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FINTECH | Fintech Regulation in the CEMAC Zone

FINTECH | Fintech Regulation in the CEMAC Zone

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The Central African Economic and Monetary Community ( the “CEMAC Zone”) has witnessed a remarkable surge in electronic money transactions in recent years, with 572,362,635 transactions valued at XAF 8,296,166,023,386 (over US $14 billion) recorded in the 12 months leading up to December 2018.

This unprecedented growth, which surpasses any other statistics in sub-Saharan Africa, highlights the significant role of technology in bridging the financial inclusion gap in Central Africa. This exponential growth also creates the need for a regulatory framework to govern the operations of financial technology (FinTech) companies.

In response to the above demand, the Ministerial Committee of the Central African Monetary Union (UMAC) adopted Regulation n o 04/18/CEMAC/UMAC/COBAC on Payment Services within the CEMAC on 21 December 2018.

It is worth noting that, prior to the enactment of the 2018 CEMAC Regulation, only credit or microfinance institutions were authorized to issue e-money, following the banking model established by the Central Bank. However, the new regulation introduced a non-banking model, allowing entities beyond traditional financial institutions to issue e-money.

This fundamental shift grants non-banking institutions called Payment Institutions the authority to issue e-money, thereby expanding the landscape of payment service providers within the CEMAC zone (Cameroon, Chad, Equatorial Guinea, Gabon, the Central African Republic (CAR) and the Republic of the Congo)

Also, prior to the enactment of the 2018 CEMAC Regulation, Mobile Money transactions in the CEMAC zone were predominantly facilitated by telecom companies through technical partnerships with licensed banks. However, with the 2018 CEMAC regulation, FinTech companies can now engage in e-money issuance activities as payment institutions without the obligation of partnering with credit or microfinance institutions. Nevertheless, companies utilizing mobile telephony technology for payment services must obtain authorization for the specific technology.

Under the 2018 CEMAC regulation, payment services are defined as the issuing, providing, or managing payment instruments, means of payment, or the execution of payment orders. This definition encompasses a wide range of activities related to fund transfers, irrespective of the medium or technical process employed. The payment services covered by the new regulation include cash payments and withdrawals into pay or payment accounts, direct debits, payment transactions using cards or similar devices, one-off or permanent transfers, provision of payment instruments, money transmission services, and the issuing and management of e-money.

Apart from the traditional players (credit or microfinance institutions) in the payment services sector, the 2018 CEMAC Regulation introduces three categories of actors:

  • approved or authorized payment institutions;
  • distributors of payment services; and
  • sub-distributors of payment services.

Payment Institutions: as defined by the regulation, exclusively provide payment and related services as their main profession. They do not engage in foreign exchange payment instrument activities or deposit collection. These institutions operate solely within the CEMAC zone and require authorization from the National Monetary Authority of the CEMAC Member State, subject to approval from the Banking Commission of Central Africa (COBAC), following a positive opinion from the Central Bank to execute payment services.

Distributors and Sub-distributors: These individuals or entities act on behalf of authorized payment service providers and market their contracts and services. Distributors and sub-distributors are responsible for offering payment services to customers, and their activities are subject to the limits and responsibilities defined by the payment service providers.

In conclusion, the adoption of Regulation n o 04/18/CEMAC/UMAC/COBAC on Payment Services within the CEMAC zone marks a significant milestone for the FinTech industry in Central Africa. This regulatory framework not only addresses the need for comprehensive oversight of electronic money transactions but also paves the way for increased innovation and competition among payment service providers.

As the fourth industrial revolution continues to reshape the financial landscape, the CEMAC zone is well-positioned to harness the power of technology to propel financial inclusion and economic progress.

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Epanty Mbanda

Attorney-at-law | Corporate-Commercial | Technology (FinTech+Blockchain+Cryptocurrency) | Securities | Tax| Managing Partner at 4M Legal and Tax ( Law Firm in Cameroon)

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