EAC Payment System Sees 40% Growth.

Published on 17th January 2025

Traders across East Africa transacted a record $2.015 billion through the East African Payment and Settlement System (EAPS) in the 12 months leading up to June 2024, despite a sharp increase in transaction costs. This growth underscores the growing importance of intra-regional trade, with traders increasingly adopting the platform for its convenience.

According to data from central banks in Kenya, Uganda, and Tanzania, the total value of transactions processed through the regional payment system rose by 40% in the last fiscal year, surpassing the $2 billion mark for the first time. This growth occurred even as the average cost of sending $200 across borders climbed from 17.05% in September 2023 to 25.4% by June 2024.

Growth Amid Challenges

Launched in 2014 to simplify cross-border settlements within the East African Community (EAC), EAPS has struggled with limited uptake, with only four countries—Kenya, Uganda, Tanzania, and Rwanda—currently participating. Tanzania experienced the sharpest growth in transaction value, recording $261 million (Tsh657 billion) in 2024, an 80% increase from $145 million (Tsh364 billion) in 2023. However, Tanzania remains the second-smallest participant in the system, ahead of only Rwanda.

Uganda saw an 18% increase in transactions, rising from $519 million (Ush1.91 trillion) to $610 million (Ush2.45 trillion), largely driven by trade in Ugandan and Kenyan currencies. Kenya, the dominant player in the system, crossed the $1 billion mark for the first time, with transactions reaching $1.144 billion, a 47% rise from the previous year’s $777 million.

Despite the growth in transaction value, both Kenya and Tanzania reported a decline in the volume of transactions processed through the system, with total deals dropping by 7,685 to 47,929 in the year leading up to June 2024. This indicates that traders opted for fewer, higher-value transactions.

Rising Transaction Costs

Transaction costs have increased significantly in most remittance corridors. In Tanzania, cross-border payment costs peaked at 55% for transactions with Kenya and Uganda, while sending funds to Rwanda became 16 percentage points more expensive, rising from 20% to 36%.

At $2 billion, transactions through EAPS account for just 14% of intra-EAC trade, which reached a record $14.3 billion during the review period—an 18.9% increase from $12 billion a year earlier. The inclusion of Somalia, which joined the bloc in 2023, contributed to this rise.

Challenges to Expansion

However, Burundi, South Sudan, Somalia, and the Democratic Republic of Congo have yet to adopt the payment system. The EAC Secretariat continues to encourage these countries to join the platform, aiming to strengthen regional trade and financial integration.

EAC Secretary-General Veronica Nduva noted that the slow uptake of EAPS has forced many banks to continue relying on foreign correspondent banks for regional payments.