The extent to which Kenya's national payment System (NPS) reform objectives have been achieved

Abstract

National payment system can be defined as the whole combination of instruments and infrastructure through which money moves from one point to another in order to effect payments. Theses systems have emerged as a central area that affects all other areas and sectors in both developing and developed economies. This study sought to establish the extent to which Kenya's National Payments System reform objectives had been achieved as the end of 2005. The study was carried out using sampling method by administering a structured questionnaire to capture responses from the various National Payment System participant categories. The study found that the objectives of Kenya's National Payment System reform have been substantially met. Key achievements include the introduction of Kenya Electronic Payment and Settlement System (KEPSS) which Kenya's Real Time Gross Settlement System (RTGS), the increased awareness of risks in payment systems and the automation of the Clearing house. The objective to encourage the provision of financial services to the rural area remained largely unmet as indicated by the greater proportion of Commercial branch network in the urban areas as compared to the rural areas, Awareness and usage of modem payment systems was low as indicated by the greater usage of cash and cheques to settle financial obligations. The researcher recommends that the-need to raise public awareness on the importance of using modern payment systems and instruments. Further, the subject of National Payment Systems could be introduced Kenya's educational curriculum at the lower and middle educational institutions as well as the tertiary levels, It is the researcher's view that such a move would improve public appreciation of the importance of payment systems in their daily financial transactions and the critical role it plays in the economy in general.