Why Africa Needs Its Own Financial Architecture
A major reason is the structure of the global financial system. New developments such as China’s Cross-Border Interbank Payment System (CIPS) could help lower costs. But the bigger opportunity lies in Africa developing its own financial infrastructure.
Most international money transfers rely on the SWIFT system.
SWIFT is not a payment system itself. It is a messaging network used by banks to communicate payment instructions.
When someone sends money to Africa, the payment often travels through multiple intermediary banks, usually in Europe or the United States.
A typical transfer may look like this:
Diaspora sender → European bank → US correspondent bank → African bank
Each intermediary:
charges fees
holds liquidity buffers
adds compliance checks
The result is higher costs and slower transfers.
What CIPS Changes
China created the Cross-Border Interbank Payment System to settle international transactions directly in the Chinese currency (RMB). It was developed by the People's Bank of China. CIPS does several things differently:
1. Direct settlement: Payments can move directly between participating banks without multiple intermediaries.
2. Lower transaction layer: Fewer intermediaries mean fewer fees.
3. Faster settlement: Transactions can be processed within hours rather than days.
4. Alternative currency settlement: Payments can occur outside the US dollar system.
For African countries that trade heavily with China, this can reduce transaction costs in:
trade payments
cross-border business transfers
potentially remittances in RMB corridors.
Why This Matters for Africa
China is now Africa’s largest trading partner. Many African businesses already:
import machinery from China
export minerals and agricultural products to China
If payments for these transactions move through CIPS rather than SWIFT, transaction costs can decline. However, CIPS alone will not solve Africa’s remittance cost problem.
The deeper issue is that Africa lacks its own global financial payment architecture.
Africa’s Emerging Solution
Africa has already begun building the foundations of a new system. One of the most important developments is the Pan-African Payment and Settlement System (PAPSS).
PAPSS was developed by the African Export-Import Bank to support trade within the African Continental Free Trade Area. The goal is simple:
Allow African countries to settle payments directly in local currencies without using the US dollar or euro as intermediaries.
How PAPSS Can Reduce Remittance Costs
If fully implemented, PAPSS could transform remittance flows. Today, payments are routed:
London → New York → Johannesburg → Gaborone
Under a mature African payment system, they could be routed:
London → African payment gateway → Gaborone
This removes multiple intermediary banks. The benefits include:
Lower transaction fees
Faster transfers
Less foreign exchange conversion
Greater monetary sovereignty
The Missing Piece: A Global African Financial Architecture
For Africa to truly lower remittance costs, three additional reforms are necessary.
1. African Diaspora Payment Networks
Africa should develop licensed diaspora payment platforms linked directly to PAPSS.
These platforms would allow:
diaspora workers to send money directly into African banking systems
settlement in local currencies
lower compliance costs through shared KYC infrastructure.
2. African Digital Settlement Currency
A regional settlement currency or digital clearing unit could reduce foreign exchange costs. Instead of converting:
Pounds → Dollars → Rand → Pula
Payments could settle in a continental clearing unit. Several regions already do this.
3. Deep African Capital Markets
Remittances should not only support consumption. They should also be able to flow into:
infrastructure bonds
manufacturing investment funds
diaspora investment vehicles.
This requires deeper African capital markets and secure financial instruments.
The Strategic Opportunity
Africa receives tens of billions of dollars from its diaspora every year. If remittance costs were reduced by just 3–4 percentage points, billions of dollars would remain in African households and businesses. Those savings could:
finance small enterprises
fund housing development
support industrial growth.
Lower transaction costs effectively create new development capital without borrowing.
The Bigger Lesson
Systems like China’s CIPS show that the global financial architecture is evolving. Countries that build their own financial infrastructure gain:
lower transaction costs
faster capital flows
greater economic sovereignty.
Africa must do the same.
The continent already has the building blocks:
PAPSS
AfCFTA
growing digital payment systems.
What is needed now is scale, integration, and political commitment.
If Africa builds its own global financial architecture, the cost of sending money home will fall. And when remittances become cheaper and faster, the African diaspora will become one of the most powerful engines of the continent’s economic transformation.
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