A new regulatory framework being developed by the Central Bank of Kenya and the National Bank of Rwanda could reshape how payment companies expand across East Africa by removing one of the sector’s most persistent barriers: duplicate licensing.
The two regulators recently signed a Memorandum of Understanding to create a licence passporting framework for Payment Service Providers (PSPs). While the agreement itself marked the formal start of cooperation, the structure behind the framework reveals a broader attempt to address regulatory fragmentation that has slowed the regional growth of fintech firms.
The initiative sits within the East African Community (EAC) Cross-Border Payment System Masterplan, a five-year programme running from 2025 to 2030 that aims to modernise payment infrastructure and harmonise regulation across partner states.
A longstanding barrier to regional expansion
For many fintech firms, expanding beyond their home market has historically meant repeating nearly identical licensing processes in each jurisdiction. Payment providers licensed in Kenya, for example, must typically submit new applications, meet similar capital and operational requirements, and undergo separate regulatory reviews before entering neighbouring markets such as Rwanda.
The Kenya–Rwanda Licence Passport would enable regulators to recognize each other’s licensing regimes, allowing PSPs approved in one jurisdiction to operate in the other through a streamlined approval process instead of submitting a full licence application. Regulators say the approach maintains oversight while reducing administrative duplication.
Regulatory cooperation remains central
The framework does not remove regulatory supervision. Instead, it introduces deeper cooperation between the two central banks. A PSP entering the partner market would still be required to comply with local prudential rules, consumer protection standards and operational requirements. The two regulators will also coordinate supervisory activities to monitor firms operating across both jurisdictions.
Implementation will be managed by a joint technical committee tasked with building the administrative and regulatory mechanisms needed for cross-border passporting.
Technical standards behind the framework
The system being developed relies on several technical and regulatory pillars designed to ensure interoperability and financial stability. One of the most important is the adoption of ISO 20022 messaging standards for cross-border payments. The standard enables richer payment data and more consistent communication between financial systems, helping reduce settlement delays and reconciliation issues.
PSPs participating in the framework will also be required to demonstrate operational readiness, including anti-money laundering and counter-terrorism financing controls, cybersecurity safeguards and adequate capital structures. Customer funds must also be protected through trust structures or similar safeguarding arrangements.
Building regional payment infrastructure
The passporting system is expected to eventually connect with a regional instant retail payment switch planned under the EAC payments modernisation programme. The infrastructure upgrade is intended to complement the existing East African Payment System (EAPS), which handles cross-border settlements between central banks.
Together, the regulatory and infrastructure changes are designed to support faster retail payments across the region and reduce reliance on costly international payment networks.
Implications for fintech companies
For fintech firms and mobile money operators, the framework could shorten the timeline for entering new markets. Lower regulatory barriers may allow companies to scale services more quickly across the Kenya–Rwanda corridor, particularly in digital remittances, merchant payments and cross-border e-commerce.
Greater competition among payment providers may also encourage the development of new financial products tailored for cross-border trade and regional consumers.
Trade links driving demand for better payments
Improved cross-border payment systems are becoming increasingly important as trade between the two countries expands. Kenya exported goods worth about KSh 40 billion to Rwanda in 2024, according to trade data, creating growing demand for faster and more efficient settlement mechanisms for businesses operating across the corridor.
A model for wider EAC integration
The Kenya–Rwanda framework is the first initiative under the EAC Cross-Border Payment System Masterplan to move into implementation. If successful, the model could be extended to other partner states within the regional bloc, potentially allowing payment providers to expand across multiple markets under a coordinated licensing system.
Such arrangements would represent one of the more significant regulatory shifts for East Africa’s fintech sector, where companies have long faced fragmented national rules despite operating in increasingly connected digital markets.
Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.