Compliance in Kenya’s Finance Industry: A Call for Unification and Reform

Kenya’s financial sector is facing significant challenges due to regulatory fragmentation, inadequate coordination, and inconsistencies. This has led to a plethora of regulations, statutes, and circulars that new entrants must navigate to understand their obligations. As a result, competition, consumer protection, and responsible business conduct are hindered.

The Need for Unification

Experts argue that Kenya needs a unified regulatory framework that addresses systemic risks, including money laundering, fraud, and bankruptcy. A single model would create secure supply chains, increase synergies, and promote information sharing among stakeholders, thereby minimizing regulatory arbitrage and capture by the industry.

Consequences of Inconsistencies

The current inconsistencies threaten the flow of finances within supply chains, increasing costs for financing institutions and ultimately leading to higher prices for consumers. Market disruptions caused by inflationary pressures, recessions, climate change, cyber threats, pandemics, and geopolitical conflicts have become the new normal, driving unprecedented variability in supply chain activities.

Global Best Practices

Regulatory bodies around the world, such as Australia’s ASIC, have successfully suppressed dishonorable practices, set guidelines on business conduct, and promoted public understanding of the financial sector. Kenya’s policymakers must consider technological advancements, global regulatory trends, market conditions, and the needs of the financial system when determining an effective regulatory model.

Periodic Review and Reform

The writer, a procurement and contract management consultant, emphasizes that the regulatory structure should be periodically reviewed and reformed to anticipate contemporary developments. This ensures that the regulatory framework remains relevant, effective, and efficient in addressing emerging challenges and opportunities.

Key Takeaways

• Regulatory fragmentation is a significant challenge in Kenya’s finance industry
• A unified regulatory framework is needed to address systemic risks and promote competition, consumer protection, and responsible business conduct
• Inconsistencies threaten the flow of finances within supply chains and increase costs for financing institutions
• Global best practices should be considered when determining an effective regulatory model
• The regulatory structure should be periodically reviewed and reformed to anticipate contemporary developments