The Nigerian Securities and Exchange Commission (SEC) on 16th June, 2021, released a statement on its regulatory incubation program as a necessary requirement for fintechs operating or seeking to operate in the Nigerian Capital Market.
SEC in a statement on Wednesday explained that “The Regulatory Incubation (RI) program is designed to address the needs of new business models and processes that require regulatory authorisation to continue carrying out full or ancillary technology-driven Capital Market activities”
It further stated that “The RI Program has thus been conceived as an interim measure to aid the evolution of effective regulation which accommodates the innovation by FinTechs without compromising market integrity and within limits that ensure investor protection”
Financial Technology also known as Fintech is a technology used to deliver financial services such as money transfer, airtime recharge, internet subscription and the likes.
In Nigeria, there is a growing number in the creation of Fintech companies and businesses leading to the ease of doing business and financial development.
Nigeria’s fintech landscape has been estimated to consist of about 250 fintech companies in the last few years, with the likes of Flutterwave, Paystack and Interswitch (believed to be the first Nigerian Fintech unicorn) topping the chart.
Launching in the third quarter of the year, the Regulatory Incubation Program will kickoff its operations by admitting identified Fintech business models and processes for a period of one year. Participation in the RI program will encompass an Initial Assessment Phase and the Regulatory Incubation Phase. The categories to be admitted into each cohort will be determined based on submissions received through the FinTech Assessment Form and communicated before each date.
FinTechs who operate without any specific regulations governing their business models or who require clarity on the appropriate regulatory regime for seeking the authorisation of the Commission or startups that look into joining the Fintech sector, are encouraged to fill a Fintech Initial Assessment (FIA) form to determine if they are eligible to be a part of the process.
Completed Fintech Assessment Forms will continue to be reviewed regularly.
Empowered by the Investment and Securities Act 2007, the Nigerian Security Commission seeks to regulate and develop the Nigerian Capital markets to “ensure fairness, integrity, ease and freedom of participation (entry & exit)”
However, following the introduction of the RI, it is believed that Nigerian fintech startups such as micro-lending platforms, investment tech, crowdfunding platforms and many other innovations that operate under no specific regulatory framework will greatly be affected. This may result in a halt in operations for affected fintechs until they’re thoroughly certified through the incubation program.