Nagad Finance gets BB nod

Does the crowded, troubled non-bank financial sector need another player? The Bangladesh Bank deems so as it yesterday gave the primary licence to Nagad Finance plc, where Nagad Ltd Managing Director Tanvir A Mishuk and Executive Director Mohammad Aminul Haque are directors.

"The central bank board gave the letter of intent to Nagad Finance with some conditions," BB Spokesman Md Serajul Islam told The Daily Star.

He, however, did not elaborate on the conditions.

The promoters behind Nagad Finance first applied for a multipurpose licence to run as an NBFI, mobile financial service (MFS) provider and microcredit lender at once in November last year. The name of the proposed company was Amar Fintech.

The central bank rejected the application as such a licence does not exist.

A second application was submitted on January 11 to the same fate.

Then on January 20, a third application was submitted where the name of the proposed company was changed to Nagad Finance Ltd.

Nagad Finance Ltd sought to conduct "small-value lending" and provide MFS. That application was also turned down by the BB board.

Soon after, a fresh application was filed seeking just the NBFI application.

That application was approved by the BB board last evening, taking the total number of NBFIs to 36.

As of June, default loans in the NBFI sector stood at Tk 15,936 crore, which is about 23 percent of the total outstanding loans, according to the latest data from the BB.

The development raises questions about the fate of Bangladesh Post Office's MFS brand Nagad Ltd, which is yet to get a full licence from the BB in more than three years of its operations due to its inability to fulfil conditions.

To get the licence, a subsidiary company needs to be formed and for that, the Post Office Act, 1898 and the Post Office (Amendment) Act 2010 need to be amended.

For now, Nagad remains the brand name of the BPO, so the new NBFI's name is bound to run into trademark issues.

But the two organisations share board members.

Mohammad Aminul Haque and Tanvir A Mishuk are directors of both Nagad Ltd and Nagad Finance.

Mishuk is the MD of Nagad Ltd and Haque is an executive director. Haque previously served as Nagad's acting chief executive officer and chief financial officer.

Rahel Ahmed, the chief executive officer of Nagad Ltd, has been proposed as the managing director of Nagad Finance.

Asked whether the new NBFI would run MFS, Islam said the issue would be considered later.

Muhammad Farid Khan, the vice-chairman of the Summit Group of Companies, is the chairman of Nagad Finance. His son Farhan Karim Khan is also a director of the proposed NBFI.

The other directors of Nagad Finance are Hasib Hasan Tarafder and Dan Parker, both of whom work for HomePay, a Silicon Valley-based fintech company specialising oi for real-time cross-border and local payments and identity verification founded by Rubel Ahsan, a director of Amar Capital.

The Summit Group vice-chairman and his son and Ahsan were shown to be directors of Amar Capital in the first three applications filed with the BB.

The seventh director in Nagad Finance is Nakib Choudhury, who is a representative of Finclusion. Nagad CEO Ahmed is part of the Nagad Ltd board as a representative of Finclusion.

The proposed NBFI would be bringing 98 percent of the paid-up capital of Tk 100 crore from the US and Singapore, said a BB official on the condition of anonymity.

"Subject to the final approval of our strategy, Nagad Finance will operate as an independent financial institution," Mishuk said.

However, the existing partnership between the postal department and the mobile financial service provider Nagad Ltd will remain unchanged.

"Nagad Ltd will be run as a Postal Department's mobile financial service whereas Nagad Finance will thereafter operate similarly to any other NBFI."

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 Ltd will also remain the same."

However, Nagad Finance will promote its products and services through Nagad Ltd, Mishuk said.

"Jointly, Nagad Finance and Nagad Ltd will work to bring the underserved into the fold of digital financial inclusion."