Instruments of Payment

The instrument used to make payments will depend on the sum of money being paid and whether the transaction is a local or an external one.


A cheque is an order to the bank to transfer payments from an individual’s account (the

payer’s/drawer’s account) to credit another individual’s account (the payee’s account) or to pay the payee on presentation of that cheque.

Credit Transfer 

A customer of a bank may use this system by instructing the bank to transfer money from his account to an account at any other bank.

Standing Order/Banker’s Order

This allows regular monthly payments to be made from a customer’s bank account to a named payee. The customer must complete and sign a standing order form instructing the bank to make payments.

Credit Cards/Debit Cards

This allows the card holder to make payments by simply presenting the card to the seller. A credit card facility is actually a loan given to a customer and thus it is repaid at an interest. A debit card is issued against a customer’s account balance and is therefore not a loan.

Postal Order

Postal orders are cheques issued in specific values by a post office. The value of each postal order is printed on it and a price depending on its value is paid for each. The postal order will be sent to the post office of the payee as designated by the payer.

Money Order

These can be purchased from a bank or a post office. They can be used to make payments locally or overseas, as they are made out in the currency in which they are to be paid.  The payee will cash the money order at his bank.

Telegraphic Money Order

The sender must first pay the sum to be sent over the counter of the post office. A telegram is sent to the payee informing him to collect money at his local post office. He must present proof of his identity.

Bank Draft

This is a cheque that is used to make payments overseas. Bank drafts are obtained for a fee from a bank and are made out to a named payee in foreign currency.

Bill of Exchange

This is used to pay for goods bought overseas on credit. It is an order in writing from an exporter to an importer requiring payments of a certain sum of money at a fixed future date.  The time period allowed is normally three months.

Letters of Credit/ Documentary Credit

This is a sent from an importer’s bank to an exporter guaranteeing payment to the exporter for goods to be supplied. The exporter must present a clean bill of lading, certificate of origin and a certificate of insurance to the importers bank.

Irrevocable Letter of Credit

Once an exporter receives this letter of credit the importer cannot cancel payments for goods to be supplied without the exporter’s permission.

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