Question

PAYMENTS IN A NEW DEMOCRACY

A country in Africa has recently undergone a revolution and is now governed by a popular democracy. In the past, all economic activity was undertaken by the autocratic leadership and their facilities, which no longer exist. The population of the country only survived in the past via various forms of barter, but now have to understand and establish modern functioning payment facilities. Start the process of understanding by describing some of the basics of payment in a letter to the revolutionary council.

Include:

Suggest possible payment systems that the government should consider and describe conceptually how they would work (2 typed page)

Answer 1

As the country becomes democratic and is free from ristrictions and so the economy and commerce will expand.There would be an increase in the volume of trade and so there is a need to have a well defined payment facility. A payment system is a mechanism that facilitates transfer of value between a payer and a beneficiary by which the payer discharged the payment obligations to the beneficiary. Payment system enables two way flow of payments in exchange of goods and services.The first and traditional payment facility is the cash system that can be widely used in this case as it is comparetively easy to establish. The most important system to facilitate payment facility is banking system which can back paper based payment.

1) Cheques 2) Demand draft .

To a next level there would be a requirement of card based payment.

1) Credit card 2) Debit card .

This mode of payment would provide cashless transaction facilities that will help the working professionals to meet their demand.

Lastly the most advance is electronic payment

1) Electronic Clearing system

2) Electronic fund transfer.

3) Internet banking

4) Mobile banking.

The following above modes of payment facilities will be required initially the cash base currency of paper note and coins should be made available for that sound economic and development policies should be adopted by the New government .Strong trading relations with other countries to be made and investment should be allowed along with that efforts are to be made to adopt the new and advanced payment systems