MasiboLaw

Building a business in the payments space in Kenya is quite an uphill task. From the numerous and relentless requirements from the Central Bank of Kenya to figuring out how to incorporate the proper structures for your business. At other times, entrepreneurs are stuck at getting evidence of having KES 5,000,000 or around 50,000 USD in their bank account to get the license. A lot of these hurdles can seem impossible to navigate especially if you want to operate a financial technology company in Kenya. 

Whereas there are no shortcuts to getting authorization from the Central Bank of Kenya, there are some hacks and tricks that you can use to make the process easier for yourself;

1. Use a Holding Company

One of the ways to more easily navigate forming a trust for your payments business, especially if you are branching out from another business, is to create a separate holding company to run the business and its trust account. One of the benefits of using a holding company is you do not need to get individual trustees for your trust as you can list the holding company as a trustee for your payments business. Whereas the holding company will still be scrutinized by the CBK, it eases the strain of finding natural human trustees for your Trust. It is one of the hacks that Safaricom used to register MPesa as a Trust.

2. Follow Instructions and Expect the Unexpected 

When it comes to licensing, practice has taught me that not everything required is written down and some things can only be learnt from experience. One of the reasons that licensing is such a big deal right now is because of money laundering and data protection concerns. What this means is that despite it not being explicitly written in the licensing requirements, you may need to get a license from the Office of the Data Commissioner to get any License from the CBK. You will also need to have comprehensive and contextualized privacy and data protection policies.

3. Be sure of the license you need

Not every fintech that deals with money should seek a license as a Payment Service Provider (PSP), some are better suited as Money Remittance Providers (MRP) or as other entities. Although they share a lot of similarities, PSPs and MRPs are two different entities which have different licensing processes and core capital requirements. Therefore it is important to find out which exact license you need so that you do not waste time seeking the wrong license. 

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The writer is a lawyer who specializes in offering legal services to people in technology. You can reach him through info@masibolaw.co.ke