Central bank: for a modern, sure and quick cash system

The Madagascar’s cash system modernization project is centered on the setting up of a Decentralized Clearing based Regulation System. The goal is to speed up operations while enhancing security. It would be made possible to consult at a distance information asked at the time of payments, as for example, the issuer’s account situation or the signature conformity. The “mass teleclearing system” owes its efficiency to the remote transmission networks. The payment platforms are solvent in every banking agency since they are partially abstracted. 

Thanks to this new system, the cash circuit is significantly shortened. No more never ending 15 to 60 necessary days long expectation period before the completion of a payment. The distance between two banks’ locations used to be determining. Thanks to the new system, a check possibly turns into money within less than 5 days. When the system will be fully integrated by banking institutions, the payment time will be reduced to 3 or even 2 days, independently from the distance between the concerned banking institution’s locations. Optically read pay checks are enhancing the treatment’s security and celerity. 

The recent reform can, therefore, reduce the “float” or the scripted platform based debt collection time. According to Madagascar’s Central Bank, this important delay used to represent the precariousness of the country’s regulation system. Henceforth, thanks to the RTGS or Real Time Gross Settlement, a couple of banking institutions can instantly execute an operation with important amounts. The track description record is judged optimal, limiting the systemic risks. The spread of a problem potentially raised by a bank is under control. 

During the float, the amount in expectation of payment can easily pile up since the handwritten credences are stagnating between two institutions. Hence the importance granted to the delay reduction process which is favouring the fluidity of exchanges in the financial system. The banks have been ordered to comply with the new system instituted by the central Bank. Some of them reacted faster and have consequently been already up to date since nearly a couple of years, particularly concerning the pay checks’ standardization process, the use of a banking identity statement for every transaction and the modernization of banking information systems.  

Thanks to the new system, the physical exchanges of checks, inland and transfer bills are automated by the inter-bank clearing departments of Madagascar’s Central Bank . A short while ago, all of this used to be done by hand, following a regulation on the value exchange modes. The law n° 2005-045 of the 01/14/2005 related to prevention and repression of law infringements concerning checks was a first stage in the promotion of the use of scriptural payments in a country in which transactions are usually and naturally completed through banknotes. Reckoning with abstracted clearing instruments in the legal text on clearing systems will be requiring an amendment.