The Central Bank of Kenya (CBK) and the National Bank of Rwanda (NBR) have entered a Memorandum of Understanding (MoU) that seeks to form a Licence Passporting Framework for Payment Service Providers (PSPs) between Kenya and Rwanda.
The two banks in the agreement are committed to establishing a mechanism through which payment service providers already licensed in one of the two countries would be able to operate in the other country without having to go through the entire regulatory process once again.
According to CBK, the Licence Passporting Framework that is on the table will hopefully put an end to the challenge of different licensing requirements even though the two countries’ regulatory standards are very similar.
The framework that advocates for the mutual recognition of licensing systems will facilitate the facilitated growth of licensed PSPs in both Kenya and Rwanda, recognizing the need to uphold rigorous regulatory measures and supervisory collaboration.
This action of making it possible for fintechs and digital payment providers to easily expand their services outside their home markets will most likely contribute to the improvement of the regional payment ecosystems.
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Market Share and Transformation
According to the central banks, the newly launched framework would not only increase the market share of digital financial services (DFS) providers but also play a critical role in transforming the financial services industry into one that is more seamless, effective, and efficient.
This approach will maintain the highest standards of consumer protection and financial stability while significantly lowering the regulatory costs resulting from the licensing process, said CBK
A major target of the masterplan is the creation of a mutual recognition framework for licensing Payment Service Providers (PSPs) among partner states. This is to reduce the regulatory fragmentation, which has been one of the limiting factors in the expansion of payment services across the region.