The news:
Yesterday (July 28), Patrick Njoroge, the Governor of the Central Bank of Kenya (CBK) said Flutterwave Inc and Chipper Cash were not licensed as payments processors. It has today issued a statement to financial institutions to cease all operations with the aforementioned companies.
Njoroge at a Monetary Policy Committee said that “Flutterwave is not licensed to operate as a remittance provider or for that matter as a PSB service provider in Kenya”. He added, “They are not licensed to operate and therefore they shouldn’t be operating. We can also say the same for Chipper Cash. ”
The Central Bank of Kenya has now issued a 7-day ultimatum to all banks and financial institutions to stop all transactions with the companies.
According to the National Payments System Act, a set of rules and instruments that guide the transfer of funds, any person who neglects, refuses or fails to comply with the issued directive commits an offence and shall be liable on conviction to a fine not exceeding $4,203 or to imprisonment for a term not exceeding three years, or both.
The Controversy:
Flutterwave has however sent out a statement, affirming that it had “submitted its application for a Payment Service Provider licence” in 2019 and has also “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.”
Chipper Cash’s Country Director in Kenya, Leon Kiptum had earlier in January told Hapakenya that Chipper Cash was in the process of securing the International Money Transfer Operator (IMTO) Licence and was waiting “to be issued with because we have met all the requirements.”
Was there ever an authorisation?
The National Payments System Act (PDF) on the Authorisation of service providers. 12. (1) states:
- No person shall in Kenya conduct the business of a payment service provider except an authorized payment service provider.
- (2) A person who contravenes the provisions of subsection (1) commits an offence and shall, on conviction be liable to a fine not exceeding $4,203 or to imprisonment for a term not exceeding three years, or to both.
Flutterwave and Chipper have however processed payments for over 7 years before they were declared unlicensed. Note that CBK did not mention a revocation of licence, rather, it points to a lack of authorisation. The questions therefore keep growing:
- Was this merely an oversight by Kenya’s apex bank?
- Were there no regulations while they were in operation?
- Will the fintech companies be penalised for operating without a licence?
Getting licensed:
CBK makes provisions for the licence procedure which a legal company may seek authorisation properly.
- A person proposing to transact the business of a payment service provider shall, before commencing such business, apply to the Bank for authorization.
- After a prescription form is filled for a fee, the CBK shall now decide whether the entity seeking authorisation meets its requirements.
Nothing here suggests that it could take years to get the licence. However, an infographic by Osaretin Victor Asemota, co-founder of SwiftaCorp, reveals that payments processors in Kenya have operated for over a decade before the CBK issued a licence.
Infographic showing launch date of six companies and the year of getting licensed.
