The Securities and Exchange Commission (SEC) is pleased to announce the launch of the Regulatory Sandbox, developed in partnership with the UN Capital Development Fund (UNCDF), under a Memorandum of Understanding (MoU), to enhance Zambia’s digital economy.

Through this MOU the SEC and UNCDF aim to collaborate on creating an enabling policy and regulatory environment that encourages innovations in the Zambian capital market, and promotes the market’s development.

Pursuant to its mandate to supervise and promote the development of the Zambian Capital Market, the SEC has developed Guidelines for a Regulatory Sandbox Framework (“Sandbox”). A Sandbox is essentially a “safe playground” in which the testing of capital market innovations can be facilitated under a set of conditions and limitations designed to protect investors.

The Capital Markets Sandbox will enable the Commission to examine, admit and support the development and facilitate a safe introduction of innovations in the capital markets. We believe the Sandbox creates an opportunity for bridging the expectations gap between would-be participants piloting innovations and regulators in an environment that permits a clear understanding of the potential impact on consumers and the financial services ecosystem as a whole. FinTechs and SMEs that aspire to deploy capital markets-related innovations are often unclear about the applicable legal and regulatory requirements, as they may not fit into the existing framework. The Sandbox shall guide such businesses as they test and pilot their product or service.

Given the rapid evolution of FinTech, financial sector regulators worldwide are scrutinizing the development and application of FinTech in financial markets to better understand the potential impact on consumers and market dynamics. The introduction of FinTech in financial markets has necessitated a shift from traditional business models and paved way for innovations that add value to consumers, enhance efficiency and risk management, and foster financial inclusion.

The SEC and Ministry of Finance have a common objective of promoting diversified, customer-centric products. Encouraging innovative products developed or introduced by FinTechs through a Sandbox can help make this objective attainable.

Phillip Chitalu, SEC Chief Executive Officer stated, “We are happy to launch the Regulatory Sandbox, particularly because it enables us to address a regulatory gap in our market and most importantly will enable us to live test capital markets innovations under a controlled environment, designed to protect investors. In the same light, we are confident that the Sandbox Guidelines that have been developed for this initiative will provide an enabling environment that shall promote the desired participation of various players to drive innovations that respond to market needs. We envisage that the Regulatory Sandbox for Capital Markets will encourage ingenuity with respect to customer centric products that leverage technology e.g. Crowdfunding platforms, Peer-to Peer lending platforms and other FinTechs. We are certainly convinced that the Sandbox initiative is a game-changer for the capital markets and the financial sector as a whole.”

FinTechs have an important role to play in Zambia’s economy as they continue to contribute positively towards enhancing financial and digital inclusion. Furthermore, FinTechs have proven capacity to provide innovative financing solutions to help a variety of businesses (especially Small and Medium Enterprises) succeed and scale their solutions to reach more customers, as well as improve incomes, economic activity and deepen the digital and financial skills for clients. The Sandbox is a critical entry-point for SMEs that have a capital market solution to test or pilot the product before it officially enters the market.

“Our support for the Capital Markets Regulatory Sandbox Framework fits squarely within UNCDF’s mandate to build a ‘digital economy in which no-one is left behind.’ We understand the role that FinTechs and other innovative financial service providers can play in meeting the needs of specific segments within the digital financial services market. However, FinTechs, being relatively new on the market, often do not fit within the bounds of existing financial regulation and require special circumstances and considerations. We hope for the Sandbox to provide just such an environment by combining the close watch care of the regulator and the flexibility required for digital innovation and transformation.” said Isaac Holly Ogwal, UNCDF Country Lead.

About SEC

The SEC as apex regulator of the capital markets in Zambia is mandated by the Act to ensure the supervision and promote development of the Zambian capital markets through licensing, registration and authorization for financial intermediaries, issuers of debt and equity instruments and collective investment schemes and protection of interests of persons who invest in securities to suppress illegal, dishonorable, and improper practices. As part of its core functions, the SEC is mandated to promote: High Standards of Investor Protection; Integrity of Industry; Self-Regulation of Industry Players, Orderly Growth and Development of Industry; Operation of Free, Orderly, Informed Market, among others.