National Payment System to be digitized

Jan 11, 2018 News

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By Kiana Wilburg

The National Payment System is a crucial component of any country’s fiscal construct. It is the conduit which allows for buyers and sellers of goods and services to make transactions.

Research shows that an efficient national payment system can reduce the cost of exchanging goods, services, and assets while a weak one can severely drag on the stability and developmental capacity of a national economy.

With the aforementioned in mind, the Government has taken the decision to digitize the National Payment System (NPS). This will help to facilitate the effective monitoring the flow of public funds and improve financial reporting by budget agencies. The improved NPS will also lend to the protection of the integrity of the treasury and improve accountability and transparency.

According to Finance Minister, Winston Jordan, the government is cognizant that financial sector development is pivotal for sustained economic growth and development.

He said that some of the core policy initiatives that were implemented within the financial sector over the past year included measures to promote capital market development and initiatives to enhance financial market infrastructure.

Jordan noted that the overarching goal of these initiatives is to create a more competitive financial environment, enhance financial stability, and fulfill the government’s financial inclusion imperative.

Jordan said that the design of a country’s payment system has financial risk implications for the development, safety and soundness of the domestic financial system and the performance of the macro economy.

He said in his budget speech that these risks need to be managed and mitigated through the establishment of a modern payments infrastructure that is supported by a sound institutional and regulatory framework.

The Finance Minister said that the evolution of the National Payment System (NPS), from paper-based to electronic, is underway. The Bank of Guyana has commenced work on the National Strategy for the Payments System Reform, which will serve to guide the development of the NPS.

Specifically, in 2018, Jordan said that the Strategy is expected to be completed and compilation of the technical specifications of the required infrastructural upgrades will be underway. Once operationalized, the NPS is expected to handle a turnover of approximately 120 percent of Guyana’s Gross Domestic Product (GDP).

Jordan said that Guyana’s capital market is still small and underdeveloped, being plagued by limited instruments and participants, and insufficient financial literacy. He emphasized that a more mature capital market could provide for better risk management, enhance financial stability, and promote more efficient administration of fiscal, monetary and exchange rate policies.

At the same time, the Finance Minister asserted that the Government wants to ensure that there is a good balance between debt and equity financing, to broaden, deepen and diversify the investment base while enhancing risk sharing.

He said that the development of a bond market is still being considered, actively, following the submission of a report by the International Monetary Fund (IMF). Jordan articulated that the legal and regulatory framework governing the operation of the securities sector has not kept pace with developments in Guyana and global best practices.

The Finance Minister said that this has created an impediment to the development and expansion of the securities market. He noted that a modern and comprehensive legislative framework will enable the diversification of the capital market in Guyana, facilitate the mobilization of financial resources, and broaden market participation.

He said that it will also enhance investor protection and strengthen cross-border supervision and cooperation among financial regulators, in order to reduce systemic risk. To correct this deficiency, the economist said that the Guyana Securities Council has begun re-writing the Securities Industry Act.

He said that some of the key elements of the new legislation include Improved licensing regimes for self-regulatory organizations, securities exchanges and securities intermediaries;  Extension of regulatory authority over the entire securities marketplace, including quotation and trade reporting systems and alternative trading schemes;  Institution of a licensing regime for collective investment schemes; Establishment of a Central Securities Depository to record and maintain securities and register the transfer of ownership of securities; and  Conferral on the regulator (to be renamed the Securities Commission) of such powers and duties as would enable it to promote the orderly development of the securities market and to protect the integrity of the market from abuse.

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