Fintechs & Regulators

Kenya’s Central Bank Says Flutterwave & Chipper Cash Lack Licenses [UPDATED]

By  |  July 28, 2022

Flutterwave and Chipper Cash, two of four African fintech startups that got their horns last year, have been singled out by the leadership of Kenya’s apex bank as financial services companies operating in the country without fulfilling important licensing requirements.

In what appears to be a confounding revelation, Patrick Njoroge, Governor of the Central Bank of Kenya (CBK), mentioned in the Monetary Policy Committee press briefing taking place Thursday, July 28, in Nairobi that both companies do not possess the required licenses that would authorise their operations in the country.

“Flutterwave is not licensed to operate as a remittance provider or payments service provider (PSP) in Kenya. They are not licenced to operate and therefore, they should not be operating, and I think Chipper Cash, we could also say the same,” Njoroge said.

Flutterwave, which is Africa’s highest valued startup given its last funding round gave it a value of around USD 3 B, is a prominent fintech player in Africa, providing payment infrastructure for global merchants and payment service providers across more than 30 African countries, including Kenya where it expanded into in 2016 and even faced a scandal that sparked a lawsuit by a former employee; a Kenyan national who led the East Africa expansion initiatives.

Chipper Cash, a startup backed by Jeff Bezos and other high-profile investors in the venture capital mainstream, boasts 4 million users on its platform which supports peer-to-peer cross-border payments in Africa and Europe; as well as solutions for businesses and merchants to process online and in-store payments. Chipper Cash’s valuation galloped to USD 2 B last year in unprecedented fashion and it’s expanded to serve at least seven African countries.

The words of the CBK Governor, which blatantly casts the two prominent fintech startups as non-compliant on licensing regimes, are somewhat surprising but not exactly out of the blue given earlier revelations from an ongoing legal matter that places Flutterwave at the centre of an elaborate money laundering controversy.

Earlier this month, Kenyan authorities indicted Flutterwave in a USD 200 M money laundering allegation that also implicates a network of obscure companies, some of which are led by persons with suspicious ties to Flutterwave, or at least, its embattled founder, Olugbenga Agboola. A Kenya court order froze multiple bank accounts tied to Flutterwave and others. It was the latest of several well-publicised scandals around Flutterwave in the last couple of months.

The latest case also alleges that Flutterwave is operating in Kenya without the required licenses. The prosecutor claims Flutterwave masked the nature of its business by purportedly offering a platform for payments without receiving permission from the Kenyan central bank. They claim that under the pretext of offering merchant services, the bank accounts linked to Flutterwave were exploited as channels for money laundering.

Like some of the other companies embroiled in the matter, Flutterwave maintains there was no wrongdoing or impropriety, reiterating in a statement (that later had to be modified) that “we are a financial technology company that maintains the highest regulatory standards in our operations.” It is understood recourse is now being pursued, though the matter remains up in the air amid some noteworthy evidence that fuels suspicion.

The most recent comments by the CBK Governor on the status of the operations of the two fintech unicorns in Kenya would raise further eyebrows.

However, industry insiders note that the Kenyan regulator has been tough to budge when it comes to issuing payments/fintech licenses, and the companies under the microscope may be struggling to complete the process, but not necessarily for lack of trying.

The licensing hurdle is such that fintech companies in Kenya typically have to operate for years before securing the formal licenses. For example, prominent Kenyan fintech, Cellulant, which launched in 2003 and went full-fintech in 2011 only got a CBK license in February this year. Another known local fintech startup, Pesapal, got the license in June 2021 having launched 12 years prior.

Thus, it’s somewhat bizarre that the CBK is hinting at the license shortcomings of observedly international fintech companies, knowing the observed laggardness of the licensing process has seen the CBK only begin to issue fintech licenses in the last two years to mostly local firms.

However, the observed recent softening of posture on the part of the CBK with respect to issuing licenses could be expected to bring some joy.

Feature Image Credits: Wired

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