BB allows financial institutions, govt entities to enter MFS business
Financial institutions and government entities will be able to get licences for mobile financial service (MFS) business from now on, under a new regulation issued by the central bank on Tuesday.
The new regulation replaces the "Bangladesh Mobile Financial Services (MFS) Regulations, 2018", under which only scheduled banks were allowed to do MFS business.
Under the previous rules, an MFS provider could function as a wing of a scheduled bank or its subsidiary with the parent entity holding at least 51% of the ownership and ensuring a majority at the board of directors.
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The new central bank regulation might allow MFS provider Nagad to get a full-fledged licence now, as it claims to be the digital financial arm of the Bangladesh Post Office, industry insiders said.
Earlier last September, the Bangladesh Bank granted Nagad six months for the fifth time to fulfil the regulator's conditions to become a full-fledged MFS provider.
Meanwhile, the new rules also allow scheduled banks, financial institutions and government entities with no MFS operations of their own to join any of the existing MFS companies by acquiring equity.
Moreover, two or more eligible organisations may jointly form a new MFS company with one of them being the parent entity, holding a majority share.
The new rules also makes it compulsory for companies to build up "capital reserve" from retained earnings at a minimum rate of 10% of their annual profits after tax, which will be equal to the amount of its paid up capital – a minimum of Tk45 crore – to mitigate risks.
However, loss incurring MFS providers is required to inject additional capital to maintain the minimum paid up capital requirement. But the parent entity of the subsidiary has to maintain at least 51% ownership at all times.
bKash, the leading MFS provider in the country, sustained a Tk104 crore loss in nine months up to October 2021, which was nearly 100% more than that of the same time of the previous year, The Business Standard reported last year.
The central bank released MFS guidelines on 22 September 2011 for the first time and later revised the same in December 2011, which applied as the basis for the entire MFS industry.
