Nagad Digital Bank becomes the first scheduled digital bank in Bangladesh. Bangladesh Bank on 3 June 2024 declared ‘Nagad Digital Bank PLC.’ as a scheduled bank.
Nagad Digital Bank, the brainchild of the mobile financial service provider Nagad, has received preliminary approval, marking a pivotal moment in its quest for operational licensing. Led by Muhammad Farid Khan, a director of Summit International, and backed by the visionary Tanvir Ahmed Mishuk, founder and MD of Nagad, the digital bank aspires to be a powerhouse that orchestrates every aspect of a Bangladeshi’s financial journey. Bangladesh Bank has granted digital banking licenses to two out of 52 applicants-Nagad Digital Bank and Kori Digital Bank
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Surrendering the NBFI licence
In a strategic move to align with evolving industry dynamics, Nagad took a significant step in August 2023 by surrendering its Non-Bank Financial Institution (NBFI) license. Opting for a forward-looking approach, Nagad actively sought a digital bank license from regulatory authorities. This transformative decision underscores Nagad’s commitment to staying at the forefront of financial innovation, adapting to emerging trends, and meeting the evolving needs of its users. By relinquishing the NBFI license and pursuing a digital bank license, Nagad positions itself to explore new horizons in the financial services sector. This strategic shift reflects the company’s dedication to harnessing cutting-edge technology and solidifies its role as a key player in shaping the future of digital banking in Bangladesh.
License from Bangladesh Bank
BB Approval
According to one circular signed by the Bangladesh Bank’s Deputy Governor Nurun Nahar, ‘Nagad Digital Bank PLC’ was listed as a scheduled bank on 3 June 2024 making it the first scheduled digital bank in Bangladesh.
Mohammad Shahriar Siddiqui, Director (BRPD) of Bangladesh Bank hands over a copy of the digital bank licence to Tanvir A Mishuk, founder and chief executive officer (CEO) of Nagad Ltd.
Nagad Reactions
Upon receiving the licence, Tanvir A Mishuk, founder and CEO of Nagad Ltd, told TBS, “Getting the licence for the country’s first digital bank is historic. We have been advocating for a digital bank to transform Bangladesh into a smart economy through cashless transactions. A significant portion of the country’s people remain out of financial inclusion and Nagad Digital Bank will work with them.”
“Customers will no longer need to visit banks; instead, banking services will be at their fingertips. We will offer single-digit interest loans without any collateral, introduce micro savings schemes and provide solutions to people’s day-to-day transactions. ,” Tanvir added.
Shareholding Exemptions
The central bank has granted final approval to Nagad Digital Bank with an exemption on the shareholding of its three institutional investors. Typically, individuals, companies, or their family members are limited to acquiring no more than 10% of a bank’s shares, whether held individually, jointly, or through combined ownership.
However, a special arrangement has been made for these three investors of Nagad — Osiris Capital Partners LLC, Blue Haven Ventures LLC, and Finclusion Ventures Pte Ltd.
Earlier on 27 March, The Financial Institutions Division of the finance ministry approved a central bank request for exempting these three aspiring Nagad Digital Bank investors/shareholders, each exceeding 10% ownership, from the Bank Companies Act ownership limit.
Central Bank Spokesperson Md Mezbaul Haque said foreign investors typically show less inclination towards acquiring minor stakes in a company. Therefore, a special concession has been offered to attract foreign investment.
Nagad Sponsors
Nagad Digital Bank has issued 12.5 crore shares among seven sponsors. Of them, three companies — Osiris Capital Partners (USA), Blue Haven Ventures (USA) and Finclusion Ventures Pte Ltd (Singapore) — hold more than 10 percent shares.
The US-based company Osiris Capital Partners LLC owns the largest stake, at 6.225 crore shares, representing nearly half (49.80%) of the bank’s total shares. Tanvir Ahamad Mishuk, the managing director of Nagad, serves as their representative.
Blue Haven Ventures LLC, another US company, holds 3.125 crore shares, equivalent to 24.90% ownership. Their representative is Muhammad Farid Khan, a director at Summit Group of Companies.
The Singapore-based firm Finclusion Ventures Pte Ltd owns 1.375 crore shares, translating to an 11% stake in Nagad Digital Bank. Nakib Chowdhury, a Nagad official, represents Finclusion Ventures.
The remaining four shareholders are: Zen FinTech (USA), Trupay Technologies, Farhan Karim Khan and Fintechtual Holdings Ltd, the only local shareholder.
The central bank published the digital bank guidelines in June last year. According to guidelines, the digital bank has to keep provision for paid-up capital at Tk125 crore. The minimum shareholding of each sponsor will be Tk50 lakh (maximum 10% or Tk12.5 crore). However, the ceiling of 10%, in consultation with the government, may be relaxed.
According to the guideline, the digital bank must go for an initial public offering (IPO) within five years from the date of the licence issuance by the central bank and the IPO amount should be minimum to the sponsor’s initial contribution.
Ready with the State-of-the-Art Technology
In a bold move towards the future of finance, Nagad, the joint venture mobile financial services provider with the Bangladesh Postal Department, is gearing up to launch digital banking services on March 26 next year. This strategic expansion underscores Nagad’s commitment to harnessing advanced technology to bring innovative and accessible financial solutions to the forefront.
Nagad’s confidence in a rapid launch stems from its current utilization of advanced technology. By leveraging cutting-edge solutions, Nagad has been able to stay at the forefront of the industry, offering efficient and secure financial services to its users. The integration of technology not only streamlines operations but also positions Nagad as a key player in the evolving digital banking ecosystem.
Redefining Banking Through Innovation
Nagad Digital Bank positions itself as the first full-fledged digital bank in Bangladesh, heralding a paradigm shift in banking dynamics. The institution is poised to eliminate traditional barriers, replacing physical interactions and paperwork with a comprehensive suite of customer-centric services. Tanvir A Mashuk, Nagad’s founder and managing director, envisions a banking experience centered around accessibility, security, and customer support.
Advancing Toward a Cashless Future
Embracing the government’s vision of achieving 75 percent digital transactions by 2027, Nagad Digital Bank strategically aligns its initiatives to foster a cashless transaction ecosystem nationwide. By contributing to this ambitious target, the digital bank becomes an active participant in the vision of establishing a Smart Bangladesh by 2041.
Key Features and Services by Nagad Digital Bank
Branchless Operation:
One of the key features of Nagad Digital Bank is its commitment to operate without physical branches. Instead, it will have a head office and a call center for customer support. Services will be seamlessly delivered through the website and mobile app, offering financial transactions akin to those in a traditional bank branch.
Comprehensive Financial Services:
Customers can expect a wide array of services, mirroring those offered in physical branches. This includes opening accounts, checking balances, transferring money, paying bills, and applying for loans, among others. Nagad Digital Bank is set to redefine the customer experience, emphasizing digital interactions and convenience.
Digital Lending:
Nagad Digital Bank’s innovative approach extends to digital lending, aiming to disrupt the financial industry. By leveraging customer transaction data and financial behavior, the bank plans to offer personalized credit solutions. The introduction of single-digit, collateral-free loans is targeted towards small informal businesses and farmers, providing an alternative to high-interest moneylenders.
AI-Based Credit Rating System
A highlight of Nagad Digital Bank’s strategy is the development of an AI-based credit rating system. This system, utilizing National ID (NID) and mobile number data, assesses creditworthiness. The goal is to instantly disburse loans through Nagad’s app, eliminating paperwork and the need for physical visits to bank branches.
Financial Inclusion:
The digital bank aims to extend its reach to unbanked and underbanked populations, acting as a gateway to financial services. The user-friendly mobile app is designed to enable marginalized individuals to save, transact, and invest without a traditional bank account.
Cybersecurity and Trust:
Nagad Digital Bank prioritizes security and trust, ensuring the highest standards of cybersecurity to safeguard user data and transactions.
Conclusion
Nagad Digital Bank emerges as a catalyst for change, ushering in an era of inclusive, convenient, and innovative banking. With a commitment to technological advancement, financial inclusion, and national development, Nagad Digital Bank stands poised to redefine the future of banking in Bangladesh, one digital transaction at a time.
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