The Capital Markets Authority intends to introduce a regulatory sandbox to help businesses in financial technology develop innovations without incurring all regulatory consequences.
The Sandbox, a space that allows fintechs to test viability of their services without common barriers such as capital and licensing, will accommodate products such as peer to peer financing, cryptocurrencies, distributed ledger technology, artificial trading, big-data, RegTech credit rating and online broking among others.
Speaking to The Star during a stakeholders’ meeting, chief executive Paul Muthaura said the move aims at helping fintechs provide convenient, reliable, fast, affordable and efficient services to Kenyans.
A first-of-its kind in the East African region, the Sandbox is the product of a Memorandum of Understanding between Australian Securities and Investments Commission and CMA.
The new partnership is expected to pave way for further development in Capital Markets through innovation.
“What we are doing with the Sandbox is to create a regulatory safe space to help fintechs develop their innovations, and identify the full potential of their solutions before getting licensing,” Muthaura said.
Within this space, innovators will have an unlimited spectrum of investors who they can engage within certain terms and conditions.
The safe space regulations were put in place following consultations with Australia, Singapore, Abu Dhabi, Malaysia and the United Kingdom, where such a regulatory space has been implemented.
Other perimeters include the value of transactions that it can carry out and if it is limited to delivering capital markets-related solutions only.
It also allows cross-border exchange of services and ideas across countries in different continents.
According to Finnovating for Africa: Exploring the African Fintech Startup Ecosystem Report 2017 by Disrupt Africa, Africa is home to slightly over 300 fintech startups that are active across the continent, disrupting the financial services landscape with innovative solutions that are attracting the attention of banks and investors.
South Africa hosts 31.2 per cent or 94 of the fintech startups, while Nigeria and Kenya follow in second and third place respectively with 74 and 56 such startups.
Since 2015, they have been able to secure a combined $92.68 million (Sh9.6 billion) in funding.