Financial institutions

BB allows financial institutions and government entities to enter MFS business

TBS report

February 15, 2022, 10:20 p.m.

Last modification: February 15, 2022, 10:22 p.m.

Bangladesh Bank file photo: Salahuddin Ahmed/TBS

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Bangladesh Bank file photo: Salahuddin Ahmed/TBS

Financial institutions and government entities will now be able to obtain licenses for mobile financial services (MFS) activities, under new regulations issued by the central bank on Tuesday.

The new regulations replace the “Bangladesh Mobile Financial Services (MFS) Regulations, 2018”, under which only regular banks were allowed to do business with MFS.

Under previous rules, an MFS provider could operate as a wing of a regular bank or its subsidiary, with the parent entity holding at least 51% ownership and securing a majority on the board.

New central bank regulations could allow MFS provider Nagad to get a full license now, as it claims to be the digital financial arm of Bangladesh Post, industry insiders have said.

Earlier last September, Bangladesh Bank granted Nagad six months for the fifth time to meet the regulator’s conditions to become a full-fledged MFS provider.

Meanwhile, the new rules also allow banks, financial institutions and scheduled government entities that do not have their own MFS operations to join one of the existing MFS companies by acquiring shares.

Additionally, two or more qualifying organizations may jointly form a new MFS company, with one of them being the parent entity, holding a majority share.

The new rules also require companies to build up a “capital reserve” from retained earnings at a minimum rate of 10% of their annual after-tax profits, which will be equal to the amount of its paid-up capital – a minimum of Tk 45 . crore – to mitigate risk.

However, MFS providers experiencing losses are required to inject additional capital to maintain the minimum paid-in capital requirement. But the parent entity of the subsidiary must maintain at least a 51% ownership at all times.

bKash, the country’s leading MFS provider, suffered a loss of Tk 104 crore in the nine months to October 2021, nearly 100% higher than the same period a year earlier, The Business reported. Standard last year.

The central bank first issued the MFS guidelines on September 22, 2011, and later revised them in December 2011, which applied as a basis for the entire MFS industry.