The Central Bank of Kenya (CBK) and the National Bank of Rwanda (NBR) have signed a Memorandum of Understanding (MoU) to develop a licence passporting framework for payment service providers (PSPs) operating between Kenya and Rwanda.
The framework is intended to facilitate the mutual recognition of PSP licences issued in each of the two jurisdictions and to enable licensed PSPs to expand across the two markets without undergoing duplicative licensing processes.
The initiative is anchored in the East African Community (EAC) Cross-Border Payment System Masterplan (Masterplan), which seeks to modernise and integrate cross-border payment systems across the EAC. The MoU represents an early implementation step under the Masterplan and may serve as a model for similar arrangements across other EAC Partner States.
Background
The Masterplan establishes a regional strategy aimed at improving the efficiency, interoperability and inclusivity of cross-border payments across the EAC. It identifies several structural challenges affecting cross-border payments in the region, including fragmented regulatory frameworks, duplicative licensing regimes for PSPs, limited interoperability between national payment systems and relatively high transaction costs.
One of the key initiatives under the Masterplan is the development of a mutual recognition framework for cross-border PSP licensing, which is intended to reduce regulatory duplication and support the expansion of licensed payment providers across the region.
Licensing passporting framework
The MoU indicates that the CBK and NBR intend to develop a regime that facilitates the mutual recognition of PSP licences as set out above.
The framework is expected to:
- enable mutual recognition of PSP licences issued by the CBK and NBR;
- reduce duplicative licensing processes for PSPs seeking to operate in both jurisdictions;
- promote regulatory cooperation and supervisory coordination between the two regulators; and
- preserve appropriate regulatory oversight and enforcement powers in each jurisdiction.
Implications for market participants
For PSPs operating in Kenya and Rwanda, the MoU signals a shift towards a more harmonised regulatory framework for cross-border payment services.
We anticipate that the framework may reduce licensing barriers for PSPs seeking to expand into neighbouring markets; support regulatory alignment between the CBK and NBR; and facilitate broader regional initiatives aimed at improving payment system interoperability and cross-border payment infrastructure.
This is also an exciting development that has the potential to share how PSPs scale across the EAC. As one of the first concrete implementation measures under the Masterplan, the Kenya–Rwanda MoU may also serve as a useful reference point for similar arrangements among other EAC Partner States.
