Financial Crime World

Fintech Regulatory Challenges in Botswana: A Barrier to Financial Inclusion

Botswana has been actively developing its fintech sector to promote financial inclusion and leverage technology. However, regulatory challenges are emerging as a major obstacle to the country’s progress.

The Current State of Fintech Regulation in Botswana

The Bank of Botswana, Botswana Communications Regulatory Authority, Non-Bank Financial Institutions Regulatory Authority, Financial Intelligence Agency, and Competition Authority are some of the key regulatory bodies that shape the fintech landscape. While the regulatory framework is robust, it lacks alignment between payments and other related laws.

Key Challenges in Fintech Regulation

  • Interoperability issues: Different regulatory requirements for various financial services hinder seamless transactions.
  • Slow regulation: Regulatory developments are not keeping pace with the evolution of fintech products and services.
  • Limited availability and reliability of mobile telephony infrastructure in rural areas, cyber security breaches
  • Little or poor market analysis by start-up companies

The Impact on Financial Inclusion

Despite efforts to promote financial inclusion, only about 50% of Botswana’s population has access to formal financial services and products. 26% rely on informal financial services and products, while the remaining 24% are excluded from both.

Barriers to Financial Inclusion

  • High minimum balance requirements
  • Account maintenance fees
  • Bank charges

The Way Forward

Forward-looking regulation, risk-based application of Know-Your-Customer (KYC) requirements, and incubation centers or sandboxes are necessary to support start-ups and ensure regulatory compliance.

Supporting Start-Ups and Regulatory Compliance

  • Incubation centers provide resources and mentorship for start-ups.
  • Sandboxes allow companies to test innovative products and services in a controlled environment.
  • Risk-based application of KYC requirements helps prevent financial crimes while minimizing the regulatory burden on legitimate businesses.