Fin-tech in Kenya was pioneered by Safaricom’s M-pesa application at a time when there was no regulation, pushing the unbanked and informal sector (which represents 80% of the total job market) to buy mobile phones and move from brick-and-mortar banking into the digital economy. Since then, Fin-tech has expanded to person-to-business (P2B – utility payments, shopping etc.), business-to-business (B2B), and credit and savings services, purchasing and transferring of airtime and so on.
The current regulatory framework poses challenges that could potentially be a barrier to innovation and investors. Fin-tech obscures the current independent sectors of regulation; telecommunications and banking presenting an overlap between different ministries and Government agencies. It involves confirming with these agencies whether licensing or authorization is needed to operate, in addition to understanding which licenses would apply.
Generally, a tech company looking to launch Fin-tech in Kenya should be aware of the following licenses and applications.
1. An application to be authorized and designated as a payment service provider from the Central Bank of Kenya (CBK) for the money transfer services it would offer its proposed users. CBK has to be satisfied that the tech company has a minimum core capital of Kenya Shillings five million (KES.5,000,000/=) to be licensed as an electronic payment service provider. The CBK may label/designate the platform as a payment system if it believes that its payment system poses systemic risk, is necessary to protect the interest of the public, or if designation is in the interest of the integrity of the payment system. Though Kenya Electronic Payments and Settlement System (KEPSS) is the only payment system that is known as having been designated, the decision to designate remains with CBK.
2. Application to the Communications Authority of Kenya (CA) for a Content Service Provider (CSP) license, an Application Service Provider (ASP) license and /or a Network Facilities Provider (NFP) license;
- Where the platform features sending SMS’s using a network carrier in Kenya, it will be considered to be providing a communication service under Kenya Information and Communication Act and thus a Content Service Provider CSP license would be needed.
- Where the platform provides notifications and alerts in connection with the Fin-tech products that it offers, the platform will need to be licensed as an application services provider (ASP) by the CA.
- Where the tech company will in addition to the above set up and operate communications infrastructure (based on satellite, mobile or fixed), it shall be required to procure a Network Facilities Provider (NFP) license.
- If the application will only be web based then CA approval may not be needed however this needs to be confirmed by them.
3. If the platform offers cross border sending or receiving of money (money remittance), the tech company has to be licensed as a money remittance operator. For this license, the company has to demonstrate that it has a core capital of at least Kenya Shillings twenty million (KES. 20,000,000).
4. Other legal requirements that would be considered are money laundering, bribery, consumer protection, data protection and cybercrime.