Nagad Announces Free Cash Withdrawals for Customers

Nagad’s Managing Director, Tanvir A Mishuk, announced that the company will introduce a free cash withdrawal service for its account holders in Bangladesh by the end of this year, as part of the country’s efforts to promote financial inclusion.

In a recent interview with The Daily Star, Mishuk stated that the move will not have a negative impact on the company’s earnings, but rather will help expand their business.

Currently, clients of mobile financial service (MFS) providers in Bangladesh are charged between Tk 10 to Tk 18.50 per Tk 1,000 withdrawal.

Nagad, as one of the largest MFS operators in the country, plans to offer the service through its upcoming non-bank financial institution, Nagad Finance PLC.

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Nagad Finance was granted a letter of intent by the central bank on August 30, and on January 12 of this year, the Bangladesh Bank granted in-principle approval for Nagad Finance to operate mobile financial services (MFS), making it the first non-bank financial institution (NBFI) to receive such approval in the country.

Tanvir A Mishuk, Nagad’s Managing Director, the NBFI will begin operations once it receives the necessary license from the central bank. Mishuk added that just as clients can withdraw funds from their banks without charge, the same should apply to clients of MFS providers.

Nagad Finance plans to offer a range of financial services for micro-businesses and underprivileged groups, including disbursing loans and mobilizing deposits through its MFS platform, which currently has 7.25 crore users.

Tanvir A Mishuk revealed that approximately 60% of the people in Bangladesh obtain loans from formal and informal channels at exorbitant interest rates, with some microfinance institutions charging rates as high as 30-40%.

Mishuk stated that such rates are unsustainable and that Nagad Finance aims to revolutionize the system within two years, offering single-digit interest rates and collateral-free loans.

The NBFI will prioritize micro and small businesses, including street vendors and marginalized groups, when disbursing loans through digital platforms to reduce costs and speed up the process.

Nagad Finance will also offer various savings products, enabling even those with a small amount of money, such as Tk 10 per day or week, to save.

According to Mishuk, the profits from the NBFI’s operations will enable the MFS provider to offer a free-of-charge cash-out service. Despite its rapid expansion, Nagad has decided to distribute dividends to its shareholders this year, reflecting its smart business strategy.

Nagad entered the MFS market in 2019, and its large customer base over the past few years attests to its success.

Nagad revolutionized the MFS sector by offering e-KYC (Electronic Know Your Customer) and reducing the account opening time to just 15 minutes, compared to the typical 3-15 days.

This led to a significant increase in users, and partnerships with mobile operators further enabled clients to open MFS accounts in only 10 seconds.

Nagad also reduced the rates on cash-out transactions in 2020, resulting in a boost in transactions.

Regarding ownership, Nagad started as the MFS service of the Bangladesh Post Office and was later operated by Third Wave Technologies Ltd before being renamed Nagad Ltd.

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Nagad Finance will own 51% of shares of the MFS operator, and the rest will be owned by Nagad Ltd, which will clear up any confusion about ownership.

Nagad Finance plans to establish a digital bank to further enhance financial inclusion. Mishuk aims to break the current lending system, where formal and informal channels charge high interest rates, by providing collateral-free loans to micro-businesses at a single-digit interest rate.

Nagad’s operations have proven to be profitable, enabling them to offer free-of-charge cash-out services to clients.

The MFS system is widely used by various government and private organizations, with about Tk 3,000 crore in transactions made through the system every day, and 19.10 crore registered users across 13 MFS providers in 2022.