Africa Fintech Festival Calls For “Passporting”

The Africa Fintech Festival has sparked robust discussions on the future of fintech regulations across the continent. One of the key takeaways from the event was to push for smart regulation and explore the concept of “passporting” fintech regulations, a model that could significantly streamline the licensing process for fintech companies operating in multiple African countries.

The passporting model, as discussed by industry leaders at the festival, involves regulators in different African countries recognizing and trusting the fintech licenses issued by other African nations. This would allow fintech companies to operate across borders with minimal additional regulatory hurdles, requiring them to comply only with specific local requirements rather than undergoing a complete re-licensing process in each new market.

Proponents of passporting argue that it represents a form of smart regulation, one that fosters innovation and growth while maintaining necessary oversight. The model aims to reduce redundancy and inefficiencies that currently plague fintech companies trying to expand their services across the continent.

“Passporting could be a game-changer for fintechs in Africa,” said Salome Kimani, a Consultant at CGAP. “It not only reduces the cost and complexity of compliance but also accelerates the pace at which innovative financial solutions can be scaled across multiple markets.”

The Africa Fintech Festival, attended by over 500 participants, including regulators, industry leaders, and fintech entrepreneurs, served as an ideal platform for this pivotal discussion. Key speakers highlighted the potential economic benefits of passporting, including increased investment, job creation, and the expansion of financial inclusion.

Leon Kiptum, Senior Vice President for East Africa at Flutterwave, told CIO Africa that he advocates for passporting because fintechs often operate in multiple countries in Africa, facing significant challenges with the licensing process and the differences across various markets.

“Each central bank has its own set of requirements and rules. The idea of passporting for me is to introduce some element of standardization regarding regulatory requirements for fintechs in Africa. The piloting should be Africa-wide so that if a fintech is licensed in Kenya, the Central Bank of Gambia can acknowledge the due process carried out by the Central Bank of Kenya. If there are any additional country-specific requirements, it would ease the process for fintechs already licensed elsewhere,” Kiptum said.

For passporting to take effect, Kiptum stated that central banks in Africa need to communicate and agree on standards. “If we in the industry can help inform the standards, we are willing to go through the process with the central banks through our fintech lobby groups, like the Africa Fintech Network.”

According to Sebie Salim, Co-Founder of Eclectics International, a pan-African fintech company, the best way to push for continent-wide passporting is through the African Union. Alternatively, he proposes approaching it through regions, as is currently practiced among West African countries.

“Passporting is already working in certain jurisdictions. For Africa, we need centralized rules and regulations on how it’s going to be managed. For East Africa, we can lobby for it through the East African Community organization,” he said.

Adrian Pillay, VP Sales at Provenir, emphasized the importance of regulatory collaboration, stating, “For fintech companies, especially startups, navigating the regulatory landscape can be daunting and costly. Passporting offers a pragmatic solution, enabling these companies to focus more on innovation and customer service rather than regulatory compliance.”

The festival also highlighted the successful implementation of similar models in other regions, such as the European Union, where passporting has allowed financial services to flourish across member states. The African fintech community is hopeful that adopting a similar approach could yield comparable results.

Differences in regulatory frameworks, levels of technological infrastructure, and the readiness of various countries to adopt such a model were among the concerns raised. Panelists underscored the need for a harmonized regulatory approach and greater cooperation among African regulatory bodies.

Kagisho Dachabe, President of the Fintech Association of South Africa and Africa Fintech Network Board Member, noted, “While the concept of passporting is appealing, it requires a concerted effort from all stakeholders to standardize regulations and ensure mutual trust and cooperation. This is a journey that will require time, commitment, and a shared vision for the future of fintech in Africa.”

The Africa Fintech Festival concluded with a call to action for regulators and industry players to collaborate on creating a more conducive regulatory environment for fintech innovation. As Africa continues to position itself as a global fintech hub, passporting could play a crucial role in unlocking the continent’s full potential.