In 2014, the financial inclusion rate of Bangladesh was only 31 percent which reached 50% by 2017 and has now increased further. Although the government of Bangladesh has taken various steps to improve this financial inclusion rate, people are still hesitant to use institutional financing due to a lack of knowledge about conventional banking. Also, in Muslim-majority countries, conventional banking does not align with the religious values of many people. Although there are Islamic banking services in Bangladesh, it is not easy for most to avail; hence a large part of the country’s population remains out of the service coverage. But with the launch of the MFS service in 2012, financial inclusion in the country also increased. Adding Islamic banking facilities to these MFS will increase inclusion further with such a vision; three years ago, the Shariah-based mobile financing service “Nagad Islamic” was launched by Nagad, the Mobile Financial Services of Bangladesh Postal Department.
Overview of Nagad Islamic Banking
On November 11, 2018, Mobile Financial Service Nagad of the Postal Department started its journey under a public-private partnership as a joint venture between Bangladesh Post Office and Nagad Limited. In less than a year after the commencement of operations, the daily cash transactions amounted to more than BDT 160 crore. In addition, allowances paid from government funds are mostly disbursed through Nagad. As a result, the amount of cash transactions is constantly increasing. In April 2021, Nagad reached the milestone of BDT 400 crore transaction per day. In addition, the number of cash users crossed the 4 crore milestones at the same time that year. According to the company, the number of Nagad users exceeds six crores, and more than 700 crore transactions are taking place on an average every day.
More than 90% (90.40%) of the total population of Bangladesh is Muslim. The “Islamic Account” facility of Nagad, the Mobile Financial Services of the Bangladesh Postal Department, has been in operation since 2019 to ensure Islamic Shariah and finances align with the Islamic way of life for the vast Muslim population. For the past three years, Nagad has been providing this service to its customers through its mobile app. This cash service has been under the supervision of a Shariah Supervisory Committee since its inception. Using this account called “Cash Islamic” a user can easily save his money in an account in an interest-free and Shariah-compliant way.
The users can avail the Nagad Islamic service through the Nagad app. After downloading the app from the Play Store and logging in, selecting the “Nagad Islamic” option as the type of account from the “Amar Nagad ” option, will convert the user’s account to Nagad Islamic Account. Although it is an Islamic account, all the other benefits of Nagad Islamic and regular Nagad accounts are the same in case of transactions and cash-out except for some extra services.
The main advantage of the Nagad Islamic account is that no interest is paid to the user against the money saved in this account. Regular cash accounts pay interest ranging from 1.50% to a maximum of 7.50% against the amount deposited by the customers. However, being a Shariah-based account, Nagad does not pay any interest on the money deposited by the Islamic account holders. In addition, due to having an Islamic account, users can use this account to pay various types of Islamic donations, Zakat, Fitrah, etc. For Zakat money and Islamic donations, Nagad is associated with several organizations.
Through the Nagad Islamic account, customers can also pay for Hajj and Umrah flights and other travel expenses. Also, through this account, users can complete their various Islamic life insurance installments and payments from the comfort of their homes. To utilize the benefits of the Nagad Islamic account, users must keep the Islamic account active at all times. The Islamic account does not have a dedicated app. Users can convert to the Islamic account option from the original Nagad app.
Future of Nagad Islamic Banking
The journey of the Islami Bank in Bangladesh started in the 1980s with the establishment of “Islamic Bank Bangladesh Limited.” 10 Islamic banks currently operate in Bangladesh, having 1569 branches across the country. According to Bangladesh Bank, by the end of June 2021, Bangladesh’s Islamic banking sector had three crores 68 lakh 16 thousand 300 crore taka (3,68,16,300,00,00,000 BDT) in the deposit, which was 27.26 percent of the total deposits of Bangladesh’s banking sector. This proves the popularity of Islamic banking in Bangladesh. In addition to full-fledged Islamic banks, most conventional banks in Bangladesh now have their exclusive Islamic banking branches or windows.
In addition to their regular banking services, conventional banks provide Islamic banking services for their customers. For example, in December 2021, The City Bank Limited, one of the leading banks in the country, relaunched the Islamic Banking window under the name City Islamic. Although these are Islamic banks, availing of services of these banks is challenging, especially for the low-income class. Moreover, unlike the Conventional Bank, these banks do not have adequate branches and cannot serve the minorities’ customers even if they want to.
As a result, many devoted people of the country remain out of banking facilities. In this regard, Islamic MFS is the need of the era to bring the country’s common people under financial inclusion and make Shariah-based banking services available to the people. With the growing popularity of Islamic Sharia-based banking in Bangladesh, the popularity of Islamic MFS Nagad Islamic, the only Islamic MFS in the mobile financing sector, is expected to grow further in the future.