Fintech
The Central Bank of Kenya (CBK) will issue payment licenses to Fintech startups
The Central Bank of Kenya (CBK) will soon issue a payments license to fintech startups operating in the country. This move marks a significant change from the regulator’s previous position and will open up East Africa’s largest payments market to these innovative companies.
Two major fintech companies, Flutterwave and Chipper Cash, are among those hoping to obtain this license. CBK Governor Kamau Thugge said the regulator is working diligently to amend the National Payment Systems Act 2011, with the aim of establishing a regulatory framework legal regime that will allow fintech firms to operate legitimately.
The proposed changes could represent a significant victory for remittance and payment providers who have been subject to investigations and raids by Kenyan authorities over money laundering allegations. These companies operate in a legal gray area due to the lack of clear regulations on their operations.
Thugge recognized the need to update existing legislation on payment systems. “We are updating and amending the payments law, essentially making a new law,” he said. “We hope to be able to wrap this up soon, along with the regulations, which will guide our path in terms of the payment service provider space.”
The governor’s remarks came in response to a question on the registration status of Flutterwave and Chipper Cash in Kenya during a post-monetary policy press conference.
Kenya’s financial sector is currently regulated by the Central Bank of Kenya Act, the National Payment Systems Act and the National Payment Systems Regulations 2014, as well as the Electronic Money Regulations 2013. However, these laws lack clarity regarding fintech companies, creating ambiguity and hindering their expansion in the country.
This legal ambiguity has led to conflicts between remittance and payments startups and the Kenyan authorities. Law enforcement agencies, including the Financial Reporting Sector (FRC) and the Asset Recovery Authority (ARA), have frozen accounts and seized assets of industry traders, citing concerns about money laundering.
In 2022, the CBK ordered local financial institutions, including banks and mobile money service providers, to sever ties with fintech firms, citing unspecified threats to the country’s financial systems. The regulator said these companies were operating without authorisation.
By introducing a clear regulatory framework and issuing payment licenses to fintech startups, CBK aims to address this legal uncertainty and promote a more inclusive and innovative payments ecosystem in Kenya.