Capital Markets Authority (CMA) has admitted three fintech firms into its regulatory sandbox, allowing them to live test innovative solutions with the capacity to deepen and enhance the efficiency of capital markets.
Innova Limited, Pezesha Africa Limited and a third firm which remains anonymous.
Innova will test its cloud-based data analytics platform designed for use by Investors, Fund Managers, Custodian Banks, Actuaries, Pension Administrators and Regulators.
Pezesha will test an internet-based crowd-funding platform through which investors can provide loan facilities structured as loan notes for Small and Medium Enterprises (SMEs).
CMA CEO Paul Muthaura says the Regulatory Sandbox is set up to innovators work under a less onerous regulatory regime and is expected to attract fintech companies and existing capital markets licensees to test the application of technology to financial services.
“To enhance the Authority’s investor protection mandate, Sandbox participants are required to comply with minimum regulatory requirements prescribed by the Regulatory Sandbox Policy Guidance Note (PGN) such as submission of test plans, which outline key test objectives, testing metrics, performance indicators, and safeguard and remedial measures for test clients,” Muthaura said.
The PGN specifies that the Authority can revoke or suspend an approval to participate in the Regulatory Sandbox at any time before the end of the test period and can take enforcement action against a participant in breach of the regulatory requirements.
Upon exit from the Sandbox, participants could be granted a license or approval to operate in Kenya subject to compliance with existing legal and regulatory requirements.
The Authority may in the alternative grant permission to operate in Kenya subject to compliance with the terms of a letter of no objection.
Muthaura noted that at minimum, Sandbox applicants need to be companies incorporated in Kenya, or existing licensees of the Authority or other capital markets regulators.
Fintech firms are assessed for admission based on their intent to offer innovative products, solutions or services with the potential to deepen Kenya’s capital markets following successful exit from the Sandbox.
The Regulatory Sandbox serves to continuously improve CMA’s understanding of emerging technologies as well as the risks and opportunities that the innovations portend for investors, financial institutions and the regulator. The insights from the tests allow for a more evidence-based approach to regulation.
The Regulatory Sandbox is not an incubation center, physical or virtual space. It is not applicable for proposed products, services or business models that are already clearly addressed under existing laws and regulations.