The consultative paper issued by the Capital Markets Authority for the Kenya's proposed regulatory sandbox framework, published for comment.
The paper provides an analysis of existing regulatory sandboxes and comparison of the UK, Australia, Malaysia, Singapore and Abu Dhabi.
The Capital Markets Authority is mandated to promote the growth and development of Kenya’s capital markets, with the aim of positioning Nairobi as the preferred regional investment destination of choice through facilitative regulation and innovation. In this regard, the Authority is in the process of developing a framework to create a ‘safe space’ (or Regulatory Sandbox) in which businesses can test innovative Financial Technology (FinTech) products, services, business models and delivery mechanisms for the capital markets in a live environment, without immediately incurring all the normal regulatory consequences of engaging in the Fintech activity in question.
In view of the foregoing, the Authority has developed the First Consultative Paper that discusses the key ingredients of such a regulatory regime, to inform stakeholders on benefits, rationale, practices in other jurisdictions and a proposed framework for Regulatory Sandbox in Kenya.
BACKGROUND AND RATIONALE FOR REGULATORY SANDBOX
Kenya’s Vision 2030 and Fintech
Kenya’s Capital Markets - Existing supportive regulatory framework for Principle-based regulation
Emergence of Financial Technology (Fintech) as a new focus area
Increasing use of mobile phones
Capital markets-based Fintech innovations
Peer to Peer (P2P) Finance
SCOPE OF THE REGULATORY SANDBOX IN THE KENYAN CONTEXT
Introduction to Regulatory Sandbox
Benefits of Regulatory Sandbox
Reduced time-to-market at potentially lower cost
Better access to finance:
More innovative products reaching the market:
Contained consequences of failure:
Reaching the best solution for the customer:
Salient Characteristics of Fintech
Risks of Regulatory Sandbox
APPLICATION OF REGULATORY SANDBOXES IN OTHER JURISDICTIONS
Monetary Authority of Singapore (MAS)
ABU DHABI REGULATORY SANDBOX
COLLABORATIVE INITIATIVES UNDERTAKEN BY THE CMA ON FINTECH
Crowdfunding Policy & Regulation: Market Development in East Africa
Engagement with ICT Business incubators
Engagement with other regulators and other international standard setting bodies
Table 1. Comparative Sandbox Criteria in Various Jurisdictions
OPTIONS IN INTRODUCING THE KENYAN REGULATORY SANDBOX
CONCLUSION AND RECOMMENDATIONS