One of the UN Capital Development Fund’s (UNCDF) greatest strengths is to facilitate dialogue between various stakeholders to advance growth and fulfil the local government’s ultimate goals: reducing poverty and improving livelihoods for those underserved.

Last month, UNCDF convened a roundtable discussion between Financial Services regulators and fintech representatives in Zambia to foster an enabling and conducive regulatory environment for digital financial transformation through the FinTech industry.

These discussions are crucial considering the significant growth of the FinTech industry in Zambia. A FinTech Scoping conducted in 2017 by UNCDF in Zambia revealed that around 25 FinTechs were developing solutions across various sectors such as PAYGO solar, health, finance, education. The study also indicated that FinTechs are potential drivers of financial inclusion because they target the underserved. However, FinTechs’ heavily depend on stakeholders such as banks, microfinance institutions and regulators to operate properly and to be sustainable.

Within this context, UNCDF invited key regulators and stakeholders such as the Bank of Zambia (BOZ), Securities and Exchange Commission (SEC), Pensions and Insurance Authority (PIA), Competition and Consumer Protection Commission (CCPC), the Bankers Association of Zambia (BAZ), the Capital Markets Association of Zambia (CMAZ) and the Zambia Information Communication Technology Authority (ZICTA). BongoHive, an innovation hub that works closely with FinTechs and CGAP, participated as well.

Regulators agreed upon the need for an enabling regulatory and policy framework that both protects the end-user and allows for the testing of new and innovative solutions.

The roundtable discussions revealed several initiatives regulators have already adopted to foster the responsible growth of the Zambian FinTech industry. These include but are not limited to:

• Information exchange and licensing facilitation between regulators;
• Innovation programmes hosted by regulators e.g. the ICT Innovation Programme hosted by ZICTA;
• Exploring tools such as sandboxes in facilitating easier market entry and testing for FinTechs.

During the roundtable discussions, regulators of the financial sector reinforced that they share the mandate of developing deeper and more inclusive financial and capital markets, while simultaneously working to ensure customer protection and industry integrity. The sessions also revealed that regulators aim to continue the dialogue with the FinTech industry as it develops, to advance the establishment of an enabling policy environment.

The regulators were very engaged and shared their ideas openly about what kind of industry they would like to see developed. “We need a sector-wide approach to FinTechs so that they do not have to deal with each regulator individually. We as regulators need to share relevant information amongst ourselves to simplify their process,” said a representative of ZICTA.

Through the development of partnerships with both the FinTech industry and the regulatory partners, UNCDF aims to bridge the gap between these two stakeholders and support the creation of a responsive, adaptive and enabling policy environment that encourages responsible innovation and digital financial transformation in Zambia.

To this end, FinTech4U Accelerator Programme, a UNCDF initiative and collaboration with BongoHive, aims to address some of the gaps in the Zambian digital economy. For example, FinTechs rarely use an iterative product development model and rarely test their products with real customers, or rarely have the ability or access to other partners in the market, especially large digital finance providers. Another challenge faced by Fintechs is their lack of experience or know-how to adequately navigate regulatory requirements. The FinTech4U Accelerator Programme addresses all these challenges and build the FinTechs’ capacity in other areas. As a part of the programme, UNCDF is providing technical assistance to BOZ and SEC as they develop a framework for regulatory sandboxes within which FinTechs can pilot, stress test their digital financial solution, and eventually exit and scale.