In a ground-breaking development, the Central Bank of Kenya (CBK) is poised to issue payment licenses to fintech start-ups operating within the country, signalling a significant departure from previous regulatory stances and heralding a new era of opportunity in East Africa’s bustling payments market.
Among the hopeful recipients of these coveted licenses are industry giants like Flutterwave and Chipper Cash, eagerly awaiting official approval to legitimize their operations in Kenya. Governor Kamau Thugge of the CBK recently announced that the regulatory body is actively working on amending the National Payment Systems Act of 2011. This proactive measure aims to establish a robust legal framework that will provide fintech firms with the necessary legitimacy to operate within the Kenyan market.
The proposed amendments represent a monumental victory for remittance and payment providers, who have long grappled with legal uncertainties and regulatory ambiguities. These innovative firms have navigated a murky legal landscape, often finding themselves ensnared in investigations and subjected to raids by Kenyan authorities on allegations of money laundering.
Acknowledging the pressing need for regulatory clarity, Governor Thugge affirmed the CBK’s commitment to modernizing existing payment systems legislation. “We are in the process of updating and amending the Payments Act, basically coming up with a new act,” he stated. “We hope to be able to finish that soon, along with the regulations, which will guide our way forward in terms of the payments service providers space.”
Governor Thugge’s remarks come on the heels of mounting concerns regarding the registration status of fintech heavyweights like Flutterwave and Chipper Cash in Kenya. During a recent post-monetary policy committee press briefing, the governor addressed these concerns, signalling a proactive stance towards fostering a more conducive regulatory environment for fintech innovation.
Presently, Kenya’s financial sector operates under a patchwork of regulatory frameworks, including the Central Bank of Kenya Act, the National Payment Systems Act, and various e-money regulations. However, the absence of clear guidelines pertaining to fintech companies has created a breeding ground for legal ambiguity and regulatory conflicts.
This ambiguity has culminated in clashes between remittance and payment start-ups and Kenyan authorities, with law enforcement agencies citing concerns over money laundering and unauthorized operations. In response to these challenges, CBK issued directives in 2022 instructing local financial institutions to sever ties with fintech firms, citing potential threats to the country’s financial stability.
By introducing a comprehensive regulatory framework and granting payment licenses to fintech start-ups, CBK aims to dispel the clouds of uncertainty that have shrouded the industry. This landmark decision not only affirms Kenya’s commitment to fostering innovation but also underscores the country’s determination to create a more inclusive and dynamic payments ecosystem.
