The East African Community (EAC) Banking Association, an umbrella lobby formed more than a decade ago, has been sharing information among member associations, undertaking capacity building as well as benchmarking, so as to facilitate cross-border trade and promote financial inclusion in the region. The founders of the EAC Banking Association umbrella were the Kenya Bankers Association (KBA), the Tanzania Bankers Association, the Uganda Bankers Association (UBA), and the Burundi Bankers Association (BBA).
“Over the past few years, we have seen growth in cross-border trade volumes in the region. For instance, cross border trade volumes grew from US$ 7.1 billion in 2019 by 15% to US$ 9.9 billion in 2021,” said Tanzania Banking Association (TBA) Executive Director Tusekelege Joune.
She made these remarks at the ongoing CEO Chat, a social media event presented by Kenya Bankers Association.
The session is meant to facilitate discussions on current financial sector trends. In the sessions, Chief Executive Officers share information and receive feedback on various aspects of banking.
Joune, who was discussing the role of the EAC Banking Association in promoting cross-border growth and trade, said that while there are many MSMEs in the region, their contribution to GDP in the regional partner states remains dismal.
“Due to their huge number, informal nature, and small size, we need to work as a banking association in the region to assist these MSMEs in growing and participating in cross-border trade activities,” she said.
While Central Banks in the EAC region have made attempts to set up a common payment system to facilitate settlements across the EAC region, significant challenges remain.
“We still have huge disparities in the skills of workers in the EAC region as well as the level of productivity between workers in the region. Even with free movement of labour, there is a need for capacity building to ensure that all the EAC countries are at par,” said Joune.
She said investment flows into the EAC region are also unequal since each of the member states has different packages and reforms geared at attracting foreign investors. The level and use of technology in the region is also unequal and this is an impediment to regional economic integration and cross-border trade.
She said the EAC Banking Association plays a policy advocacy role to ensure there is a conducive environment both at the national and regional levels, to promote doing business in the region.
While most businesses in the EAC region are MSMEs, most of them are informal and not in the proper value chains that can enable them to participate in cross-border trade.
“The informal nature of most of these MSMEs across EAC is denying them access to more trade opportunities, funding and credit. We have a number of regional initiatives such as asking all partner states to come up with national policies that promote the growth of MSMEs, deal with the challenges that they face, and set up the required environment that will foster their growth,” said Joune.
She said Tanzania has put in place an MSMEs strategy, domiciled at the Tanzania Ministry of Finance, and is only awaiting formal approval and adoption by industry players.
She suggested that each partner state within EAC use its trade and industry ministry to set up systems where formalization of MSMEs can be simplified.
“In Tanzania, we are working on a digital ID that will identify all the small businesses or merchants. This has also happened in countries such as India. These businesses will be on a digital ID registry and can therefore be able to access such services as mobile credit. We aim to reach a point where we can identify owners of those behind these businesses using biometric or fingerprint IDs,” said Joune.
She said that the EAC has seen the entry of South Sudan and DRC with Ethiopia set to join the regional block. This signals that opportunities for more cross-border trade exist.