Nagad does not meet license conditions for third time

Nagad, a fast-growing provider of mobile financial services (MFS), has sought an extension of the interim licensing period for the fourth time to complete the process in line with the central bank's requirement.

The interim licensing period expires on 30 June.

According to the Bangladesh Bank's licensing condition, Nagad will have to transfer the trust cum settlement account to the Bangladesh Post Office from Third Wave Technologies Limited.

Trust cum settlement account is a custody account where the legal tender shall be stored against the issuance of e-money by a payment service provider.

Nagad will send letters containing the signature of the Bangladesh Post Office to respective banks about the account's operations as per the central bank's requirement.

But Nagad did not transfer the bank account and could not comply with any of the licensing conditions given by the Bangladesh Bank. As a result, the company has not got the licence even in more than two years of its operation.

Nagad is operated by Third Wave Technologies and its customer money is managed in the bank account of Third Wave. It was asked to send statements of the balance of e-money and physical money to the central bank regularly.

According to the MFS guideline, the balance of e-money and physical money will have to be equal.

Though Nagad is sending transaction statements, those are not acceptable to the Bangladesh Bank. It is because Third Wave has loans with two private commercial banks against the fund of the trust cum settlement account. The balance of e-money and physical money cannot be equal until the loans are adjusted.

The Bangladesh Bank asked Third Wave to adjust the loans but they have not done it yet, according to a high official of the Bangladesh Post Office.

One of the licensing criteria is to transfer 51% of Nagad shares to the Bangladesh Post Office. To comply with this, the Post Office Act needs to be amended, which could not be done even in two years.

Nagad could not comply with even a single condition for getting the licence, said a senior executive of the Bangladesh Bank.

As a result, though they are sending regular transaction statements, those are not reflected in the total MFS statistics, he said.

The Bangladesh Post Office held a meeting on 7 June to discuss the progress of forming Nagad as a subsidiary company with the presence of representatives from the Bangladesh Bank and Nagad.

The meeting decided to extend the time to complete the process of law amendment and transfer 51% of Nagad's ownership to the Bangladesh Post Office till December this year.

The meeting also decided to take an initiative to send letters to respective banks about the operations of the trust cum settlement account.

Asked why Nagad had not transferred the account from Third Wave to the Bangladesh Post Office, its Managing Director Tanvir Ahmed Mishuk claimed that operations had been running according to the MFS guideline but did not explain the reason behind the delay.

Since its beginning on 26 March 2019, Nagad has been branding itself as a state-run MFS provider, with the Bangladesh Post Office having the ownership of it. But in reality, the government has no stake in it.

Nagad, in which Sigma Group has majority investment, is providing services through the MFS agreement with the Bangladesh Post Office, which is not acceptable to the Bangladesh Bank for availing a licence.

The Bangladesh Post Office requires at least 51% of Nagad's share to get the MFS licence, according to the MFS guideline of the Bangladesh Bank.

The central bank issued a temporary no objection certificate for MFS operation at the request of the Bangladesh Post Office in March last year.

Nagad is now the second-largest MFS provider in Bangladesh, with daily transactions amounting to Tk400 crore.

It obtained more than 30% market share in its two-year journey.

Currently, 15 banks have MFS operations and the daily average transactions reached Tk2,000 crore in April. However, these statistics exclude Nagad.