The Payment and Settlement System
A payment and settlement system can be described as a system which consists of a particular group of institutions and a set of instruments and procedures, designed to ensure the circulation of money and speed up interbank and other settlements resulting from the various economic transactions either within a country or between countries.
From this definition, we can deduce that a country's economy is made up of systems and sub-systems, in which each system is supported by all sub systems below it. The top most system represents the real economy and the financial markets - the purchase and sale of goods and services throughout the country. This system is supported by the country's banking system, which provides a means whereby all players in the economy can come together and interact in a payment system through the use of their instruments and procedures that enable, people to effect payments and move their funds as and when necessary. The final settlement of payment transfers takes place across the accounts which banks hold with the central bank that plays the pivotal role to facilitate the functioning of the economy as a whole.
The National Payment System can therefore be considered as a component of the broader financial system. It can be viewed as the infrastructure which provides the economy with the channels for processing the payments resulting from various economic activities. The payment and settlement system covers a wide range of financial transactions, from Sierra Leonean businesses transacting in the global market to servicing the individual payment requirements of the population of Sierra Leone.