Nagad returns NBFI licence to become digital bank

Nagad has surrendered its non-bank financial institution (NBFI) licence as most of its shareholders are for it to become a digital bank, said Tanvir A Mishuk, managing director of the mobile financial service (MFS) provider, yesterday. 

For this purpose, an entity named "Nagad Digital Bank PLC" will apply to Bangladesh Bank soon. "We will take the license of MFS after getting the licence of digital bank," he said.

Since its inception, Nagad has been offering MFS with an "interim" approval to operate as a service under Bangladesh Post Office.

Nagad introduces itself as the "digital financial service of Bangladesh Post Office" although the post office does not have any ownership of Nagad and only gets a share of Nagad's revenue.

The central bank gave the letter of intent to Nagad Finance on August 30. On January 12 this year, Bangladesh Bank decided in principle to allow Nagad Finance to run MFS, the first such approval granted to any NBFI in the country.

Asked how Nagad was so sure of getting an MFS licence as a digital bank even though it has not even applied for it, Muhammad Zahidul Islam, head of public communications, said the government was moving fast towards providing digital bank licences.

"It will be understandable very soon (whether Nagad will get a digital bank licence). If not, there is also an option to get MFS licence through a government agency…Nagad can get licence through post office," he added.

"We had applied for NBFI (licence) because there was no guideline for digital banks at that time…making a profit (as an NBFI) will be very difficult as return on investment is very low," said Mishuk.

He said they were looking to introduce loan products for small and medium enterprises (SMEs) that face challenges in accessing finance.

"Many SMEs in Bangladesh need working capital for a day or two but they have to take that loan from loan sharks paying high interest. So, we want to introduce flexible and suitable loan products for them," he said.

A savings option will also be introduced in Nagad Digital Bank along with insurance products, said Mishuk.

"Nagad wants to ensure financial inclusion by 2025. It will be possible to do this if the digital bank is formed," he told reporters at his office.

Most of Nagad's shareholders will join the digital bank initiative, he said, adding that Nagad's current shareholder Summit Group also expressed interest to become involved with Nagad Digital Bank.

During the conversation, Mishuk highlighted how Nagad being recently recognised as the fastest-growing "unicorn" would pave the way for drawing more foreign investment in Bangladesh.

He said Nagad currently has over 8 crore customers availing daily transactions of Tk 1,000 crore alongside 2.5 lakh agents or entrepreneur points across the country.

"We will use this network for the faster expansion of the digital bank if we get approval," he added.