There are two extremes that define Africa's FinTech space: Initial Public Offerings (IPOs) are over regulated and Initial Coin Offerings (ICOs) are barely controlled - which leaves the investor exposed to risk.
This is one of the takeaways from the Finnovation Kenya Summit, hosted this week in Nairobi and formed the basis of an intense discussion on regulation of this area of business.
Dave van Niekerk, founder and executive chairman of MyBucks, said finnovation (incorporating the rise of ICOs and non-traditional financing in Africa) is being stifled by outdated regulation.
"In a small business environment when you want access to banking and financial services, you want speed and agility and the problem is that you have an old fashioned financial service. Even if you go to a MFI for funding you still go through the slow process of application forms to get access to the capital," said van Niekerk.
"Now we are at an age where you can get money literally in minutes," he added, facilitated through micro finance apps such as Tala, Branch and Haraka, where users do not have to endure the traditional loan application process.
Van Niekerk said ICOs are filling a void created by the slowness of the IPO process, but that IPOs are over-regulated and ICOs are not at all, which is a risk to investors.
"In the middle there are real businesses which need access to capital today and they cannot afford to wait."
Van Niekerk believes regulators need to create new ways for small business to access finance. At the same time, the sustainability of these businesses will depend on the data they provide to enable financial institutions to assess their credit worthiness and secure financing.
Paul Muthaura, CEO of Capital Markets Authority in Kenya said that the government is analysing new technologies in a sandbox model as they prepare draft regulations around blockchain, ICOs and cryptocurrency in general.