July 2012|Lawrence Semakula & Robert Muwanga|Country Learning Notes,

This briefing note identifies such benefits and explores changes in payment systems prior to EFT, enumerates key issues that were considered and challenges met in implementing the EFT in Uganda.

Summary

  • Electronic Funds Transfer (EFT) is a system for transferring money from one bank account to another electronically, minimising the need for human intervention.
  • In July 2007, the Government of Uganda began using EFT to transfers payments to its suppliers of goods and services by crediting their accounts directly through the banking system. EFT has now been extended to the full range of Government financed payments for central ministries and agencies.
  • This shift from the use of physical cheques has achieved three things: it has enhanced security of the Government’s payment process as manual interventions have been reduced and loss or forgery of paper payments instruments of cheques has been eliminated; it  reduced cost of operations particularly accruing from printing cheques, it improved efficiency in cash management with the elimination of a cheque float as the period it takes to transfer funds to beneficiaries has significantly reduced.
  • A major risk of the current system is the irrevocability of the of an EFT payments once it has been made, even when an error could has occurred in this process. Unlike in countries like South Africa, the current Ugandan system offers no protection against such risks.
  • Careful planning has been a critical factor in the successful implementation of the EFT, as has close collaboration between the Ministry of Finance, the Bank of Uganda and the commercial banks.

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The Country Learning Notes series is intended as a tool for policy makers and practitioners to learn from the experiences of other countries. Each note focuses on a specific country and a particular policy area, documenting the challenges faced and decisions taken to overcome them.

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