Cameroon is part of the Central African Economic and Monetary Community (CEMAC), comprising six other countries who share a common currency - the CFA franc - and a common central bank, the Bank of Central African States (BEAC). Cameroon's payments system is part of the CEMAC zone and is operated and supervised by the BEAC. The 2006 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA) on CEMAC talks about a 2002 payment system reform project spearheaded by the BEAC to make the systems more effective and secure. According to a 2002 World Bank report, the professed objective of the reform project is to build a comprehensive and consistent payment system infrastructure that complies with the Committee on Payments and Settlement Systems' (CPSS) Core Principles for Systemically Important Payment Systems (CPSIPS). The FSSA, however, finds that progress is lax because of a lack of experience, weak coordination, and some disagreements with the national banks regarding the interbank card system component of the project. To accelerate completion of the project, the FSSA recommends the setting up of payment system management units - at the BEAC headquarters as well as within each country - tasked with the joint responsibility of implementing and supervising the new system. A 2007 IMF working paper talks about a reform proposal that includes a Real Time Gross Settlement System; an Electronic Bulk Payment Clearing System or Regional Inter-Bank Compensation; an interbank bank card system; and a "Centrale des Incidents de Paiement," which is a limited credit information system, in the CEMAC zone. However, it rues the tardy progress of the five year old project, but expects its completion in 2008.

General Overview

In 2000, the International Monetary Fund (IMF) published a Report on the Observance of Standards and Codes (ROSC) on the payment systems in Cameroon. The report found that as of 2000, Cameroon was fully compliant with four Core Principles for Systemically Important Payment Systems (CPSIPS) promulgated by the Committee on Payments and Settlement Systems' (CPSS), partially compliant with three, and non-compliant with three. Among the significant weaknesses cited by the ROSC, the uniform law for payment instruments in the Central African Economic and Monetary Union (CEMAC), which was prepared at the regional level in 1997, had not been adopted until 2000. Also "there is no guaranteed settlement finality, the payment system is not efficient and practical for participants, and there is scope for improvement in security procedures." However, since the time of the 2000 IMF assessment, much has changed in terms of payment systems infrastructure in Cameroon. A more recent IMF report in 2006, the Financial System Stability Assessment (FSSA) on the Central African Economic and Monetary Union (Communauté Economique et Monétaire en Afrique Centrale, or CEMAC), observed that "weak payment systems" form one of the "severe deficiencies in the business environment" (p. 6), hampering the development of financial services in the area. The FSSA talked about a 2002 payment system reform project spearheaded by the Bank of Central African States (BEAC) "to make the national and regional payment systems more effective and secure" (p. 22). It, however, finds that progress is lax because of "a lack of experience, weak coordination, and some divergence with the banks regarding the interbank card system component of the project" (p. 22). To accelerate completion of the project, the IMF recommended setting up payment system management units - at the BEAC headquarters as well as within each country - tasked with the joint responsibility of implementing and supervising the new system. The FSSA also called for a consultative approach to implementation in order to allay concerns of national banks and end users of the system, and advised regular meetings of the recently created Coordination and Monitoring Committee to increase transparency and dialogue during the implementation phase. The IMF also recommended that the BEAC improve data transparency on the risk management policy of and changes in its payment system. According to a 2002 World Bank report, the professed objective of the reform project is to build a comprehensive and consistent payment system infrastructure that complies with the Committee on Payments and Settlement Systems' (CPSS) Core Principles for Systemically Important Payment Systems (CPSIPS).

A 2003 World Bank report titled "Memorandum of the President of the International Development Association to the Executive Directors on a Regional Integration Assistance Strategy for Central Africa" mentioned the project for the modernization of the payments system in the BEAC zone, calling it "the first truly regional [World] Bank-supported project in that it involves all of the six countries, all the banks and, of course, the central bank" (p. 11). The project was approved by the International Development Association (IDA) in July 2002 for US$14.5 million and involves the collaboration of the IMF as well. The report hopes that the project will result in the development of "electronic payment clearing systems for both bulk and high-value transactions, an inter-bank card system and a payment risk management system" (p. 16).

According to the 2002 World Bank report on the BEAC payment system, Cameroon is one of the six CEMAC countries. The others are Chad, Central African Republic, Congo, Equatorial Guinea, and Gabon. The CEMAC countries share the CFA franc as currency, work through a common central bank (BEAC), share a unitary bank supervisor (Banking Commission of Central African States - La Commission Bancaire de l'Afrique Centrale, or COBAC), and participate in a common money market. They also participate in a shared external tariff and observe a common set of business laws under the auspices of the Organization for the Harmonization of Business Law in Africa (OHADA). OHADA is a regional organization in Western and Central Africa set up to implement the harmonization of commercial laws in the region. The World Bank takes a regional approach to development of the CEMAC region, including financial sector restructuring wherein payment systems reform is a high priority area. As the CEMAC's central bank, the BEAC operates the payment systems therein.

As noted by the 2002 World Bank report, the Financial Sector Assessment Program (FSAP) mission in Cameroon in early 2000 had pointedly indicted the inadequacy of the national payment system and the regional payment system run by the BEAC as the principal culprits behind slow economic growth and financial sector development in the country and the region in general, and called for urgent reform. The 2000 FSAP of Cameroon found the payment systems to be "slow, unreliable, cumbersome and costly to all participants" (p. 7). A 2007 IMF working paper echoed this sentiment, proposing reforms that would include "a Real Time Gross Settlement System (RTGS): an Electronic Bulk Payment Clearing System (EBPCS) or Regional Inter-Bank Compensation (CIR); an interbank bank card system (Système Monétique Interbancaire or SMI [IBCS]); and a "Centrale des Incidents de Paiement," which is a limited credit information system" (p. 19) in the CEMAC zone. However, it rues the tardy progress of the five year old project, but expects its completion in 2008.

The professed objectives of the payment system reform project in CEMAC, as enumerated in the 2002 World Bank report, are to: (1) reduce delays in transactions through the use of electronic payment systems, so as to facilitate financial sector and economic development; (2) facilitate economic integration and trade relations in CEMAC by replacing cash transactions, which are bulky, costly, time-consuming, and fraught with fraud and risks, with low-cost, fast, easy and secure payment instruments; (3) enhance the reach of banking services and payment systems to the wider population, especially the low-income category; (4) make safe and efficient electronic payment instruments and transaction methods available to the governments, commercial sector and the public; (5) facilitate the implementation of an effective sub-regional monetary policy by the BEAC due to the RTGS of large value transactions and the centralization of accounts of all financial institutions in the CEMAC with the BEAC; and (6) "build a comprehensive and consistent payment system infrastructure that complies with international standards and in particular with the...CPSS Core Principles" (p. 3). The report also outlined some performance goals of the project. They include: (1) bringing 8 percent of the population in the formal deposit taking network, as opposed to just 3 percent existing clients; (2) total computerization of financial and clearing systems transactions; (3) reducing payment settlement delays to a maximum of three days for inter-bank transactions and seven days for client-to-client transactions; (4) making IBCS operational; (5) making two inter-bank card centers operational by 2004, and thereafter ensuring a 10 percent increase in the volume of card use each year; and ultimately (6) "conform[ing] to the principles established by the Bank for International Settlements for payment systems" (p. 4-5).

Per the 2002 World Bank report, the project will have eight key national or regional level components. The first is Global Project Management (GPM), tasked with coordination and implementation of reforms, and with disseminating information to stakeholders. Second is the EBPCS, to manage the exchange/clearing of bulk payment transactions. It will also handle converting paper instruments to electronic form. The EBPCS will exist in identical form in all CEPAC member countries. Third is the RTGS, handling the immediate and final settlement of individual large value and other time critical transactions. The RTGS would also handle payment of securities transactions and settle the multilateral balances of the EBPCS. Forth is the IBCS, with a dedicated network, which will offer prepaid cards for the poor to use for the payment of utility bills. Fifth is the Payment Risk Management System (PRMS) to collect payment information for individuals and businesses. Sixth is the telecommunications infrastructure, to be developed subregionally, in particular, that would enable the operation of the system under secure, standardized, high-quality conditions. Seventh is a legislative framework governing payments processing, clearing, and settlement. This would include coverage of the rights and obligations of all parties involved at every step along the transaction stream, including the areas of claims and dispute resolution. Finally, eighth is a training component for the BEAC and commercial bank staff, including specific training on the RTGS, EBPCS and IBCS.

The 2002 World Bank report mentioned that the chief beneficiaries of the project will be the national governments, financial institutions, the commercial sector, and bank and non-bank clients. The project was envisaged to be completed in four years, but the coordinators have taken a flexible approach, in acknowledgement of the constraints of the country financial systems. Its implementation and progress will be monitored and regularly reviewed by a Regional Steering Committee, which will hold at least quarterly meetings and report to the BEAC's Governor. Further, the progress will also be regularly reviewed by the Ministers of Finance of the six CEMAC countries in the Conseil Ministeriel (or Ministerial Council) meetings.

The 2002 World Bank report provided statistics on the payment instruments in CEMAC. It found that only 3 percent of the population has bank accounts, and that cash is the predominant payment instrument used. Of the non-cash payment instruments, paper checks are the most common, representing 98 percent of the volume, and 92 percent of the value of non-cash transactions. They are also used for large-value transactions instead of day-to-day retail transactions. Clearing is done manually by the clearing centers of the BEAC in each country. Per the report, a settlement is only final on the following morning, and "in case of lack of liquidity the unwinding process is activated" (p. 8). This is a clear non-compliance with CPSS Core Principles IV, V and VII. Some commercial banks in Cameroon have introduced cards to facilitate cash withdrawals. The report observes that "the legal framework, including inter-bank rules and procedures to ensure that payment transactions processing is fully secured, automated and efficient, needs to be strengthened" (p. 8). Of specific concern are non cash and electronic payments. In addition, the World Bank noted an urgent need for the standardization of paper and electronic payment instruments across the region.

The Principles

I. The system should have a well-founded legal basis under all relevant jurisdictions.

II

According to the 2000 IMF ROSC, Cameroon is partially compliant with this principle. The 2002 World Bank report informs that the payment system reform project in CEMAC has been preparing to define a clear legal and regulatory framework to govern the systems and their participants. The report observes that "the legal framework, including inter-bank rules and procedures to ensure that payment transactions processing is fully secured, automated and efficient, needs to be strengthened" (p. 8). Of specific concern are non cash and electronic payments. In addition, the World Bank noted an urgent need for the standardization of paper and electronic payment instruments across the region. In this respect, the report notes that the IDA-funded payments system project in the CEMAC area promises to "introduce a modem institutional and legal framework for payment services" and "establish norms and standards for payments across the central African monetary zone" (p. 12). Apart from the 2000 ROSC, there is little recent information publicly available addressing Cameroon's compliance with this Principle.

II. The system's rules and procedures should enable participants to have a clear understanding of the system’s impact on each of the financial risks they incur through participation in it.

II

According to the 2000 IMF ROSC, Cameroon is fully compliant with this principle. However there is a reform process underway in the payment systems of the CEMAC countries that includes Cameroon and there is little information publicly available subsequent to the 2000 ROSC that directly addresses Cameroon's compliance with this principle.

III. The system should have clearly defined procedures for the management of credit risks and liquidity risks, which specify the respective responsibilities of the system operator and the participants and which provide appropriate incentives to manage and contain those risks.

II

According to the 2000 IMF ROSC, Cameroon is partially compliant with this principle. However, there is little subsequent information publicly available that directly addresses Cameroon's compliance with this principle, except that a 2006 IMF FSSA talked about a 2002 payment system reform project spearheaded by the BEAC to make the payment systems in CEMAC - of which Cameroon is a member - more effective and secure. A 2002 World Bank report added that the professed objective of the project funded by the International Development Association is to build a comprehensive and consistent payment system infrastructure that complies with the CPSS CPSIPS.

IV. The system should provide prompt final settlement on the day of value, preferably during the day and at a minimum at the end of the day. (Systems should seek to exceed the minima included in this Core Principle.)

II

According to the 2000 IMF ROSC, Cameroon does not comply with this principle. However, there is little subsequent information publicly available that directly addresses Cameroon's compliance with this principle, except that a 2006 IMF FSSA talked about a 2002 payment system reform project spearheaded by the BEAC to make the payment systems in CEMAC - of which Cameroon is a member - more effective and secure. A 2002 World Bank report added that the professed objective of the project funded by the International Development Association is to build a comprehensive and consistent payment system infrastructure that complies with the CPSS CPSIPS.

V. A system in which multilateral netting takes place should, at a minimum, be capable of ensuring the timely completion of daily settlements in the event of an inability to settle by the participant with the largest single settlement obligation. (Systems should seek to exceed the minima included in this Core Principle.)

II

According to the 2000 IMF ROSC, Cameroon does not comply with this principle. However, there is little subsequent information publicly available that directly addresses Cameroon's compliance with this principle, except that a 2006 IMF FSSA talked about a 2002 payment system reform project spearheaded by the BEAC to make the payment systems in CEMAC - of which Cameroon is a member - more effective and secure. A 2002 World Bank report added that the professed objective of the project funded by the International Development Association is to build a comprehensive and consistent payment system infrastructure that complies with the CPSS CPSIPS.

VI. Assets used for settlement should preferably be a claim on the central bank; where other assets are used, they should carry little or no credit risk and little or no liquidity risk.

II

According to the 2000 IMF ROSC, Cameroon is fully compliant with this principle. However there is a reform process underway in the payment systems of the CEMAC countries that includes Cameroon and there is little information publicly available subsequent to the 2000 ROSC that directly addresses Cameroon's compliance with this principle. The 2002 World Bank report noted that the proposed BEAC payment system project aims at minimizing credit risks inherent in the delays in payment settlements (p. 61). Also systemic risk will be minimized in the new architecture, where "bulk transaction netting systems and the RTGS used for settlement of large value transactions is designed in compliance with the [Bank for International Settlements] payment systems core principles" (p. 62).

VII. The system should ensure a high degree of security and operational reliability and should have contingency arrangements for timely completion of daily processing.

II

According to the 2000 IMF ROSC, Cameroon is partially compliant with this principle. However, there is little subsequent information publicly available that directly addresses Cameroon's compliance with this principle, except that a 2006 IMF FSSA talked about a 2002 payment system reform project spearheaded by the BEAC to make the payment systems in CEMAC - of which Cameroon is a member - more effective and secure. A 2002 World Bank report added that the professed objective of the project funded by the International Development Association is to build a comprehensive and consistent payment system infrastructure that complies with the CPSS CPSIPS.

VIII. The system should provide a means of making payments which is practical for its users and efficient for the economy.

II

According to the 2000 IMF ROSC, Cameroon does not comply with this principle. The 2002 World Bank report detailed plans on making the modernized payment system in CEMAC cost effective as well as efficient and reliable. The payment systems reform project, as noted, therefore approved a "three-pronged payment system (RTGS, low value, and inter-bank card components)" (p. 62). The project is being finalized with active consultation from the private commercial banks in the CEMAC countries, who will be the major cost bearers of the system, so as to take the most cost-effective route. The report stated that the proposed costs for the different components of the system meet benchmarks of similar projects in emerging markets like the Central Bank of Western African States, Mauritius, and Moldova. Further, costs are reigned in due to extensive use of cost-effective technology and the economies of scope and scale permitted by the regional integration of payment systems in CEMAC. However, there is insufficient information addressing Cameroon's compliance with this Principle.

IX. The system should have objective and publicly disclosed criteria for participation, which permit fair and open access.

NC

According to the 2000 IMF ROSC, Cameroon is fully compliant with this principle. However there is a reform process underway in the payment systems of the CEMAC countries and there is little information publicly available subsequent to the 2000 ROSC that directly addresses Cameroon's compliance with this principle.

X. The system's governance arrangements should be effective, accountable and transparent.

II

According to the 2000 IMF ROSC, Cameroon is fully compliant with this principle. However there is a reform process underway in the payment systems of the CEMAC countries and there is little information publicly available subsequent to the 2000 ROSC that directly addresses Cameroon's compliance with this principle.

A. The central bank should define clearly its payment system objectives and should disclose publicly its role and major policies with respect to systemically important payment systems.

II

The 2002 World Bank report notes that besides being a "key player in the [CEMAC] zone in promoting financial sector and fiscal stability and economic reform," the BEAC "has an explicit mandate to maintain an efficient payment system in the sub-region" (p. 15). Besides this, there is little information publicly available that directly addresses Cameroon's compliance with this principle.

B. The central bank should ensure that the systems it operates comply with the Core Principles.

II

There is insufficient information publicly available as to Cameroon's compliance with this principle.

C. The central bank should oversee compliance with the Core Principles by systems it does not operate and it should have the ability to carry out this oversight.

II

There is insufficient information publicly available as to Cameroon's compliance with this principle.

D. The central bank, in promoting payment system safety and efficiency through the Core Principles, should cooperate with other central banks and with any other relevant domestic or foreign authorities.

II

There is insufficient information publicly available as to Cameroon's compliance with this principle.