The Executive Director-Supervision at Bank of Uganda (BoU), Dr. Tumubweine Twinemanzi said Thursday that the Central Bank is working on the Regulatory Sandbox, which will, hopefully, be rolled out by the end of this year to guide on how financial technology services, or FinTechs, can operate in the country.
The Central Bank of Bahrain defines a Regulatory Sandbox as a framework and process that facilitates the development of the FinTech industry in a calculated way. In order to create a safe space for FinTech startups and other innovators to conduct live experiments in a controlled environment, various governments have since 2016 been launching sandboxes to cushion risks.
The traditional banking system in Uganda is still poor, with most banks concentrated in main towns, which is a reason FinTechs, because of their flexibility, can easily penetrate the market faster, if they are innovative enough to tailor their products with the market needs.
And, according to Dr. Tinwemanzi, this is the reason they want to regulate them because the Central Bank is aware of the risks that they come along with. But he was also quick to add that the regulations are not meant to hamper innovation but to fight risks that may come along, for instance, fraud and cybercrimes.
“… by the end of this year, we will have established basic guidelines for a regulatory sandbox … we are trying to appreciate what technology can do,” he said. “As regulators, our focus is on risk, what kind of risk are they (Fintechs) bringing … as you plan, bear in mind what the regulator is focusing on. What are the potential (both intended and unintended) consequences? We want to focus on the risks that your product might bring to the financial services but also be mindful of the risk we introduce to killing or hampering or, in any way, restraining innovation.”
Formerly at Uganda Communications Commission (UCC) as a director of Industry Affairs and Content, Dr. Twinemanzi was speaking at the second general meeting for Financial Technology Service Providers Association Limited (FITSPA), which was held at Protea Hotel in Kampala.
Formed in 2017, fitspa aims at building Uganda’s digital economy by bringing together diverse partners to share knowledge and build a strong base for shaping the financial technology market in Uganda.
Headed by Muyiwa Asagba, the managing director Interswitch Uganda, the association has 16 companies registered as members. Membership fee is Shs3.5 million.
Speaking at the event, Dr. Tumubweine Twinemanzi praised the members for starting the association, promising to always work with them in formulating policies for the financial sector.
The meeting featured presentations from Allan Rwakatungu, the managing director, Xente, who walked the audience through the current state of the association; Denis Kakembo, a tax specialist, and energy lawyer — led the discussion on mobile money taxation; and Kenneth Legesi, a manager of Corporate Finance/Infrastructure Advisory at Deloitte, talked about how the association can help build Uganda’s economy.
Legesi told the entrepreneurs that if they want to make a strong impact, they must be the leaders and not followers. He argued that the market is constantly evolving and if they wait to learn from others instead of leading, they could be left behind or die on the way.
He also advised the companies that they should ensure that their products assure the customer of transparency, they are flexible and, more importantly, they should use the association to root for appropriate policies.