Regional integration of the banking system in East Africa and the Common Market for Eastern and Southern Africa (Comesa) is setting a technology bar that the majority of the region's banks are struggling to meet.
Comesa says it has committed to upgrading the region's banking capabilities as an essential platform for cross-border trade and investment. However, it says, progress has been stilted to date, with a large number of local banks remaining backward in their service delivery.
The sales director of Internet Solutions, Lauren Bosch, says it is always surprising to see how slow the technology uptake has been in banking outside of the few star players.
"Many of the region's banks are still operating on manual systems. Others have hand-built their own internal information platforms as a way of getting there more cheaply," she adds.
She notes that as banks now face the challenge of creating strong internal information systems and connecting to clearing and transfer systems, they are even being hampered by their internal decision-making processes.
“The IT decisions of the larger international banks are driven by IT directors with clear international compliance specifications. But in East Africa, banks are trying to work out individually what they want and need to achieve minimum level of sophistication in handling information," she points out.
International data show that just 12 of Kenya's 49 banking institutions have achieved the Comesa base target of registering for full SWIFT membership - Society for Worldwide Inter-bank Financial Telecommunication - to send and receive international transfers directly and securely.
The SWIFT system acts as a communications gateway that connects banks and other financial institutions to each other, and allows an easy form of inter-bank communication.
The technology lag is even greater in the region, with just 5 SWIFT members in Uganda, according to the most recent data from SWIFT.
In an effort to accelerate progress in this regard, the Comesa secretariat has scheduled a session for regional bankers at the Aitec Banking and Mobile Money Comesa Conference in Nairobi on 2 to 3 March, at the Kenyatta International Conference Centre.
Plan of action
The association says it has an action plan for financial system development and stability, which is endorsed by its council of ministers. “The implementation of this action plan is crucial for banking integration in the region,” it adds.
It says, to implement the action plan there is need to promote and strengthen links between banks in the sub-region and provide a forum for exchange of information on banking practices in the sub-region.
“This requires the re-establishment of the Comesa Bankers' Association. The association can contribute in building capacity through education and seminars, promote an efficient payment system; and also contribute for the creation of zone of macroeconomic and financial stability," it points out.
Tackling issues
Aitec says the conference will tap on issues in the banking industry in Africa by addressing issues that come with the increased regional economic integration.
“Banks have to develop effective systems for seamless cross-border transactions.
“The emphasis of the programme is on practical experience and knowledge sharing with the objective of equipping participants with the knowledge they need to compete in the rapidly evolving financial services landscape,” the company points out.
The theme of the 2011 conference is 'Strategies for a new era of financial integration' in response to the accelerated drive for regional business across borders.
The East African Business Council is supporting the event as a platform to promote effective financial services to support the accelerating business drive across the region, Aitec promises.
"The big theme this year in the wider banking sector will be ways of cutting costs to compete," says Bernard Matthewman, CEO of Paynet Group. "The point is that banks are going to have to forge new partnerships to stay abreast."
The secretary general of Comesa, Sindiso Ngwenya, says the conference will be an opportunity for dialogue between the region's banks on the best practices for quick and efficient financial transactions.
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