1. What is National Payment System
System is defined as a group of institutions and a set of
instruments and procedures, used to ensure the circulation of
money within a country. The NPS supports the full spectrum of
financial activity, from Tanzanian businesses transacting
globally in the international markets to servicing the
individual payment requirements of the Tanzanian
Top2. Who are the major NPS Stakeholders
Stakeholders are those that have
an interest in the NPS. This definition includes those that
own, provide, manage or use components of the system, or take
ultimate responsibility thereof. The major stakeholders are: -
- Bank of Tanzania; as the monetary authority in Tanzania,
fulfils a pivotal role in the economy and, specifically, in
- Financial Institutions: Cormecial banks and registered
financial institutions under the BOT act
stakeholders included in the payment system are:
- Infrastructure Providers e.g. Telecommunication
- Payment service providers e.g. Swift, Card Operators.
- Payment System End-Users: e.g. Individuals, corporate
businesses and government.
- Regulatory authorities e.g. Dar es salaam Stock Exchange
(DSE), Capital Markets Authority Government.
- Regional Monetary Authorities and Regional Arrangements
e.g. the East Africa Community.
- International Monetary Authorities .;These bodies
include IMF, World Bank.
3. What is the National Payments System (NPS)
The NPS vision
is to put in place a modern payment system that is effective,
efficient, secure and compatible with internationally
recognized payment systems.
The NPS mission is to have
a payment system characterised by the following features:-
- Risks related to Payment Systems will be well understood
and managed by all stakeholders.
- The Payment System shall be self-regulated.
- Settlement of all domestic inter-bank exchanges on the
value date of the settlement instruction.
- Open for all parties, both domestic and foreign who wish
to provide payment services.
- Easily accessible to both urban and rural consumers to
effect both domestic and international transactions.
- Efficiency and lack of duplications as shared payment
infrastructure will be encouraged.
- Basic NPS features well understood by all including the
- The Payment System will support electronic trading in
both the securities and foreign exchange markets.
- The Payment System will be compliant with international
standards, practices and compatible with other international
4. What are the Common Payment Instruments in
popular payment medium is cash. It is generally acceptable
everywhere as a legal tender and is suitable for small value
transactions. With the expansion of the economy and
development of commercial banking, computer and communication
technology, other non-cash payment instruments have been
introduced. The non-cash instruments may be further classified
under the following: -
- Paper-based instruments – these include payment orders,
bills of exchange, promissory notes and cheques. Automated
credit transfers and direct debits are included in this mode
- Plastic cards-these include, credit cards, debit cards /
ATM cards and prepaid cards.
- Electronic Funds Transfers (EFTs)- with the application
of computers and communication technology, a number of
paper-based payments have evolved into electronic forms,
especially for large value transactions. EFTs are used for
transferring value between banks on behalf of customers.
5. The role of Bank Of
Tanzania in the Payments System?
The operation of payment systems is closely related to
the BOT's objectives of monetary stability and financial
stability. The role of BOT in payment systems entails but is
not limited to the following functionalities namely
As a user of Payment Systems: A central
bank has its own transactions to carry out requiring the
movement of funds e.g. settlement of government
As a member of Payment Systems: The
central bank can make and receive payments on behalf of its
own customers for example government departments and other
As a provider of Payment Systems: The
provision of settlement account to both the government and the
commercial banks operating in the payment
As a guardian of public
interest: The role is much broader and may involve
any of the following: Acting as payment system regulator,
acting as a supervisor of system members, providing
administration and planning for the payment systems,
arbitrating in the event of complaints and handling
The BOT may also be involved
in wider issues such as promoting competition and cooperation
while encouraging the development and adoption of technical
As an overseer of the Payment system: The
major oversight role of BOT is principally intended to promote
the smooth functioning of payment systems and to protect the
financial system from possible “domino effects”.
As a guarantor of daily settlement: By
providing collateral intraday liquidity, availing funds to
commercial banks in times of liquidity constraint, acting as a
lender of last resort and rediscounting for government