Kenya’s central financial institution eyes readability on fintechs with regulation change transfer

The Central Financial institution of Kenya (CBK) is making ready to assessment the Central Financial institution Act and the Banking Act in what might turn into one of the consequential regulatory shifts within the nation’s digital finance and banking sectors.

In a young discover on Monday, the regulator has invited consultants to assist assessment the 2 legal guidelines that outline its powers in a bid to strengthen provisions associated to digital banking, fintech regulation, client safety, and cybersecurity.

The assessment might clear up a authorized gray space that has slowed down the growth of fintechs within the nation, permitting industrial banks and telcos to dominate. CBK has delayed issuing working licences to fintechs like Chipper Money within the absence of enabling legal guidelines.

“The target of this consultancy is to undertake a complete authorized assessment of the Central Financial institution of Kenya Act (CBK Act) and the Banking Act to make sure alignment with present monetary sector developments, worldwide finest practices, and Kenya’s evolving regulatory wants,” CBK stated.

Kenya’s monetary sector is regulated below the Central Financial institution of Kenya Act, the Banking Act, the Nationwide Fee Techniques Act, alongside the Nationwide Fee Techniques Rules of 2014, and the e-money Rules of 2013, all of which have unclear provisions on fintechs and neobanks.

Authorized gray zone

Over the previous decade, Kenya has turn into certainly one of Africa’s most lively fintech markets. Funds startups, financial savings apps, lending platforms, payroll instruments, remittance corporations, and the ecosystem has expanded effectively past conventional banking.

Nonetheless, regulation has moved erratically. At the moment, CBK immediately supervises industrial banks, microfinance banks, mortgage financiers, and—since 2022—digital lenders. The final class solely got here below formal regulation after public outrage over predatory lending apps compelled intervention. Earlier than that, a whole bunch of digital credit score suppliers operated in a gray zone.

Outdoors digital lending, many fintechs nonetheless sit past CBK’s speedy mandate. This has put remittance and fee startups on a collision course with Kenyan authorities, with regulation enforcement, together with the Monetary Reporting Sector (FRC) and the Asset Restoration Authority (ARA), freezing accounts and seizing belongings of sector gamers on cash laundering fees.   

In 2022, CBK ordered native monetary establishments, together with banks and cell cash service suppliers, to chop hyperlinks with fintechs, citing unspecified threats to the nation’s monetary programs. The regulator stated then that the companies have been working with out authorisation.