By Mercy King’ori
There is a common perception that the law clashes with innovation. The narrative as perpetuated by this perception is that the law only focuses on how to protect rights endangered by a particular innovation but never permitting it. Undeniably so, regulation can be used to discourage innovation by prohibiting exploration and adoption of certain innovative technologies and/or increasing the cost and uncertainty of developing such innovations. However, in some parts of the world, this perception seems to be slowly fading away as regulators realise the heavily dependent relationship between regulation and innovation.
The close linkage between the two has seen regulators begin to use regulation as a means of permitting innovation while at the same time safeguarding human rights. This is the case in the European Union (EU). In 2018, the General Data Protection Regulation (GDPR) and the Payment Services Directive 2 (PSD 2) came into effect. The PSD2 was the catalyst for an innovative model of banking known as “open banking” in the EU. To a great extent the PSD2, as the enabling legislation ensured that consumers were offered the much-needed data protection that comes with this form of banking. On the other hand, the GDPR as the overarching data protection legislation contains certain provisions that would mandate open banking providers to be conscious of consumers privacy.
This post posits that Kenya has a similar opportunity to use certain provisions of the recently enacted Data Protection Act (DPA) to nurture innovation in particular in the digital finance market. At the same time, the implementation of the DPA will offer privacy solutions to address existing data protection challenges that affect this industry. For example, some digital lending applications have been accused of accessing a borrower’s personal contact list and sending messages to the people on it. The digital finance sector has proven to be an innovative solution to the financial exclusion that plagues Kenya. It still is a nascent area that has room for more innovative solutions. According to a report by Financial Sector Deepening (FSD), the market for digital financial services “offers untapped opportunities for financial service providers”. However, massive privacy violation threatens its growth.Continue reading