Modernizing Money in Yemen

Speeches Shim

Friday, August 6, 2021
Central Bank Staff and Advisors discuss near-same-day settlement process.
Pragma for USAID

Modernizing Money in Yemen

“We now have the capacity to perform same day, near-real-time financial transfers using SWIFT. This new mechanism will greatly accelerate financial processes.” Mervat Bashir, Head, Payment Systems Department, Central Bank of Yemen

Like many emerging market countries, Yemen has been functioning as a cash-based economy dependent on bulky exchanges of Rial bills for everything from simple daily purchases to government salaries and complex financial transfers. Moving money from one bank or account to another has been a slow and cumbersome process, involving a sluggish system of cash or check clearances. The result has restricted the flow of money for everything from humanitarian aid to the loans, investments, and business transactions that could help fuel economic recovery. 

Now, however, Yemen’s financial sector is joining the digital age, shifting the speed at which money can move from days or weeks to a matter of minutes. With support from USAID’s Economic Recovery and Livelihoods Program, the Central Bank of Yemen has upgraded its payment systems, and as of July 2021, all banks have started using the Society of Worldwide Interbank Financial Telecommunication (SWIFT) network to move money back and forth. Financial transfers are quicker and more secure, and the details regarding transaction amounts, routes, or charges are fully transparent. This keeps money circulating more easily to help stimulate economic activity and business growth.

The USAID has been working with the Central Bank of Yemen to strengthen and modernize its financial systems to meet SWIFT institutional and security requirements, as well as providing training and technical assistance to build a best-practice compliant Payment Systems Department.

USAID also helped guide the complex process of consolidating bank data within the Central Bank headquarters in Aden and among the branches under its control. The new, internationally accepted check- clearing system directs a greater level of control to the Central Bank while also creating a quick, efficient, and streamlined clearance process. Moreover, it allows analysts to get a comprehensive view of the status of the country’s banking sector.

With payment transfers happening in near-real time, banks, businesses, and households are better positioned to control their cash flows and make investments that can improve their companies or livelihoods. The advances will help boost confidence in the Central Bank and broader banking sector.

“Now large numbers of transactions can be cleared daily,” says Mervat Bashir, who heads the Payment Systems Department at the Central Bank of Yemen. “This will help to maintain trust in the Central Bank and allow it to perform its settlement function [for accepting transactions] effectively. It will facilitate the transfer of humanitarian assistance and public salaries across the country through the Central Bank and encourage people to use the banking system.”

The transition to electronic transfers is a major step for the Central Bank of Yemen and opens the way for introducing other cashless options to bank customers. USAID is providing technical assistance and expertise to establish mobile financial services,  and electronic payment systems for merchants in Yemen, which could greatly expand access to financial services for Yemenis and increase opportunities for foreign exchange and investment. 

By modernizing the Central Bank’s payment system and strengthening its core capacities, USAID is helping to foster the economic stability and inclusion that are essential for a more self-reliant future in Yemen. 

“USAID’s technical support is translating into the upgrade of core banking functions, a modern national payment system, and a new regulatory framework for the Central Bank to evaluate, license, and establish an oversight tracking system to monitor Payment System Providers —all of which are considered a quantum leap in the field of modern banking, ” said Ms. Basheer

 

Last updated: August 06, 2021

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