Flutterwave & Chipper Cash Vs CBK, Who’s To Blame?

The recent revelation by The Central Bank of Kenya (CBK) Governor Dr Patrick Njoroge that African fintech startups Flutterwave and Chipper Cash are not registered and therefore are not allowed to operate in the country received mixed reactions from the fintech community.

Further yielding its big stick, CBK directed banks and microfinance institutions in Kenya to stop dealing with two fintechs.

In a response to CBK pronouncements, Flutterwave said, “In 2019, as our operations grew, Flutterwave submitted its application for a payment service provider license. We have been in constant engagement with the Central Bank of Kenya to ensure that we provide all the requirements, and we look forward to receiving our licence.”

The exchange between CBK and the Nigerian company once again reignited the debate on the time it takes for fintechs, especially, foreign-owned to get operation licenses in Kenya.

Cradle of fintech in Africa

Regarded as the cradle of fintech in Africa because of pioneering mobile money transfer service Mpesa, it is expected that fintech companies wouldn’t break a sweat trying to get operating licenses in Kenya. But there’s more to it.

Stephen Mwaura, Former Head, National Payments System, at CBK says there are no specific timeframes for the regulator to issue approval licenses to fintechs. That licenses are only issued after the applicants meet the licensing requirements by the CBK.

Mwaura also thinks the licensing approval problem lies with the fintech start-ups. He blames foreign fintechs eyeing the Kenyan market of failing to use the right strategies to get licensing approval, not offering services that have an impact on the local population and engaging in unethical practices that dents their firm’s reputation which reduces their chances of getting licensed.

“Some of these fintechs are not registered in Kenya and you cannot just walk into a country and start doing business. Foreign fintechs must meet certain regulatory thresholds for them to be allowed to operate in Kenya. These include standards that protect consumers and safeguards against money laundering” he told CIO Africa.

Last month, Flutterwave was caught up in a money laundering scandal in Kenya that saw a court freeze $62 billion held in their accounts and some of their business associates. However, the Nigerian start-up denied claims of money laundering.

“Claims of financial improprieties involving the company in Kenya are entirely false, and we have the records to verify this. We are a financial technology company that maintains the highest regulatory standards in our operations. Our anti-money laundering practices and operations are regularly audited by one of the big four firms. We remain proactive in our engagements with regulatory bodies to continue to stay compliant,” Flutterwave said in a statement at the time.

Local partnerships

Mwaura advised foreign fintechs to provide clarity on services that they are coming to offer in the country when applying for licensing.

“There is no clarity in some of what these foreign-owned fintechs are doing. Are they offering API integration, payment transfers or what”? He added that the easiest way for foreign fintechs to enter the Kenyan market is through partnering with local firms instead of rushing to secure licenses. He gave the example of global companies PayPal and VISA which have partnered with Kenya’s leading Safaricom to extend some of their services here.

Flutterwave says, on their website, “It provides a payment infrastructure for global merchants and payment service providers across the continent. One the other hand, Chipper Cash says it allows users to “move money across town, across Africa or across an ocean”

Association of Fintech in Kenya (AFIK) on Wednesday called on collaboration between stakeholders noting that “the growth of the fintech industry in Kenya will be determined by the confidence which we can instil to innovators and investors”.

“Any move towards fintech regulation should focus on: Fostering innovation and the development of new products and services. Boosting financial inclusion while ensuring consumer confidence and trust in market participants. Encouraging competition by making the market accessible to new entrants. Maintaining stability in the market through right-touch regulatory oversight and supervision.” AFIK Chairman Ali Hussein said in a statement issued to newsrooms.

Digital Lenders Association of Kenya Board Chair Kevin Mutiso told CIO Africa that the body doesn’t “have any problem with the CBK because its members licensing requests are approved within 60 days of working”.