The Central Bank of Kenya (CBK) has joined the Pan African Payments and Settlement System (PAPSS), becoming the 10th African central bank to do so.
This move allows Kenyan firms to conduct trade and financial transactions with other African nations.
Other African central banks on the Pan African Payments and Settlement System platform include those of Nigeria, Liberia, Guinea, Djibouti, The Gambia, Sierra Leone, Zimbabwe, Zambia, and Ghana.
In Kenya, Standard Chartered Bank of Kenya, Ecobank, and KCB are among the commercial banks on the PAPSS network.
By 2025, all African commercial banks are expected to join PAPSS. Currently, 28 banks have joined, with West Africa having the most representation.
Kenya’s Cabinet Secretary for Investments, Trade and Industry, Moses Kuria, stated that the Pan African Payments and Settlement System will enable Kenyan firms to trade in local currencies with other African member states, boosting the African Continental Free Trade Area (AfCFTA).
The Pan African Payments and Settlement System (PAPSS) is a digital centralized payments and settlement system developed in collaboration with the African Export-Import Bank (Afrexim Bank).
It allows African firms to settle intra-African trade transactions in their own currency, reducing trade transaction costs.
Previously, African companies used correspondent banks—often outside Africa—to settle payments between two African currencies in a third external currency. All African Central Banks are expected to join the PAPSS network by 2024.
How PAPSS works
PAPSS ensures instant or near-instant transfers of funds between originators in one African country and beneficiaries in another:
- An originator issues a payment instruction in their local currency to their bank or payment service provider.
- The payment instruction is sent to PAPSS.
- PAPSS carries out all necessary validation checks on the payment instructions.
- The payment instruction is forwarded to the beneficiary’s bank or payment service provider.
- The beneficiary’s bank clears the funds to the beneficiary in their local currency.