Doing Business in Africa: How Fintech is driving financial inclusion, the role of Regulation and compliances.
By Neneng Yannick.
As we know, Africa is a continent with a multinational structure consisting of 54 countries and several regional economic committees. With its diversity, Africa has significant and growing potential for economic growth and development.
Therefore, we cannot talk about economic development without emphasizing financial inclusion.
Indeed, financial inclusion is an important aspect of economic development not only in Africa but globally.
Economic growth has become rapid on the African continent thanks to trade and more specifically cross-border and international trade.
Furthermore, global linkages have accelerated technological developments, encouraged Africa's emerging economies to adopt the resulting models and create financial solutions that respond to local realities, in which financial technology impacts business operations most clearly.
Financial inclusion on the African continent in 2023 stands at 43% of the continent's 1.18 billion people, all of whom are impacted by Fintech.
Since 2015, fintech has impacted financial inclusion in the delivery of financial services across the African continent, with Kenya, Nigeria, Zambia, South Africa and Morocco leading the way in fintech.
Recently, the Fintech market is rapidly gaining momentum on the continent, with Cameroon setting the trend for financial inclusion in the CEMAC region.
In addition, doing business in Africa presents many challenges, including navigating the regulatory environment and accessing financial services.
This is where Fintech, as a driver of financial inclusion, plays a key role in influencing business in Africa.
- Financial technology versus Financial Inclusion.
On the one hand, Fintech is the integration of technology in developing, upgrading, improving and providing financial services. while on the other part,
Financial inclusion can be described as a disruption where individuals and businesses have access to useful and affordable financial products and solutions that meet their needs for transactions, payments, transfers and foreign exchange responsibly and sustainably.
Related to the disruption of financial inclusion, Fintech is a disruption that drives financial inclusion by providing financial solution options to individuals and businesses, impacting the business narrative in Africa.
2. How fintech is driving financial inclusion on the African continent.
Fintech, the engine driving financial inclusion in Africa, involves technological innovation in the delivery of financial services. This technological innovation comes from solutions and products created by fintech, providing options for individuals and businesses to:
- Create a competitive market for exchange rates at lower fees.
- Enables fast and secure payments.
- Access to multiple payment options.
- Access to all major African currencies.
- Access to treasury services.
Additionally, some of these Fintech products and solutions include mobile banking, mobile money, remittances transfer and digital asset management that facilitate the delivery of financial services through technology.
According to the Global Findex database, Africa leads the world in mobile money adoption, which has had a significant impact on business on the continent in terms of payments and transfers.
3. Fintech Solutions for businesses on the Africa Continent.
Fintech solutions in the African continent have a growing market with opportunities to support businesses and the digital economy through affordable financial services.
The digital revolution has provided options for individuals and businesses across the continent with fintech solutions to meet their financial needs.
These solutions come from payments, transfers, foreign exchange and digital asset management.
Additionally, fintech has influenced financial services, insurance, lending, betting, remittances, payments and e-commerce activities on the continent.
Now the big question is how can individuals and organizations access fintech solutions that can impact their business in Africa?
Due diligence should be a top priority for individuals and organizations seeking financial solutions to facilitate their business transactions in Africa.
Contacting the right Fintech lawyer, legal advisory is vital guiding businesses and individuals subject to the right channels and platforms that can facilitate their financial transactions doing business on the continent.
4. How Fintech driving inclusion is impacting doing business in Africa.
The impact of financial technology on financial inclusion in business in Africa can be seen in the following aspects:
- First, facilitating trade within national borders.
- Second, facilitate cross-border trade between African countries and globally.
- Third, it also impacts the development of products and services such as AI, big data, biotechnology, blockchain, education, e-commerce, online bettingand other new models developed to create jobs and reduce poverty.
5. The role of Regulation and Compliance.
a) Regulation verse compliance?
Regulation and compliance are paramount in all jurisdictions worldwide when doing business, and this is no different when doing business in Africa.
The role of fintech regulation on the African continent is for governments to establish standards that are binding with national or regional laws and policies that protect the integrity of the state and its people.
Additionally, to better navigate the Fintech regulatory landscape in Africa, individuals and businesses must comply with the laws and policies put in place by regulators.
Africa, with its multinational structure, has diverse legal regulations related to fintech, which raises the issue of regulatory diversity.
However, five key regulatory points cut across the Fintech regulatory landscape in Africa.
These 5 key points will include:
i. Licensing and Registration
One of the key points of fintech regulation that cuts across the African continent is the requirement for companies to register and obtain licenses with the relevant regulatory authorities.
Company registrations will require criteria such as the right company structure and share capital, tax registration understanding jurisdictional corporate tax regime, opening and operating of company bank accounts.
In terms of licensing, Fintech company should be able to know the necessary criteria to be meet up with in accordance with jurisdictional Central Bank policies and the relevant licensing authorities.
Hence, due to Africa’s multijurisdictional nature, Company registration for Fintechs and obtaining relevant license differs from one jurisdiction to another across the continent.
It is therefore important for businesses to familiarize themselves with the specific requirements for operating within and across African member states.
For example, Fintech regulation respect to registration and licensing differs in Nigerian, Kenya, south Africa, Zambia and the CEMAC region.
ii. Data Protection and Privacy
Data protection and privacy are top concerns in the fintech sector globally, and the African continent is no exception.
Fintech companies operating in Africa must comply with data protection laws and regulations, which govern how personal and financial data is processed and stored.
With the growing emphasis on data privacy on the continent, it is essential for fintech companies operating in Africa to ensure compliance with regulations.
Data protection as a developing concern on the continent not just with Fintech has urged, most governments to adopt data protection laws to address the need of privacy and protecting data generally.
Presently on the continent, there are 37 African states that have enacted data protection laws and 29 states having well established bodies enforcing data protection law.
Hence, governing and monitoring how personal and financial data is processed and stored, ensuring Fintech operators compliances with regulations.
iii. Anti- Money Laundering and Know Your Customer
Regulations on Anti-Money Laundering and Know Your Customer are designed to prevent financial crimes and ensure the integrity of the financial system and states’ security.
Fintech companies operating across the continent are required to implement strict Anti- Money Laundering and Know Your Customer procedures to verify their customers’ identities and monitor transactions for suspicious activity.
The fight against financing terrorism and the proliferation of weapon of mass destruction is a big concern and treat for most African states.
Hence, these regulations are intended to protect the financial systems from exploitation by criminal enterprises and terrorist.
iv. Consumer Protection
Consumer protection is another key area of fintech regulation across the African continent.
Fintech companies are required to provide transparent and fair services to their customers. Governments role is therefore to ensure that consumers are not taken advantage of or exposed to unnecessary risks.
This includes requirements for clear and accurate disclosure of clear terms and conditions as well as customers’ dispute resolution mechanisms.
v. Cross- Border Transactions
Due to the multinational nature of the African continent, Fintech operators must also comply with regulations relating to cross- border transactions.
These regulations include considerations related to foreign currency exchange, international remittances and other cross- border financial activities.
These cross- border transaction regulations are vital for fintech companies aim at overcoming the challenges of in- flow and out- flow of cash facilitating transparent and compliant cross- border transactions.
6. Fintech Regulation in the CEMAC (The Central African Economic and Monetary region).
CEMAC is a regional integration of Six African Countries (Chad, Cameroon, Central African Republic, Gabon, Republic of Congo and Equatorial Guinea) aimed at fostering economic growth and development within member states through cross- border trade.
The CEMAC region has a common financial market and a legal framework for fintech operations in the region. This is most especially relevant to Fintech company registrations and licensing processing.
The OHADA business laws are the main regulating business instrument in the region couple with the common Bank of Central African States and the Central African Financial Market Surveillance Commission responsible for overseeing and regulating financial activities in the region.
Hence, the CEMAC region financial market is a great space and has flexible regulations in terms of fintech operations.
7. Possible Regulatory Challenges for Financial technology in Africa.
The multi-jurisdictional landscape of the Continent is one of the challenging aspect for Fintech companies.
Having to deal with multijurisdictional regulations and compliance is a nightmare.
Hence, compliance is still the way forward to gain access into new markets and jurisdictions across Africa.
8. The role of Fintech lawyers & compliance officers.
The role of a Fintech lawyer is essential, subject to advisory and compliance with jurisdictional regulations, national laws, business environment and ground experience on Fintech issues.
Fintech lawyers are therefore best placed to advise and guide Fintech companies in their registration, tax and licensing compliance with relevant authorities in all jurisdictions.
Where should Fintech consumers look to find the right Fintech solutions and platforms to facilitate their business transactions in payments, transfers and foreign exchange?
Fintech Lawyers can better advise and guide individuals, businesses and organizations to the appropriate channels and platforms to access financial solutions that support their business transactions.
It is imperative to reach out to the right contacts and channels when looking for Fintech solutions to facilitate corporate financial transactions.
In summary, the fintech landscape in Africa is expanding and the regulatory landscape also plays a key role in shaping the sector.
Fintech companies must navigate and comply with complex web of regulations related to registration and licensing, data protection, AM/KYC, consumer protection and cross- border transactions to operate successfully on the continent.
By staying informed and ensuring compliance with these regulations, fintech companies can build trust with regulators and consumers, while contributing to the growth and development of the fintech sector in Africa.
9. The Role of Neneng Law Office in the Fintech Sector in Africa.
Looking for a reputable law firm in Cameroon and the CEMAC region to help you navigate the fintech environment? Neneng Law Office is the place to go.
We are committed to offering our clients with high-quality legal services based on our years of experience and competence in the fintech sector.
Whether you need help in fintech legal advisory, legal due diligence, registration and licensing, advice and guidance to payment, transfer and foreign exchange channels and platforms or any other legal concern, our team of qualified lawyers are ready to help you navigate the fintech legal system's complexities. Client satisfaction is Neneng Law Office's top focus, with customized attention and tailored solutions for every case.
You may rely on our professionalism and deep knowledge of the Fintech and regulatory framework in Cameroon and the CEMAC region. For any of your legal needs, contact Neneng Law Office now.