Nagad Gets Approval As An NBFI - Business Insight

Nagad Gets Approval As An NBFI

Nagad has finally got the non-bank financial institution (NBFI) licence application accepted by the Bangladesh Bank last Tuesday, August 30, 2022. The founder and Managing Director of Nagad, Mr Tanvir A Mishuk confirmed that they have the clearance for becoming a subsidiary NBFI. However, they are yet to receive the official paperwork, they have been fast given the assurance. 

Since 2019, Nagad has been operating its activities on a temporary license for providing financial services under the authority of the Bangladesh Post Office (BPO). It was mainly a government-authorized financial institution. But now it can build its premises and activities as an independent financial institution (Nagad Financial PLC).

With the temporary Mobile Financial Services (MFS) licence, Nagad has an agreement with BPO for being its holding institute as MFS can not operate independently. But with the consent of Bangladesh Bank, Nagad Limited now will be able to operate the MFS being the subsidiary of Nagad Financial PLC. They have been looking forward to it since 2019.

The consent of NBFI requires a 100 crore paid-up capital while Nagad has approximately 700 crores of it. So Bangladesh Bank (BB) was less reluctant than usual to approve their appeal, as the successful NBFI formation rates are the lowest in the industry. So, in the 424th director meeting of the BB, Nagad Financial PLC got primary approval. 

Most of Nagad’s investment comes from foreign sources. Since their alleged starting period in 2019, they had to make an agreement with the Bangladesh Post and Telecommunication Ministry with a valuation of 1 billion dollars. Under the Bangladesh Postal Act Amendment 2010, Nagad regulated all their MFS and digital services.

In this arrangement, BPO claimed 51% of the company shares in 2021. Getting BB clearance for an NBFI licence became necessary more than ever right then. This conflict regarding ownership and profit distribution had created persistent barriers in the way of providing services.

With a one billion dollar valuation, 700 crores paid-up capital and 5.5 crore regular customers, Nagad had a very convincing application. The Bangladesh Bank board of directors meeting found it pretty appealing and the news spread and reached the directors of the company itself. 

The temporary license that Nagad used for distribution of their survives was renewed four times. Every extension had more rules added to it. The last one in 2021 had a renewed agreement between them and the BPO. It had points indicating their challenged ownership.

So the news of the NBFI application being approved was a relieving point for the subsidiary. Their services included mobile financial services, sending and receiving money from home and abroad. The foreign currency exchange via Nagad is the greatest selling point in its application to the BB. They presented themselves as valuable by showing the increase they brought in the foreign currency earning background.

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