The Central Bank of Kenya is amending the country’s payment systems law, which will allow it to issue operating licenses to fintech startups. Governor Kamau Thugge said he expects the bank to complete the process of amending the law soon.
Kenyan Central Bank to Issue Licenses to Fintech Firms
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Central Bank Aims to Support Fintech Startups
The Central Bank of Kenya (CBK) will soon issue operating licenses to fintech startups, including two Nigerian payment firms, Chipper Cash and Flutterwave, which are seeking to secure licenses. CBK Governor Kamau Thugge stated that the bank is amending the National Payment Systems Act of 2011 to enable fintech firms to operate legally.
A Techcabal report indicates that the issuance of such licenses would significantly benefit remittance firms and payment providers, which have faced investigations and raids by regulators. For example, the Nigerian fintech giant Flutterwave had its bank accounts frozen by the Asset Recovery Agency after the then-CBK Governor Patrick Njoroge accused it of operating in Kenya without a license.
Consequently, in a letter dated July 9, 2022, addressed to CEOs of Kenyan financial institutions, the CBK advised against transacting with Flutterwave and another Nigerian fintech startup Chipper Cash. However, the Kenyan central bank later softened its stance, with authorities now taking steps to accommodate fintech firms.
“We are in the process of updating and amending the Payments Act, basically coming up with a new act. We hope to be able to finish that soon and also the regulations and that would guide our way forward in terms of payment service providers space,” the CBK governor said.
As explained in the report, the proposed amendments to the National Payment Systems Act aim to close a loophole that has hindered the growth of Kenya’s fintech sector. If enacted, these changes would enable fintech startups to compete with traditional financial institutions that currently dominate the industry, according to the report.
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