One more non-bank financial institution, styled Nagad Finance PLC, is being born to facilitate financial-inclusion initiatives through serving more unbanked people, officials say.
The board of directors of Bangladesh Bank (BB) in a meeting held Tuesday at the central bank headquarters in Dhaka with BB Governor Abdur Rouf Talukder in the chair approved the proposal for its launch.
"Our board has decided to issue letter of intent (LoI) to the NBFI on some conditions," BB spokesperson Md. Serajul Islam told the FE after the meeting, without elaborating.
Nagad Finance PLC will act as an individual private NBFI without involvement of the state-owned Bangladesh Post Office, another BB official said, quoting the proposal of the financial institution.
He also said the paid-up capital for the proposed NBFI has been fixed at Tk 1.0 billion in line with the existing Financial Institutions Act 1993. Most of the money will come from overseas sources, particularly from the United States.
The number of directors will be limited to 7-11, according to the BB official.
The central banker also said the board would give final approval for the proposed Nagad Finance PLC to run business after complying with all the conditions of LoI properly.
The latest BB approval came when a few NBFIs have struggled to survive and even expressed inability to repay depositors' money following rise in non-performing loans (NPLs) along with weak corporate governance.
Currently, 35 NBFIs are running their business across the country.
"The central bank may give approval for another NBFI if the proposed financial institution works as a specialized one," Dr Salehuddin Ahmed, a former governor of the BB, told the FE while replying to a query.
He also said the central bank should apply due diligence along with examining all the relevant documents properly before issuing final approval.
"The central bank should monitor the activities of the NBFI as to whether the financial institution acts as per commitments," the former governor notes.
Tanvir A Mishuk, founder and managing director (MD) of Nagad Limited, says Nagad Finance PLC will operate as an independent financial institution.
However, the existing partnership between the postal department and the mobile financial service provider Nagad Limited will remain unchanged, according to the MD.
"Nagad Limited will be run as a Postal Department's mobile financial service whereas Nagad Finance PLC will operate similarly as any other NBFI," he explains in a statement.
As a mobile financial service, Nagad Limited is currently in partnership with several institutions. In this case, the relationship between Nagad Finance PLC and Nagad Limited will also remain the same.
However, Nagad Finance PLC will promote its products and services through Nagad Limited, according to the MD.
"Nagad Finance PLC and Nagad Limited will work jointly to bring the underserved into the fold of digital financial inclusion. It will also reduce the cost of services while improving the quality of service," says Mr Mishuk.
Nagad, a leading mobile financial services provider, now runs its operations as a service of Bangladesh Post Office based on a joint venture with Third Wave Technologies Limited under the Post Office (Amendment) Act 2010 without obtaining licence from the central bank.
The central bank had issued a no-objection certificate to Nagad allowing it to run its operations after meeting some conditions.
The tenure of such no-objection certificated is scheduled to expire on September 30, 2022 after five-time extensions, according to another BB official.
He also says the operations of Nagad will have to convert to a subsidiary of scheduled bank, NBFI or stated-run entity instead of the existing joint venture to comply with mobile financial services rule and regulations properly
In that case, minimum 51-percent shares will have to be held by the scheduled bank, NBFI or the state-owned entity of the subsidiary.
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