EAC Financial Sector Development and Regionalization Project

Posted in Financial

Following the signature and ratification of the Common Market Protocol, the East African Community (EAC) Secretariat in collaboration with the World Bank and other development partners established the EAC Financial Sector Development and Regionalization Project (EAC - FSDRP) I.

The Project Development Objective is to establish the foundation for financial sector integration among EAC Partner States.

The higher-level objective of the program is to support the broadening and deepening of the financial sector through the establishment of a single market in financial services among EAC Partner States, with a view to making a wide range of financial products and services available to all, at competitive prices.

The FSDRP I is structured into the following six components:

• Component 1 – Financial Inclusion and Strengthening Market Participants
• 
Component 2 – Harmonization of Financial Laws and Regulations

• Component 3 – Mutual Recognition of Supervisory Agencies

• Component 4 – Integration of Financial Market Infrastructure

• Component 5 – Development of the Regional Bond Market
• Component 6 – Capacity Building 


Component 1 - Financial Inclusion and Strengthening Market Participants:



The main objective of the component is to leverage the establishment of a single market and the benefits of scale associated with regionalization to make a broader range of formal financial services/products available to a more diversified client profile, including those that are currently unserved. The Component also provides capacity building programs to the market participants.

The main areas of focus are:

• 

Cross-regional mobile banking in EAC;


• Demand and supply study on barriers to provision of and participation by unbanked in non-bank services (pensions, insurance, capital markets, housing/mortgage);


• Retail payments infrastructure and how it can better support access to finance;


• Financial education issues in EAC states and establishment of  regional/national strategies on the same; and


• EAC Certification on Banking, Securities, Insurance, Pension, and Microfinance.

Component 2 – Harmonization of Financial Laws and Regulations:

The objective of the component is to move towards legal and regulatory harmonization in banking, securities markets, insurance, pensions, micro finance, investment funds critical to achieve an effective functioning of a single market in financial services via EAC Laws, Regulations and Directives.

The main areas of focus are:

• Establishment of technical working groups at the EAC Secretariat to formulate legal and regulatory EAC Bills on microfinance, SACCOs, branchless banking, banking, securities markets, insurance, pensions, payment systems and investment funds; and
• Production of EAC Bills, Regulations and Directives on microfinance, SACCOS, branchless banking and accounting, securities markets, insurance, pensions, payments systems, investment funds for submission to the Council of Ministers.

Component 3 – Mutual Recognition of Supervisory Agencies:

The objective of the component is to support the establishment of a regional pass porting system and mutual recognition of supervisory authorities. Under this system, a financial institution and market intermediaries licensed by the supervisory authority in one Partner State will be allowed to operate in all Partner States upon simple notification to the supervisory authority of the host State.

The main areas of focus are:

• 

Support to task force at the EAC Secretariat for compliance with international principles in banking (BCP), pension (IOPS), insurance (IAIS);


• Assessment of compliance with international principles in banking, pension, and insurance;


• Elaboration of a multi-year action plans to comply with international principles in banking, pension and insurance;


• Assessment of compliance with international principles in securities markets (IOSCO) and development of post IOSCO assessment action plans for Rwanda and Burundi; and


• Implementation of a multi-year action plan to comply with IOSCO Principles and support for the peer reviewer process for Kenya, Tanzania, Rwanda, and Uganda.

Component 4 – Integration of Financial Market Infrastructure:

The objective of this component is to support the establishment of an efficient market infrastructure, compatible at the regional level.

The main areas of focus are:

• Integrating and linking the EAC markets through implementation of a Capital Market Infrastructure for trading and settlement systems;


• Support the demutualization of the stock exchanges in the EAC; and


• Support to establish capital markets in Burundi and automate the Rwanda stock exchange trading system towards an integrated EAC capital markets.

Component 5 – Development of the Regional Bond Market:



The objective of the component is to support the development of the government bond market in each Partner States, to ensure bond issuers in individual EAC Partner States having access to a deeper pool of liquidity in a single market.

The main areas of focus are:

• Support to elaboration and implementation of government bond market development strategy in each Partner State as needed;


• Development of primary market for non-government bond market; and


• Development of secondary market for non-government bond market.

Component 6 – Capacity Building:

The objective of the component is:

1. To Strengthen the Department of Financial Regionalization and create capacity for regional policy formulation and coordination at the EAC Secretariat;
2. To strengthen financial sector supervisory capacity in the Partner States in addition to the support provided by national-level projects through:

• Capacity building for financial sector regulators and


• Financial literacy education of the East African citizenry.