As part of its strategic priority to leverage technology across the capital markets value chain, as espoused in its 2018-2023 Strategic Plan, the Capital Markets Authority (CMA) has facilitated the admission of seven firms in the CMA Regulatory Sandbox since it launch in March 2019. This follows the approval of the Regulatory Sandbox Policy Guidance Note (Regulatory Sandbox PGN) in March 2019.
The firms admitted into the Regulatory Sandbox are; Pezesha Africa, Innova Limited, Genghis Capital Limited, the Central Depository and Settlement Corporation (CDSC), Pyypl Group Limited, Belrium Kenya Limited and Four Front Management. CMA has received 24 applications in; robo-advisory, blockchain technology, tokenization of real estate, providing access to global stocks, crowdfunding platforms, Electronic Know Your Customer platform, Screen-Based Security Lending and Borrowing platform, Regtech solutions, and Data Analytics.
The CMA Chief Executive, Mr. Wyckliffe Shamiah said; ”The Authority’s commitment to the introduction of the sandbox is aligned to the Capital Market Master Plan (CMMP, 2014-2023) which identiﬁes technological innovation as one of the five centres of excellence of the Kenyan capital markets’’. Mr. Shamiah, who launched the CMA Regulatory Sandbox Report, observed CMA’s keen interest in proactively reviewing its supervisory and regulatory model to consider the fast-changing environment across the capital markets’ product and services design, infrastructure, and supervision.
Mr. Shamiah added; “CMA has been at the forefront of implementing initiatives to stimulate and support the growth of FinTech and innovation within Kenya’s capital markets. In line with its facilitative role, the Authority seeks to provide a conducive regulatory environment for the deployment of innovative FinTech and business models that have the potential to deepen capital markets in Kenya’’.
The Report covers some of the key milestones achieved, including SMEs beneﬁtting from funding through the crowdfunding platform operated by Pezesha Limited. It also covers the key lessons the sandbox review committee has learned, opportunities identified so far, and how these will be entrenched to make the future sandbox engagements better. The Authority has also gathered insights to inform the development of a facilitative regulatory framework for Fintechs. The Capital Markets Authority (CMA) has also been pursuing partnerships with key stakeholders which are critical catalysts for the growth and development of the capital markets.
The Report additionally shares insights on the next steps including; need to develop an adaptable and responsive regulatory framework to support FinTech and innovation in the capital markets; working with stakeholders to develop a market-wide regulatory framework for crowdfunding; capacity building on the sandbox for The Capital Markets Authority (CMA) staff and market players; collaboration with other ﬁnancial sector regulators to facilitate a seamless FinTech platform for ﬁnancial sector innovations which may span multiple regulatory perimeters; and automation of sandbox processes including application, assessment, admission, and reporting.
The Capital Markets Authority (CMA) Kenya has been taking progressive steps to create a conducive environment to unlock the potential of the FinTech space in Kenya, including the signing of cooperation agreements with regulators with well-established FinTech frameworks such as the Australia Securities and Investments Commission (ASIC) and the Abu Dhabi Global Markets (ADGM) Financial Services Regulatory Authority.
Strategic engagements with domestic partners and global organizations such as the International Organization of Securities Commissions (IOSCO), World Bank Group, and Global Financial Innovation Network have further provided critical insights on oversight models for the FinTech space. Other partners include Consultative Group to Assist the Poor (CGAP) and Financial Sector Deepening Kenya.
The Regulatory Sandbox allows live testing of innovations under a less onerous regulatory regime. It is expected to attract Fintech companies and capital markets licensees such as stockbrokers, fund managers, investment advisors, and collective investment schemes to test the application of technology on financial services.