Sierra Leone is confronted with the daunting task of creating an enabling financial environment to promote sustainable and inclusive growth. So to improve the space for financial inclusion in a bid to restore economic stability, the Minister of Finance and the World Bank Group (WBG) has signed a concessional loan of US$12 million, on 27 February,2019 to build national payment switch .
This project is expected to develop and expand on modern financial services to the formal as well as the non-formal sectors of the economy especially thorough automation and electronic forms of intermediation.
Upon completion of this project, a national switch system will be installed which will ensure that the systems of all commercial banks in the country are integrated and will allow customers to withdraw or make deposits from/into their accounts irrespective of the bank their account is domiciled.
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It will reduce the demand to move with huge sums of physical cash around the country and will see an increase in installations of point of sales systems in retail stores and supermarkets across the country.
World Bank Country Director for Ghana, Sierra Leone and Liberia Henry Godfrey Rupiny Kerali said that the signing marks a very important preparation in the implementation of the project as financial inclusion in Sierra Leone is actually lower than the average in sub Saharan Africa.
According to the Financial Index 2017, it is stated that the adult population under 20% has an account with a formal banking institution or a mobile money, “therefore this project is aimed to address this low level financial inclusion which has repercussions including access to finance particularly for small and medium term enterprises, who rely on credit to expand and to grow jobs in Sierra Leone. In addition to contributing to domestic revenue” he said. The payment switch is a system of interoperability between digital accounts held by banks, mobile money and all other financial institutions normally regulated through the central bank.
The goal of the Group initiative is to achieve universal financial access by 2020 and to ensure that all working age individuals and businesses have access to at least one transactional account operated by, authorised or regulated by private service provider which is exactly what the payment switch that will be financed will be providing. “The focus for us, as you know is to end extreme poverty and boost sheer prosperity. We are particularly interested in ensuring that the poorest in the population do have access to financial services and therefore access to affordable finances from these institutions that cannot happen unless we deliver services to them wherever they are” he said.
Minister Jacob Jusu Saffa said that the project will last for a period of six years. The loan term is 38 years with six years grace period coupled with a concessional interest rate of 0.75 percent. “This rate is good as the overall objective is to increase the interoperability of the digital system and access to financial services. The demand for cash will reduce the cost of printing currency notes” he said.
He urged the Governor of the Central Bank to engage the public on the importance of the national switch as he says the population needs to own the project and that not every customer will be inclined to this new system. The design is within the context of the New Direction and assured the WBG of his office’s closed supervision. “The advantages are so much and the beneficiaries are so huge, we can’t allow it to fail, it must be a highly satisfactory project. We can’t keep talking about the switch forever, we have to monitor it and escalate it to the Presidency” he said. Deputy Governor Ibrahim Stevens said that the rolling out of the national switch infrastructure will provide the necessary connectivity required to enhance and push access to affordable finance in particular the banking sector would move to another level where interbank activity for customers will become seamless.
“With the introduction of the national switch we are able to get huge amount of efficiencies in financial transactions across the board for all customers. In addition the national switch will ensure that National Revenue Authority and the ministry overcome most of the bottlenecks that we get with delays with payment and delay with transfer from one bank to the other” he said.
He went on to say that with the national switch project they are able to increase effectiveness of government payment, systems and payment mechanism which are all economic gains from the switch. With the introduction of the switch and the financial inclusion project, he believes that in a few years it will increase the population of bankable customers and also to reduce the size of the informal sector which in itself will increase government revenue and contribute to boarder economic development.