Mobile Financial Services in Bangladesh: As MFS grows, its regulations need to change | The Business Standard
Skip to main content
  • Home
  • Economy
    • Aviation
    • Bazaar
    • Budget
    • Industry
    • NBR
    • RMG
    • Corporates
  • Stocks
  • Analysis
  • World+Biz
  • Sports
  • Features
    • Book Review
    • Brands
    • Earth
    • Explorer
    • Fact Check
    • Family
    • Food
    • Game Reviews
    • Good Practices
    • Habitat
    • Humour
    • In Focus
    • Luxury
    • Mode
    • Panorama
    • Pursuit
    • Wealth
    • Wellbeing
    • Wheels
  • Epaper
    • GOVT. Ad
  • More
    • Subscribe
    • Videos
    • Thoughts
    • Splash
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • COVID-19
    • Games
    • Long Read
    • Interviews
    • Offbeat
    • Podcast
    • Quiz
    • Tech
    • Trial By Trivia
    • Magazine
  • বাংলা
The Business Standard

Tuesday
May 30, 2023

Sign In
Subscribe
  • Home
  • Economy
    • Aviation
    • Bazaar
    • Budget
    • Industry
    • NBR
    • RMG
    • Corporates
  • Stocks
  • Analysis
  • World+Biz
  • Sports
  • Features
    • Book Review
    • Brands
    • Earth
    • Explorer
    • Fact Check
    • Family
    • Food
    • Game Reviews
    • Good Practices
    • Habitat
    • Humour
    • In Focus
    • Luxury
    • Mode
    • Panorama
    • Pursuit
    • Wealth
    • Wellbeing
    • Wheels
  • Epaper
    • GOVT. Ad
  • More
    • Subscribe
    • Videos
    • Thoughts
    • Splash
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • COVID-19
    • Games
    • Long Read
    • Interviews
    • Offbeat
    • Podcast
    • Quiz
    • Tech
    • Trial By Trivia
    • Magazine
  • বাংলা
TUESDAY, MAY 30, 2023
As MFS grows, its regulations need to change

Thoughts

Zareen Rahman
22 September, 2020, 11:15 am
Last modified: 22 September, 2020, 12:38 pm

Related News

  • Nagad builds hope on Tk510cr bond, incurs Tk625cr loss
  • Dhaka North Chief Heat Officer Bushra infected with Covid-19
  • Covid is no longer global health emergency: WHO
  • WHO issues new strategic plan for Covid-19
  • Life expectancy fell by six months in 2021: BBS survey

As MFS grows, its regulations need to change

As MFS has become an essential and popular medium of transaction, the laws relating to MFS needed to be readdressed by the government

Zareen Rahman
22 September, 2020, 11:15 am
Last modified: 22 September, 2020, 12:38 pm
Zareen Rahman, Barrister-at-Law and an advocate at the Supreme Court of Bangladesh
Zareen Rahman, Barrister-at-Law and an advocate at the Supreme Court of Bangladesh

Earlier this year, the World Health Organisation recommended that people go cashless for their transactions to eliminate the spread of the novel coronavirus in the communities. 

As contactless payments become the norm amid the worldwide pandemic response, many countries around the world have been working on different alternatives to cash transactions. In Bangladesh, the most popular alternative to cash payment is mobile banking. 

Since the nationwide general holiday declared by the government on March began, all transactions, including person to person money transfer, disbursement of salary, utility bill payment etc. have taken place through mobile financial services (MFS). 

As it has become so essential and popular medium of transaction, the laws relating to MFS needed to be readdressed by the government.

Two years ago, Bangladesh Bank issued Bangladesh Mobile Financial Services Regulation 2018 as the governing law relating to mobile financial services, to provide a regulatory framework for efficient and prompt MFS system, promote access to formal financial services at an affordable cost and ensure compliance with anti-money laundering laws and combating the financing of terrorism. 

The regulation stated that the MFS providers shall operate as payment service providers and the regulation should be read in compliance with Bangladesh Payment and Settlement System Guidelines (BPSSG), 2014. 

The MFS provider shall obtain a license under the MFS regulation as well as under the BPSSG as a payment service provider. As both the regulations have a different set of criteria for providing license, it creates confusion and inconvenience for the investors. 

As per the regulation, the central bank will promote only scheduled commercial bank-led MFS in Bangladesh and will allow only two types of ownership structure-related models. 

The scheduled commercial banks can do MFS business through a separate wing or can open a subsidiary company where the parent bank should own 51 percent of the equity ownership, while the remaining 49 percent could be owned by the mobile operators and other stakeholders. 

However, to get a license under BPSSG as a payment service provider or payment service operator, there is no such requirement. 

The restriction on the ownership structure in giving MFS license creates a hindrance to the growing business of MFS. 

As MFS is essentially a payment service provider system, the regulation should not reserve rights for banks to hold majority shareholding. A holistic approach should be taken for ensuring a proper balance between sustainability and business. 

The regulation should be inclusive to attract more investment in the business. Mobile Network Operator and other business entities should get a chance to lead. 

MNO's generally are better equipped in terms of assets like scale, distribution, brand position, customer service, technical readiness, expertise, a business motive to drive a nationwide fast-moving business sustainably. So, they should be given a chance to lead the business to meet the growing need of MFS business.

Another contradiction in providing license can be seen in the case of "Nagad", a company owned by the postal department of Bangladesh but running on a revenue-sharing model. Bangladesh post office holds 51 percent, while the private sector owns 49 percent shares. 

After almost a year in operation, recently the Bangladesh Bank has permitted Nagad to work as a full-fledged MFS provider. 

Following the concept of "Nagad", many other public entities could use their funds or go for a public-private partnership to invest in the MFS business. 

In fact, public entities should be encouraged to invest in such business as the sector needs to flourish. But since each public entity is formed through an enabling act, they can only invest in MFS business if the enabling act has provisions for it. All enabling acts should be formulated in the same way to allow MFS businesses for public entities.

Though one of the purposes of the MFS Regulation  2018 is to ensure anti-money laundering and combating financial terrorism, very little has been mentioned about it in the regulation. 

At present, it is very difficult to identify the actual culprits behind fraudulent transactions as over the counter service is available. This service should be banned. As mobile banking is also one kind of banking, only the account holder should be allowed to avail the service.

Under these circumstances, the Parliament should take up the matter and enact a new uniform and codified law for MFS business to overcome all the lacunas in the MFS Regulation 2018. 

This law should focus on how the licensing process can be made easier. Removing the bank-led model would open greater prospects in MFS business and allow a level playing field for all the players in the MFS business. 

Consideration should also be given to whether the MFS business should fall under the Bank Companies Act (which is the case now) or should it fall under the purview of non-banking financial institutions. 

As there is an enormous scope of expansion of MFS in Bangladesh due to the emerging need of moving towards a cashless society, the government should rethink the policies and take the matter to Parliament to pass an Act. 


The author is a Barrister-at-Law and an Advocate at the Supreme Court of Bangladesh. [email protected]

Top News

mobile financial services / mobile banking / Covid -19 / Regulations

Comments

While most comments will be posted if they are on-topic and not abusive, moderation decisions are subjective. Published comments are readers’ own views and The Business Standard does not endorse any of the readers’ comments.

Top Stories

  • Priority on fighting inflation, funding projects
    Priority on fighting inflation, funding projects
  • Private credit growth hits 13-month low in April
    Private credit growth hits 13-month low in April
  • DSA may scare away potential investors: UN special rapporteur
    DSA may scare away potential investors: UN special rapporteur

MOST VIEWED

  • Shahriar Jahan Rahat, deputy managing director, KSRM.
    Amending income tax law to protect the steel industry
  • Md Touhidul Alam Khan. Sketch: TBS
    Rethinking creativity in the age of generative AI
  • Breaking the taboo: The dangerous consequences of poor menstrual practices in CHT
    Breaking the taboo: The dangerous consequences of poor menstrual practices in CHT
  • The legal remedies to ensure proper medical care in Bangladesh
    The legal remedies to ensure proper medical care in Bangladesh
  • Al Mustashim Nobi Niku. Sketch: TBS
    The legal remedies to ensure proper medical care in Bangladesh
  • Sketch: TBS
    Breaking the taboo: The dangerous consequences of poor menstrual practices in CHT

Related News

  • Nagad builds hope on Tk510cr bond, incurs Tk625cr loss
  • Dhaka North Chief Heat Officer Bushra infected with Covid-19
  • Covid is no longer global health emergency: WHO
  • WHO issues new strategic plan for Covid-19
  • Life expectancy fell by six months in 2021: BBS survey

Features

An exquisite symphony of flavours awaits in the heart of Old Dhaka, as this vegetarian ensemble takes centre stage, showcasing the rich heritage of traditional cuisine. Photo: Noor-A-Alam

Jagannath Bhojonaloy: Vegetarianism, the traditional way

14h | Food
Inside Airbus's mega plan to develop the aviation ecosystem in Bangladesh

Inside Airbus's mega plan to develop the aviation ecosystem in Bangladesh

16h | Panorama
How women's purchasing power is altering market dynamics

How women's purchasing power is altering market dynamics

15h | Panorama
Media companies are rushing to capture the youngest market of news consumers in the misplaced hope that this will ensure their survival. Photo: Bloomberg

News firms are too obsessed with wooing the young

15h | Panorama

More Videos from TBS

Erdogan prevails in election test

Erdogan prevails in election test

7h | TBS World
Why AB turns its focus on agri from corporate lending?

Why AB turns its focus on agri from corporate lending?

9h | Corporate Talks
Sword of Tipu Sultan sold in auction

Sword of Tipu Sultan sold in auction

10h | TBS World
Who will be the champion if rain washes out reserve day?

Who will be the champion if rain washes out reserve day?

10h | TBS SPORTS

Most Read

1
End of zero tax!
NBR

End of zero tax!

2
Photo: TBS
Energy

Wind power feeds national grid for first time Friday

3
File Photo: Mohammad Minhaj Uddin/TBS
Bangladesh

Low-cost housing planned for 4 lakh Bangabandhu Shilpa Nagar workers

4
Cenbank prints Tk70,000cr new money in 11 months to support nat'l budget
Budget

Cenbank prints Tk70,000cr new money in 11 months to support nat'l budget

5
File Photo: UNB
Bangladesh

US govt's new visa policy does not bother Bangladesh government: Shahriar Alam

6
Govt to double gain tax on land, flat registration
Budget

Govt to double gain tax on land, flat registration

EMAIL US
[email protected]
FOLLOW US
WHATSAPP
+880 1847416158
The Business Standard
  • About Us
  • Contact us
  • Sitemap
  • Privacy Policy
  • Comment Policy
Copyright © 2023
The Business Standard All rights reserved
Technical Partner: RSI Lab

Contact Us

The Business Standard

Main Office -4/A, Eskaton Garden, Dhaka- 1000

Phone: +8801847 416158 - 59

Send Opinion articles to - [email protected]

For advertisement- [email protected]