If you have ever considered setting up a fintech platform in Nigeria, you will agree that the entry barrier into the fintech space has been raised high with increased share capital requirements to be deposited in escrow while applying for a CBN license, not to mention other regulatory requirements which must be followed to the latter in other to gain the requisite license.
This restriction makes it difficult if not impossible for innovators within the space with little to no capital to nurture their dreams to light.
It is as a result of this, that the Central Bank of Nigeria (CBN), in the bid to create an enabling environment for innovative products within the sector to thrive in a controlled environment and with regulatory oversight, created Regulatory Sandbox Programme.
In this article, we will examine what the Regulatory Sandbox Programme is all about.
WHAT IS A REGULATORY SANDBOX
As explained by the CBN, a regulatory sandbox is an environment and process in which firms conduct live tests of new, innovative products, services, delivery channels, or business models under the supervision of a regulator.
The aim of this is to promote innovation in a safe and responsible manner.
Existing regulations are relaxed under this environment and give room for amending existing regulations that are at par with the latest developments within the sector.
Many countries have regulatory sandboxes such as;
United Kingdom – Financial Conduct Authority (FCA) Regulatory Sandbox
Singapore – Monetary Authority of Singapore (MAS) Fintech Regulatory Sandbox
Kenya – Capital Markets Authority
India – International Financial Services Centres Authority (IFSCA) Regulator Sandbox India
Russia – The Bank of Russia’s Regulatory Sandbox
WHO CAN APPLY?
The application is open to firms with already existing CBN licences such as banks and Fintech platforms as well as other local companies.
WHAT PRODUCTS OR SERVICES ARE TESTED?
The tests are limited to payment products and services. Therefore, innovative payment products and services with technologies are not currently covered under existing CBN regulations.
WHEN CAN FIRMS APPLY?
The application for the regulatory sandbox is only open at certain times of the year. Therefore companies participate in cohorts.
OTHER KEY POINTS TO NOTE
Participating in the sandbox does not guarantee grants or a license. The application process is carried out in 4 stages;
Stage 1 – Submitting through the portal
Stage 2 – Review after submission
Stage 3 – Application assessment to determine whether or not the application satisfies the criteria for selection
Stage 4 – Notification of the applicant/innovator where there is approval and engagement commences.
At the time of publishing this article, applications for the last cohort were concluded on 1st February 2023.
Firms and individuals who intend to apply for the Sandbox program in the future should visit the CBN Sandbox website for notification on the next cohort.
Need advice on the requirements for starting your fintech company in Nigeria? Please reach out to us via the Whatsapp icon on the lower right part of the page or HERE, to book an appointment, and we’ll be delighted to assist you.
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