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African banks’ handling of fintech firms worries investors

Nigerian investors, Iyinoluwa Aboyeji and Victor Asemota, have expressed concerns regarding the handling of the budding tech market in Africa by central banks in the continent after the Bank of Ghana shut down operations of Dash.

According to RipplesNigeria, Ghanaian Fintech startup was directed to cease operation on March 9, 2022, two days after it raised $32.8 million from foreign investors, and this has led to criticism of African central banks.

Dash, founded by Prince Boakye Boampong, has been operating in Ghana since 2019, and its services are available in Nigeria and Ghana. Boampong established Dash to solve Africa’s cross-border cash transfer problems, which compels Nigerians, Ghanaians, Kenyans and other Africans to exchange currencies before transacting when they are not in their respective countries.

It has so far raised $65.6 million from 17 investors; Zinal Growth, Techstars, Global Founders Capital, and more to scale this idea.

However, pulling off this stride was not enough to convince the folks at Bank of Ghana to give Dash a breathing space, as the apex bank clipped the startup’s wings midair.

According to the Bank of Ghana, Boampong’s Dash doesn’t have the necessary approval to operate such service, hence, “offering payment services in the country without a license is an offence under Section 9 (1) of Act 987.”

This spanner thrown in the works of Dash is similar to the experience of other Fintech startups operating in Nigeria, where regulators choke innovators with multiple licenses and irregular policies that catch founders unaware.

With the move by Bank of Ghana being the latest reflection of challenges innovators face in Africa, this beams the search on impact of unfriendly policies on investors‘ confidence.

One of the Nigerian fintech founders turned investors, Iyinoluwa Aboyeji, former CEO of Flutterwave, and now founder of venture capital, Future Africa, said central banks in Africa are killing innovations with regulations and licensing.

And according to Aboyeji, who also co-founded Andela, if the financial regulators continue to suffocate ideas, it would be disrupted by cryptocurrency or decentralised finance, which is a financial system that government have no control over.

“Most African Central Banks champion financial inclusion with policy statements but kill it with over-regulation and licensing. There needs to be a middle ground or central banking will be disrupted by decentralized finance.” Aboyeji stated on his Twitter account on Wednesday following reports of clampdown on Dash.

Also airing his opinion, serial investor and founder of SwiftaCorp, Victor Asemota, said he’s worried that African central banks could begin to use their powers to collaborate against Fintechs they dislike.

In his words, Asemota wrote on Twitter, “My worry is that African central banks will soon start collaborating easily against fintechs they don’t like. One small problem and endless explanations.”

Responding to Asemota’s statement, Aboyeji asserted that the financial regulators risk losing the market to the cryptocurrency industry, “If they do this (as we predicted a while back) they will push the market to crypto.”

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