expected to lead to a reduction in funds
transfer costs for SMEs, the economy and the public in general. The integration and
management of sound payment and settlement systems would contribute to the overall
landscape of the EAC while also encouraging FDI and the presence of multinational enterprises
that are evaluating investment in the region which would benefit from an integrated and sound
regional payment and settlement systems.
IV. IMPLEMENTATION
4.1 Implementation Arrangements
4.1.1 Executing Agency: The main organs of the EAC are (i) the “Summit of the Heads of
States and Governments of Partner States” which gives broad direction towards the realization
of the goals and objectives of the community; (ii) the “Council of Ministers”; (iii) the “Co-
ordination Committee” which is made up of Permanent Secretaries and reports to the “Council
of Ministers” and co-ordinates the activities of the sectoral committees; (iv) the “East African
Legislative Assembly” (EALA); (v) the East African Court of Justice (EACJ); and (vi) the
“EAC Secretariat” which is the executive organ of the Community. The EAC would be the
recipient of the grant. The EAC Secretariat will be the “Executing Agency” of the EAC-PSSIP
and will be responsible for the overall implementation of the project. The EAC Secretariat will
11
be the operational link between the Bank and the five EAC Partner States. In this regard, the
project will be implemented by an EAC “Core Project Team” (EAC-CPT) to be established at
the EAC Secretariat. The EAC-CPT would be assisted in this assignment by a Payment System
Specialist who would serve as the Project Manager, a Procurement Specialist and an
Accountant. The Payment Systems Specialist, Procurement Specialist and Accountant would be
recruited by the EAC using resources provided by the Grant. The project will also require a
Project Administrative Assistance. In addition the EAC would be required to assign an M&E
Specialist and an Information and Technology Expert to the project as part of the EAC-CPT.
4.1.2 As agreed with the EAC and NCBs, the project implementation will be delivered at
two levels: the regional level and country level. At the regional level, a Regional Core Project
Team (CPT) would be constituted at the EAC Secretariat. The EAC-CPT would maintain
responsibility for the overall coordination of project implementation. The EAC-CPT will consist
of, at least, three (3) EAC staff from relevant departments/units (including technical staff from
the ICT department and an M&E Specialist) and would be headed by the EAC Director of
Planning. He or She would be the “Project Director” and would be responsible for providing
general oversight of project implementation activities, and effective interface with the senior
management of EAC and the NCBs. The Payment Systems Specialist would serve as the Project
Manager with responsibilities for managing day-to-day project activities.
4.1.3 Actual implementation shall be done at the country level by the National Central
Banks, which shall be designated as the Implementing Agencies. The NCBs would be required
to establish National Core Project Teams (NCB-CPT) with the head of the department
responsible for payment systems at the National Central Bank as the “National Project
Coordinator”, and including experts for each of the project components, including an M&E
Specialist. The NCBs’ project teams would be responsible for all project implementations at the
national level. Furthermore, if not already in place, the NCBs will be required to facilitate the
establishment of “National Payment Systems Committees” (NPSC), comprised of
representatives of the NCBs, Commercial Banks, and other relevant stakeholders. The NPSC
would be regularly consulted during the course of project implementation, and would provide
inputs from the users’ perspective. The establishment of the EAC-CPT and NCB-CPT by EAC
and the NCBs respectively, is a condition of first disbursement of the grant resources, while the
establishment of the NPSC is also a condition of the grant.
4.1.4 The NCBs will be required to establish a Steering Committee at the country level that
would be chaired by the Deputy Governor, who will also serve as the Project Sponsor. The
Steering Committee, which will have oversight over the NCB-CPT, would include management
level stakeholders that will be directly impacted by the outcome of the project, including heads
of payment and settlement systems, information management systems, financial markets,
banking operations, banking supervision, research, finance, and legal. During the
implementation, the Steering Committee will provide policy direction, and resolve cross-
functional and other matters pertaining to the project. The “Project Coordinator”, as a member
of the Steering Committee, would provide the required interface between the project and the
committee. Representatives of the EAC and solution providers may be invited to participate in
the Steering Committee meetings as need arise. In addition, there shall be an Executive
Committee, chaired by the Deputy Secretary General Planning and Infrastructure (EAC
Secretariat), and composed of representatives of the EAC Secretariat and the NCBs at Deputy
Director or Director level which will be responsible for supervising Project operations, in
particular overseeing the execution of financial management, procurement, accounting, and
monitoring and evaluation (M&E) functions of the EAC-CPT and NCB-CPT. The Executive
Committee will be required to meet, at least once in each quarter, to deliberate on the direction
of implementation of the project and to take remedial measures where necessary. Members of
12
the EAC-CPT and NCB-CPT may be invited to participate in the Executive Committee
meetings as need arise.
4.1.5 Financial Management, Reporting and Audit: The EAC-CPT will be responsible for
the financial management of the project. Under the guidance of the Director of Planning, the
EAC-CPT, will manage; the budgeting, financial accounting and financial reporting aspects of
the project. The accounting will utilize the EAC Computerized Accounting system. All projects
in EAC use the same “Chart of Accounts” which are GFS based and they will not therefore, be
required to revise their “Chart of Accounts”. The EAC’s financial systems comply with IPSAS
Accrual basis of Accounting and operate under the Sun system.
4.1.6 The project will follow the financial year of the EAC which runs from 1st July to 30th
June. The EAC-CPT would be required to produce quarterly interim financial reports for the
project which will be submitted to the Bank no later than 45 days after the end of each quarter.
The EAC Internal Audit Department will audit the project at least once annually. The internal
audit reports will be shared with the Bank. Annually, the EAC will produce project specific
annual financial statements. An annual external audit will be carried out by a competent auditor
acceptable to the Bank, selected by the EAC, using the EAC systems. The EAC is currently
being audited by an Audit Commission made up of the Auditor Generals’ of the member states.
The Bank recognizes The Audit Commission as an acceptable auditor. However, the EAC
Secretariat has the option to recruit an international private audit firm for the purpose of
expediting the audit process. To that end, the funds have been appropriately allocated to the cost
of the audit in the project budget. The last three entity audit reports of EAC had unqualified
audit opinions. The audit report, complete with a Management Letter will be submitted to the
Bank not later than six months after the end of the financial year. A detailed audit arrangement
is set out in Technical Annex C3.
4.1.7 Procurement: All procurement of goods and acquisition of consulting services
financed by the Bank will be in accordance with the Bank's Rules and Procedures for
Procurement of Goods and Works or, as appropriate, Rules and Procedures for the Use of
Consultants, May 2008 edition and as amended from time to time, using the relevant Bank
Standard Bidding Documents. The East Africa Community (EAC) Secretariat will be the
Executing Agency responsible for coordinating the procurement of goods, services and
miscellaneous items while the National Central Banks will be the Implementing Agencies
responsible for providing the technical inputs and implementation of the activities at national
level. An assessment of the EAC Secretariat, Procurement Unit to undertake procurement under
ADF financing was undertaken and it was concluded that the unit will need further
strengthening in order to effectively support the project. In this regard, a Senior Procurement
Specialist will be recruited as part of the Regional Core Project Team to be responsible for
procurement under the project, support the Procurement Unit in its regular activities and mentor
staff. Detailed procurement arrangements are presented in Technical Annex C4.
4.1.8 Disbursement: Disbursement to the project will be undertaken in line with the Bank’s
procedure. The Bank’s four disbursement methods will be available to be used during project
implementation. Disbursement of funds for consulting and non-consulting services and the
payment of goods and equipment will be by direct payment in accordance with the Bank’s
Handbook on Disbursement. For purposes of the project, the EAC will open a “Special
Account” (in US Dollars) at a Bank acceptable to the African Development Bank to receive
funds designated for financing project implementation activities such as capacity building and
training activities as well as smaller payments. The size of the initial advance into the Special
Account shall be as per the Bank’s disbursement rules. The opening of the Special Account will
be a condition precedent of first disbursement of the grant. The Bank’s Disbursement Letter will
be issued stipulating key disbursement procedures and practices. The Bank will have the right,
13
as reflected in the General Conditions to suspend disbursement of the Funds if reporting
requirements are not complied with.
4.1.9 While the Special Account would be opened and managed by the EAC, it might be
necessary, for ease of project implementation, for sub-accounts to be opened in the recipient
countries by each of the NCBs. The EAC would be authorized to transfer reasonable amounts of
money, based on estimated project requirements, to the sub-accounts opened in the countries.
All payments into the special account together with any transfers to the sub-accounts must be
fully justified before the replenishment of the Special Account. The Special Account, opened by
the EAC will be replenished on condition that at least 50 percent of the most recent advance and
100 percent of all older advances have been justified. Transfers to the sub-accounts, opened in
the countries, will not be considered as justifications and the EAC will be responsible for
ensuring that the sub-account holders submit to the EAC the relevant documentation to account
for the transfers received from EAC.
4.2 Monitoring Arrangements
4.2.1 Monitoring and evaluation (M&E) activities remain crucial for the successful
implementation of the project. In addition to the regular dialogue between the Governance
Expert based in EARC and the EAC-CPT, the Bank will undertake supervision missions, at
least, twice annually. The EARC and Field Offices in Bujumbura, Kampala, Kigali and Dar es
Salaam will also assist in on-going monitoring of project implementation. The EAC will
maintain constant communication with the Bank on the progress of implementation. A mid-term
progress review to assess achievements, discuss constraints and make necessary adjustments,
where needed, would be undertaken after two years of implementation. At the end of project
implementation, the Bank would prepare a Project Completion Report (PCR) to evaluate the
achievements of the project and the lessons learned from its implementation.
4.2.2 The EAC will submit quarterly progress reports’ in a form and substance satisfactory
to the Bank, on the implementation of the respective components. The reports will review
progress made in light of the project’s “Results-Based Logical Framework” and include a clear
presentation description of activities undertaken during the period under review. The reports
will also analyze; to what extent the activities undertaken have contributed to the realization of
the anticipated results/outputs and project objectives, make recommendations to address any
issues encountered, and present “time-bound” actions/work plans for the following quarter. The
EAC will also be required to prepare and submit, to the Bank, a Project Completion Report
(PCR) within three months of the final disbursement that will provide an overview of the
project’s implementation, the project outputs achieved vis-à-vis the estimates and the lessons
learned from the implementation in accordance with the Bank’s General Rules and Procedures.
The indicative implementation schedule is summarized as follows:
Table 4.1: Project Implementation Schedule
Task Responsible Party Dates/Period
Preparation Bank May/June 2011
Appraisal Bank May 2012
Grant Approval Bank December 2012
Grant Effectiveness Bank and EAC/NCBs December 2012/January 2013
Procurement of goods and services EAC/NCBs March 2013 – June 2015
Training programmes EAC/NCBs June 2013 – June 2016
Submission of Annual Audit Report EAC Annually from 2014 to 2017
Supervision Mission Bank June, and December 2013, 2014, 2015, and 2016
Mid-term Progress Review Bank November 2014
Project Completion Bank and EAC/NCBs December 2016
Last Disbursement Bank June 2017
Project Completion Report Bank and EAC December 2017
14
4.3 Project Governance
4.3.1 Article 4 of the EAC Treaty which provides for legal capacity of the Community,
states that the Community, as a corporate body shall be represented by the Secretary General.
Consequently, funding for all projects and programmes of the EAC is negotiated, agreement
signed and managed by the EAC Secretariat. This is founded on the provisions of Article 4 read
together with Article 71 of the EAC Treaty which provides for, inter-alia, the Secretariat’s
function envisaging: 71 (1) (b) the initiation of studies and research related to the
implementation of programmes for the most appropriate, expeditious and effective ways of
achieving the objectives of the community; (c) the strategic planning , management and
monitoring of programmes for the development of the Community; (h) the general
administration and financial management of the Community; (i) the mobilization of funds from
the development partners and other sources for the implementation of projects for the
Community. It is clear from these provisions that the EAC Secretariat has the mandate to deal
with the Bank on EAC related projects/programmes requiring funding. The implementation of
this project shall therefore, be similar to the implementation of any other EAC project or
programme.
4.4 Project Sustainability
4.4.1 The key stakeholders to the project, including the EAC, NCBs and Commercial Banks
have indicated strong commitment to the overall sustainability of the project. In particular, the
NCBs and Commercial Banks have been in the forefront of the efforts to improve the payment
systems in the EAC Partner States. The National Payment Systems Committees, proposed in
this report, would be charged with the responsibility of monitoring and supporting the
investments made under the project. Also, the EAC has committed to mainstreaming the
Payment System Specialist, Procurement Specialist, Accountant, and Project Administrative
Assistant to be recruited for the project after the implementation of the project. This will ensure
that core capacity for payment and settlement systems is established at the EAC. In addition,
since the five countries are at different levels of implementation of payment and settlement
systems, provision has been made under the capacity building component for study tours,
including exchange programs between the NCBs to exchange expertise and experience.
4.4.2 In terms of availability of resources for project operational and recurrent costs, post-
implementation, “cost recovery” charges, which are already in place in some of the EAC Partner
States, would contribute to the sustainability of the associated payment and settlement systems.
The arrangement involves user-charges by the NCBs (owners of the systems) on the commercial
banks and other participants, on a pro rata basis, for the use of the systems. The participants, in
turn, recover the resulting charges through the banking fees charged to their customers.
Additional charges to customers are usually limited, given the large volume of transactions. It is
also expected that the increased efficiency delivered by the new systems will encourage further
reduction in charges. As part of the harmonization process, consideration must be given to the
harmonization of the “cost recovery charges” currently in place in the countries to ensure that
they are equitable across the EAC region.
4.4.3 With regard to technical sustainability, the technologies to be employed for
component 1 of the project are standard industry technologies that have been well tested and
deployed worldwide. For instance, SWIFT is a proven “message carrying” service available on a
global basis. In addition, the service providers for the new systems will be required to provide
extensive training for the personnel of the NCBs and the Commercial Banks that would operate
the systems. Capacity building is a key component of the project, and will ensure that
participant’s staff is adequately trained and that they receive regular skills upgrades when
15
necessary. An assessment of the appraisal team shows that business continuity and disaster
recovery arrangements are in place in EAC countries. However, business continuity in Burundi
and Kenya, and disaster recovery arrangements in Tanzania and Rwanda would be further
strengthened. This is provided for under component 1 of the project (see table 2.1).
4.4.4 With regard to the responsibility for coordination, after the implementation stage of
the project, the proper functioning of the proposed EAC Monetary Union would require the
establishment of the East African Central Bank (EACB) whose primary objective shall be to
achieve and maintain price stability in the single currency area. The EACB shall, together with
the NCBs, form a functionally integrated region-wide system of Central Banks that shall
perform the Central Bank functions in the Monetary Union. However, in the transition period,
there will be an Institution, as a precursor to the establishment of the EACB, to coordinate the
monetary and exchange rate policy and all the preparatory work towards the Single Currency.
The responsibility for coordination and maintenance of the proposed EAC Payment and
Settlement Systems Integration Project will be transferred to this organ as soon as it is
established.
4.5 Key Risks and Mitigation Measures11
Table 4.2: Risks and Mitigation Measure
Risks Mitigation Measures
Risk 1: Full functionality of the integrated systems if the new
systems are not fully implemented at national levels.
This risk is mitigated by continued commitment and ownership of the new systems
by the Central Banks. In fact, they have also initiated investments that are
complementary to the components being provided by the proposed project. The
proposed project is therefore intended to fill the gap.
Risk 2: Possible lack of commitment of the Commercial Banks
to the new payment systems.
This risk is mitigated given the commercial benefits that the new systems would
provide to the Commercial Banks. The Commercial Banks have been placing
demands on the NCBs regarding the need to modernize and integrate the national
payment systems. They have also initiated investments to upgrade their
infrastructure in anticipation of new payment systems. The arrangements for
implementing the project also ensure that the Commercial Banks are fully involved
in its implementation as members of the NPSCs.
Risk 3: Systems failure and systemic risk posed by having EAC
Partner States with mixed levels of readiness and payment
systems automation and standards.
Business continuity and disaster recovery plans are in place in all the NCBs. These
plans were assessed during the appraisal mission and found acceptable. However, as
a further mitigation measure, the business continuity arrangements in Burundi and
Kenya and disaster recovery arrangements in Tanzania and Rwanda would be
further strengthened.
Risk 4: Technical Solutions may not be sustained
This risk is mitigated because the technologies to be employed for component 1 of
the project are standard industry technologies that have been well tested and
deployed worldwide. Moreover, Capacity building is a key component of the
project, and will ensure that participant’s staff is adequately trained and that they
receive regular skills upgrades when necessary.
Risk 5: Possible constraints of required project implementation
capacity which could delay project implementation.
The project has provided for the recruitment of a “Payment and Settlement
Specialist, a Procurement Expert and an Accountant to strengthen the
implementation capacity of the EAC CPT. In addition, the NCBs, shall provide the
necessary technical expertise throughout the procurement process thereby reducing
any residual risk. The project provides for trainings and workshops.
4.6 Knowledge Management
4.6.1 The implementation of the PSSIP will result in the development of skills and
knowledge in specific areas of payment and settlement systems operations and functions for the
EAC Secretariat, National Central Banks, and Commercial Banks. This knowledge will be
disseminated through seminars and workshops organized by the National Central Banks and
Bankers’ Associations. Also, the implementation of the capacity building component of the
project will result in knowledge building for Judges and judicial officers at the EACJ and
national courts, as well as members of the EALA. This knowledge will be disseminated through
applications of the knowledge, law of precedence, and seminars and workshops. The EAC-
PSSIP will contribute to knowledge building and development of skills in specific areas of
payment and settlement systems for the EAC Secretariat (including the EAC-CPT), National
11
Risks relating to Financial Management are discussed in Technical Annex C3
16
Central Banks, Commercial Banks, Judges and other stakeholders who would be trained in, but
not limited to, such disciplines as; the requirement for adequate legislation to support both
national and regional payment systems that are in-line with the BIS CPSIPS; settlement finality;
legality of electronic payment instruments; soundness of computer records/image’s etc. as prima
facie evidence; commercial law and enforcement of collateral requirements, the resolution of
contractual disputes, especially in relation to payment and settlement systems. This will
contribute significantly to the legislative capacity in the region in the regulatory and legal
elements of payment and settlement systems together with; dispute resolution in the area of
payment and settlement systems so as to effectively address the concerns of the business
community and the public and build the professional capacity to effectively manage the
increasing national and cross-border complex commercial and personal transactions. Legal
officers at the National Central Banks and Commercial Banks would also be trained in legal
aspects of payment and settlement systems. Other groups that would be targeted by the training
programmes under the project will include; Ministries of Finance, Capital Market Authorities,
Stock Exchanges, Revenue Authorities, and Customs.
V. LEGAL INSTRUMENTS AND AUTHORITY
5.1 Legal Instrument
5.1.1 The Grant Protocol of Agreement between the East African Community and the
African Development Bank for an amount of ADF Grant of UA 15.0 million from the Regional
Operation Envelope.
5.2 Conditions Associated with Bank’s Intervention
5.2.1 The ADF Grant Protocol of Agreement shall enter into force on the date of signature
by the East African Community and the African Development Fund. The first disbursement of
the grant shall be subject to effectiveness of the Grant Protocol of Agreement and fulfillment by
the Grantee, to the satisfaction of the Bank of the following specific conditions:
A. Conditions Precedent to First Disbursement: The obligations of the Fund to make the first
disbursement of the Grant shall be conditional upon the entry into force of the Protocol of
Agreement and the Recipient having provided evidence satisfactory to the Fund of the
fulfillment of the following conditions.
(i) The Recipient shall submit a commitment letter jointly signed by all the Central Bank
Governors of the respective Partner States endorsing the Project;
(ii) The Recipient shall open a foreign currency account for the deposit of the proceeds of
the Grant;
(iii) The signing of Implementation Agreements between the Recipient and Partner States for
the implementation of the Project at the national level of the respective Partner States;
(iv) The designation of a Regional Core Project Team by the Recipient with the EAC
Director of Planning as the Regional Project Coordinator , Monitoring and Evaluation
Expert and an Information and Technology Expert, whose terms of reference are
acceptable to the Fund; and
(v) The constitution of National Core Project Teams at the Central Banks of Burundi,
Kenya, Rwanda, Tanzania and Uganda, with the respective heads of departments
responsible for Payment Systems as the National Project Coordinator, whose terms of
reference are acceptable to the Fund.
17
B. Other Conditions: The Recipient shall provide evidence, in form and substance satisfactory to
the Fund, that National Payment System Committees (NPSC) in Burundi, Kenya, Rwanda,
Tanzania and Uganda have been established with members and terms of reference acceptable to
the Fund.
5.3 Compliance with Bank Policies
5.3.1 This project complies with all applicable Bank policies.
VI. RECOMMENDATION
6.1 Recommendations: Management recommends that the Board of Directors approve the
proposed Grant, not exceeding UA 15.0 million, to the East African Community from the ADF
(Regional Operations envelop) to finance the activities discussed in this report.
I
APPENDIX 1: EAC - SELECTED MACROECONOMIC INDICATORS
Macroeconomic Indicators 2000 2005 2006 2007 2008 2009 2010 2011 2012
( e ) (p) (p)
Real GDP Growth Rate (%) 7.9 7.3 6.8 7.3 6.1 4.3 6.3 5.3 5.7
GDP Per Capita (US $) 301 388 422 492 561 551 578 630 667
Real per Capita GDP Growth Rate (annual %) 4.9 4.4 3.8 4.3 3.1 1.4 3.3 2.3 2.7
Inflation (%) ... 8.2 6.8 5.9 13.5 11.6 4.8 14.0 9.9
Fiscal Balance (% of GDP) -1.5 -1.0 -3.2 -1.9 -2.1 -3.7 -6.1 -6.6 -7.2
Gross Domestic Investment (% of GDP) 17.4 20.2 21.1 22.7 22.8 23.0 23.8 23.8 23.8
Gross National Savings (% of GDP) 14.1 18.8 17.1 16.6 15.9 15.6 16.7 18.1 17.6
Real Export Growth, Goods (%) 1.5 19.8 -3.9 12.0 9.3 -2.6 3.0 -1.1 12.1
Real Import Growth, Goods (%) -4.2 16.2 10.5 15.9 6.6 16.4 3.8 6.3 3.7
Terms of Trade, Goods (%) -8.1 -4.3 -5.1 4.0 -7.1 16.4 10.4 5.3 -8.6
Trade balance (As % of GDP) -8.4 -9.8 -13.3 -13.9 -16.1 -15.6 -14.9 -17.3 -16.6
Current Account (% GDP) -4.0 -2.5 -4.9 -5.4 -8.7 -7.4 -7.7 -8.5 -9.6
Remittances inflows (USD Billion) 0.79 1.17 1.58 2.11 2.51 2.61 2.84 ... ...
FDI Inflows (USD Billion) 0.59 0.91 1.32 2.25 1.62 1.73 1.74 ... ...
Net total ODA (USD Million) 2.84 4.39 5.45 7.09 6.79 7.99 7.97 ... ...
Total External Debt (% GDP) 58.4 46.4 40.6 23.6 24.5 25.8 27.4 28.8 30.3
Debt Service (% of Exports) 25.1 9.7 11.6 64.1 3.6 4.1 3.6 3.8 3.4
Source: AfDB Statistics Department, UNCTAD and IMF.
II
APPENDIX 2: BANK PUBLIC SECTOR PORTFOLIO IN EAC COUNTRIES
Updated : 31-May-12
Sector Project Title
Fin Source
/Inst
Bank
Financing
(UA mil)
Approval
Date
Completio
n Date
KENYA
Agriculture ASAL-Based Livestock and Rural Livelihoods Support Project ADF-Loan 18.4 17/Dec/03 30/Dec/12
ADF-Grant 3.2 17/Dec/03 30/Dec/12
Kimira- Oluch Smallholder Farm Improvement Project ADF-Loan 23.0 31/May/06 30/Sep/13
ADF-Grant 1.2 31/May/06 30/Sep/13
Small-Scale Horticulture Development Project ADF-Loan 17.0 5/Sep/07 31/Dec/14
Restoration of Farm Infrastructure (Rural Livelihood Rehab. & Recon.) ADF-Loan 15.0 29/Apr/09 30/Jun/13
Green Zones Developmemt Support Project ADF-Loan 25.0 12/Oct/05 31/Dec/13
Environment Ewaso Ng'ïro North Natural Resources Conservation Project ADF-Loan 13.6 22/Apr/05 31/Dec/12
ADF-Grant 2.9 22/Apr/05 31/Dec/12
Power Mombassa Nairobi Transmission Line ADF-Loan 50.0 6/May/09 31/Dec/13
Kenya Elec Transmission Project ADF-Loan 46.7 6/Dec/10 30/Jun/15
Menengai Geothermal Development project ADF-Loan 80.0 14/Dec/11 31/Dec/17
Social Community Empowerment Project (CEISP) ADF-Loan 17.0 17/Dec/07 31/Jul/14
Technical Industrial Vocational and Entrepreneurship Training (TIVET) ADF-Loan 25.0 16/Dec/08 31/Dec/13
Education III Project ADF-Loan 24.3 17/Dec/03 30/Dec/12
ADF-Grant 6.8 17/Dec/03 30/Dec/12
Rural Health Project III ADF-Loan 17.2 7/Jul/04 30/Aug/12
ADF-Grant 6.0 7/Jul/04 30/Aug/12
Nairobi - Thika Highway Improvement Project ADF-Loan 117.9 21/Nov/07 31/Dec/12
ADF-Loan 3.2 21/Nov/07 31/Dec/12
Timboroa - Eldoret Road Project ADF-Loan 35.0 24/Nov/10 29/Feb/16
Water
Sup/Sanitation Integrated Land & Water Management (AWTF) ADF-Loan 1.6 13/Jan/09 31/Dec/12
Water Services Boards Support Project ADF-Loan 35.2 21/Nov/07 31/Dec/12
RWSSI-Grant 9.2 5/Dec/07 31/Dec/12
Nairobi River Basin Restoration ADF-Loan 35.0 6/Dec/10 31/Dec/15
Small Towns Water and Sanitation ADF-Loan 70.0 3/Nov/09 31/Dec/14
BURUNDI
Power Réhabil. et Exten. infrastructures élec ADF-Grant 7.3 5/Jul/07 30/Sep/12
Social Projet multisectoriel de réinsertion (Loan) ADF-Grant 9.8 13/Dec/04 30/Nov/12
Projet de Creation d'Emplois ADF-Grant 10.0 24/Jun/09 31/Dec/13
Transport Projet Gitega- Nyangungu-Ngozi Phase 1 FSF-Grant 24.1 27/Sep/10 31/Dec/13
Projet Gitega-Ngozi Phase 2 FSF-Grant 32.0 29/Jun/11 31/Dec/15
ADF-Grant 10.0 29/Jun/11 31/Dec/15
Route Nyamitanga-Ruhwa-Ntendezi-Mwityazo ADF-Grant 49.4 16/Dec/08 31/Dec/13
Water
Sup/Sanit Projet de Rehabilitation et d'Extension des Infrast. Hydrauliques en Milieu Rural ADF-Grant 12.0 14/Dec/05 30/Dec/12
Réhabil. et Exten. infrastructures élec ADF-Grant 7.3 5/Jul/07 30/Sep/12
RWANDA
Agriculture Inland Lakes Int Development & Managementt Support Project (PAIGELAC) ADF-Loan 13.8 6/Oct/04 31/Dec/12
ADF-Grant 1.0 6/Oct/04 31/Dec/12
Bugesera Agricultural Development Support Project (PADAB) ADF-Grant 10.0 24/Jul/06 31/Dec/13
PPF LISP ADF-Grant 0.5 20/Nov/10 31/Dec/12
Livestock Infrastructure Support Program (LISP) - SBS ADF-Loan 21.8 29/Jun/11 31/Dec/15
Transport Butare-Kitabi-Ntendezi Road ADF-Grant 16.0 25/Mar/09 31/Dec/13
Rwanda-(Nyamitanga-Ruhwa-Ntendezi-Mwityazo Rd) ADF-Grant 50.6 16/Dec/08 31/Dec/13
Sustainable management of woodlands and restoration of natural forests of Rwanda CBFF-Grant 3.0 29/Nov/11 31/Dec/15
Water
Sup/Sanit Rural Water and Sanitation-Phase II (AEPA) ADF-Grant 10.0 1/Jul/09 31/Dec/13
Social Support to Skills Development in Science & Tech ADF-Grant 6.0 11/Nov/08 31/Dec/13
Regional ICT Centre of Excellence ADF-Loan 8.6 14/Dec/10 30/Jun/16
Multisector Competitiveness & Enterprise Development ADF-Grant 5.0 29/Dec/08 31/May/13
Support for Policy and Strategy Development ADF-Grant 1.0 18/Sep/09 31/Dec/12
TANZANIA
Agriculture District Agricultural Sector Investment Project ADF-Loan 36.00 24/Nov/04 31/Dec/13
ADF-Grant 7.00 24/Nov/04 30/Jun/12
Support the Lake Tanganyika Integrated Regional Development Programme
(PRODAP) ADF-Loan 4.99 17/Nov/04 31/Dec/13
Marketing Infrastructure, Value addition and Rural Finance Program (MIVARFP) ADF-Loan 40.00 29/Jun/11 31/Dec/16
Transport Zanzibar Roads Upgrading Project (ZNZ only) ADF-Loan 16.22 9/Jun/04 30/Sep/12
ADF-Grant 2.60 9/Jun/04 31/Dec/07
Singida-Babati-Minjingu Road Project ADF-Loan 60.00 17/Sep/07 31/Dec/14
III
Tanzania Road Sector Support I ADF-Loan 152.00 2/Dec/09 31/Dec/15
Tanzania Road Sector Support II ADF-Loan 120.00 4/Apr/12
Water
Sup/Sanit Rural Water Supply and Sanitation Programme II ADF-Loan 59.00 15/Sep/10 31/Dec/15
AWTF-Grant 5.46 15/Sep/10 31/Dec/15
Zanzibar Water & Sanitation Project (ZNZ only) ADF-Loan 25.00 11/Nov/08 31/Dec/13
AWTF-Grant 2.76 11/Nov/08 31/Dec/13
Power Electricity V Project ADF-Loan 28.68
14-De-
2007 31/Dec/12
ADF-Grant 1.32
14-De-
2007 31/Dec/12
Iringa-Shinyanga Transmission Line ADF-Loan 45.36 26/Oct/10 31/Dec/14
Social Support to SAP for Vocational Ed & Training ADF-Loan 14.22 9/Jul/03 30/Jun/12
ADF-Grant 1.60 9/Jul/03 30/Jun/12
Support to Maternal Mortality Reduction Project ADF-Loan 40.00 11/Oct/06 31/Dec/12
Small Entrepreneurs Loan Facility II ADF-Loan 20.00 10/May/10 31/Dec/15
Alternative Learning and Skills Development II (ZNZ only) ADF-Loan 15.00 29/Jun/11 31/Dec/16
Multisector Institutional Support for Good Governance II ADF-Loan 5.20 20/Sep/10 31/Dec/14
Poverty Reduction Support Loan IV ADF-Loan 100.00 16/Dec/11 31/Dec/13
UGANDA
Agriculture Farm Income Enhancement& Forestry Conservation project ADF-Loan 31.6 29/Sep/04 30/Dec/12
ADF-Grant 9.9 29/Sep/04 30/Dec/12
Community Agricultural Infrastructure Improvement Programme- Project I ADF-Loan 30.0 31/Jan/07 31/Dec/13
Community Agricultural Infrastructure Improvement Programme- Project II ADF-Loan 45.0 17/Sep/08 31/Dec/14
Markets and Agricultural Trade Improvement (MATIIP) ADF-Loan 38.0 25/Mar/09 30/Sep/15
Community Agricultural Trade Improvement Programme III ADF-Loan 40.0 3/May/11 31/Dec/16
Transport Road Sector Support Project 1 (Kabale Kisoro Bunagana Rd) ADF-Loan 27.0 27/Apr/05 29/Dec/12
ADF-Grant 1.5 27/Apr/05 29/Dec/12
Road Sector Support Project 1 supplementary Loan ADF-Loan 33.0 20/Dec/06 29/Dec/12
Road Sector Support Project 2 (Fort portal Bundibugyo Rd) ADF-Loan 56.7 17/Dec/07 31/Dec/13
ADF-Grant 1.4 17/Dec/07 31/Dec/13
Road Sector Support Project 3( Nyakahaita Ibanda Rd) ADF-Loan 80.0 25/Sep/09 31/Dec/14
Water Sup/Sanit Kampala Water Sanitation Project ADF-Loan 35.0 16/Dec/08 31/Dec/14
Water Supply and sanitation program ADF-Loan 40.0 10/May/11 30/Jun/16
ADF-Grant 3.6 10/May/11 30/Jun/16
Social Support to Post Primary Education and Training Project (Education III) ADF-Grant 20.0 19/Dec/05 30/Apr/12
Support to the Health Sector Strategic Plan II ADF-Loan 20.0 8/Nov/06 31/Dec/12
Rehabilitation of Mulago and KCC Clinics ADF-Loan 46.0 6/Jul/11 31/Dec/16
Support to Post Primary Education and Training Project (Education IV) ADF-Loan 52.0 25/Nov/08 31/Dec/14
Rural Income and Employment Enhancement Project ADF-Loan 10.2 17/Nov/09 31/Jul/15
Industry/Mine Mineral Resources Management & Capacity Building Project ADF-Grant 5.4 29/Sep/04 31/May/12
Power Bujagali Transmission Interconnection Project ADF-Loan 19.2 28/Jun/07 31/Dec/13
Mbarara-Nkenda/Tororo-LiraTransmission Lines Project ADF-Loan 52.5 16/Dec/08 31/Dec/13
MULTINATIONAL
Agriculture Programme d'Amenagement Lac Tanganyika - Burundi ADF-Loan 5.0 17/Nov/04 31/Dec/13
Projet Developpement Rural du Bugesera (Burundi, Rwanda) ADF-Grant 30.0 25/Sep/09 31/Dec/15
Strengthening Institutions for Risk Management of Transboundary Animal Diseases
in the SADC Region Project (TZ Comp: 3.69 mill UA)
(Tan/Malawi/Angola/Moz/Zam) ADF-Grant 3.69 5/Jul/06 31/Dec/12
Transport East Africa Trade & Transport (EAC, NCTTCA, TTFA) ADF-Grant 9.20 29/Nov/06 31/Dec/12
Mombasa-Nairobi-Addis Corridor II (Kenya, Ethiopia) ADF-Loan 125.0 1/Jul/09 31/Dec/15
Mombasa-Nairobi-Addis Corridor III (Kenya, Ethiopia) ADF-Loan 120.0 30/Nov/11 31/Dec/17
Arusha- Namanga-Athi River Road Development-Kenya (Kenya, Tanzania) ADF-Loan 49.78 13/Dec/06 31/Dec/12
ADF-Grant 3.50 13/Dec/06 31/Dec/12
Phase 2 Chemin Fer DSM/Isaka-Kiga/Keza-Musongati ADF-Grant 3.34 17/Nov/09 31/Dec/12
Social African Virtual University (Phase II) ADF-Loan 10.00 16/Dec/11 30/Jun/17
Power
Interconnection of Electric Grids of Nile Equatorial Lakes Countries (NELSAP) -
(Burundi, Kenya, Uganda, Dr Congo, Rwanda) ADF-Loan 47.36 27/Nov/08 31/Dec/14
ADF-Grant 74.45 16/Jun/10 31/Dec/14
Water
Sup/Sanit Lake Victoria Water and Sanitation Programme ADF-Grant 72.98 17/Dec/10 31/Dec/15
Songwe River Basin Development Programme (Malawi and Tanzania) AWTF-Grant 2.93 25/May/10 31/Dec/14
NEPAD/IPPF-
Grant 1.04 25/May/10 31/Dec/14
SADC Shared Watercourses Support Project (Tan/Zim/Moz) ADF-Grant 9.38 1/Jan/06 30/Dec/12
ADF-Loan 1.66 17/Dec/09 31/Dec/12
IV
APPENDIX 3