Nagad, a company launched under the Bangladesh Postal Department’s banner, is currently Bangladesh’s second-largest mobile financial service (MFS) provider, holding approximately 30% of the market share. When Nagad started its journey on March 26, 2019, bKash was the dominant player in the country’s MFS sector. However, Nagad has risen to the second-highest position over the past five years, challenging bKash’s dominance. Nagad now has around 95 million customers, with daily transactions amounting to about BDT 18 billion. In addition to transactions, the service allows users to pay various bills, make payments for purchases, and receive remittances. Although Nagad obtained the license to become Bangladesh’s first digital bank in June 2024, after the fall of the Awami League government, several allegations of irregularities against Nagad began to surface. As a result, its digital banking license was suspended, and an administrator was appointed to oversee the company, raising concerns among customers about the company’s future existence. Can Nagad overcome this existential crisis and bounce back?
Overview
In 2016, Third Wave Technologies was established to provide mobile financial services. Inspired by the success of MFS, the company aimed to make the digital money order service of the Postal Department more consumer-friendly by utilizing the extensive infrastructure of around 10,000 post offices across the country. In 2017, Third Wave Technologies began working on providing mobile banking services for the Postal Department. From this initiative, on March 26, 2019, the new mobile financial service ‘Nagad’ was officially launched by the Prime Minister of Bangladesh. From its inception, the company marketed itself as the digital financial service of the Postal Department. In its first year of operation, Nagad concluded the year with 7.8 million customers. By the following year, the customer base grew to 23.6 million. According to the company’s most recent data shared with the media, Nagad now has over 95 million customers and handles transactions of over BDT 18 billion daily. However, the company has never been able to provide strong evidence to support this rapid customer acquisition.
Nonetheless, the company claims that it gained such rapid popularity due to the trust placed in it as a Postal Department entity and its competitive pricing. To build customer trust, Nagad prominently featured the Postal Department’s runner symbol in its logo and consistently highlighted in its promotional activities that the Postal Department held a 51% ownership stake. However, from the early days of its operations, the company was embroiled in controversies such as operating without a valid license, continuing operations through temporary licenses secured via political affiliations, questions surrounding the company’s actual ownership, and taking loans against customer deposits held in banks. Most recently, after the fall of the Awami League government in 2024, questions were raised about the identity of Nagad Digital Bank’s shareholders, leading to the suspension of its license and the appointment of a government administrator.
What Happened?
Nagad began its journey under the Postal Department’s amended 2010 law. The company claimed that the Postal Department owned 51% of Nagad, with Third Wave Technologies holding 49%. Initially, Nagad only offered money transfer services but later expanded into payment services. However, this move was met with objections from Bangladesh Bank and the Ministry of Finance. According to the central bank, while the Postal Department could conduct money transfers, it could not provide payment services. The Ministry of Finance directed that to continue operations, the Postal Department would need to form a subsidiary company, where the Postal Department would hold a 51% stake. However, under the existing postal laws, there was no provision for the Postal Department to form a subsidiary company, creating a legal impasse. This legal complexity meant that Nagad never fully came under the Postal Department’s control. When the Postal Department applied to Bangladesh Bank for a license for Nagad, the central bank’s Payment Systems Department granted permission on March 15, 2020, for Nagad to operate for six months under certain conditions. Seven specific conditions were attached to the license. The Postal Department failed to meet these conditions within the stipulated time, and although the central bank extended the deadline by another six months, the company was unable to regularize its legal status or clarify the 51% ownership stake held by the Postal Department. Nagad’s Managing Director Tanvir Ahmed Mishuk claimed that Nagad had been under the control of the Postal Department since its inception, and in 2021, the Postal Department officially took ownership of 51% of Nagad’s shares. That same year, the Postal Department announced that Nagad was established through a revenue-sharing agreement in which the Postal Department owned 51% and Third Wave Technologies owned 49%, with the latter only providing technological support. However, in October of that year, the Postal Department stated that although it had assumed ownership, it would not take responsibility for any loans taken by Nagad. Meanwhile, although Nagad was initially operated by Third Wave Technologies, the company was later rebranded as Nagad Limited. The Postal Department was reportedly unaware of this rebranding. In fact, the Secretary of the Postal and Telecommunications Department at the time, Md. Afzal Hossain, stated that the transformation of Third Wave Technologies into Nagad Limited occurred without the ministry’s knowledge, further complicating questions surrounding Nagad’s ownership. Despite these legal complications, Nagad continued to operate year after year under interim licenses.
In 2019, a report published by BBC Bangla revealed that many Robi and Airtel customers had been automatically enrolled as Nagad users without their consent. This raised concerns about the security of personal data. At that time, Robi and Nagad officials explained that the initiative was taken to prevent customers from having to visit an agent to open a Nagad account. In 2021, Nagad faced another controversy regarding the security of customer accounts. In September of that year, around 1,000 Nagad accounts were suddenly frozen. Due to ongoing issues with Nagad’s licensing, some customers began to fear a potential scam. Many speculated on social media that Nagad might be attempting to flee with customers’ funds. However, Nagad clarified that the accounts were temporarily frozen due to suspicious transactions on certain controversial e-commerce sites, and the account details were handed over to law enforcement agencies for investigation. After vetting the accounts, the company gradually reactivated them, with around 700 accounts being restored on September 13. Two days later, over 10,000 accounts were reactivated.
In 2022, Nagad again became embroiled in a dispute with Bangladesh Bank. This time, Third Wave Technologies took a loan of BDT 5 billion from EXIM Bank, using customer deposits held in Nagad accounts as collateral. According to Bangladesh Bank’s MFS regulations, customer deposits cannot be used as collateral for loans. When Third Wave Technologies failed to repay the loan, EXIM Bank settled BDT 3.17 billion of the outstanding loan from the funds held in Nagad customers’ accounts. This resulted in a shortfall in customer deposits held in Nagad accounts. Despite this, the amounts displayed in customers’ personal accounts remained unchanged, meaning the company had effectively created more virtual e-money than it actually had in customer deposits. Under MFS regulations, the amount of e-money must be equivalent to the amount of real money held by the financial service provider. In this way, Nagad had effectively committed a serious offense akin to printing counterfeit money by creating virtual currency. Despite violating Bangladesh Bank’s policies, no action was taken against Nagad, sparking further controversy. Nagad claimed that the shortfall in customer deposits caused by loan adjustments had been replenished, and there was no discrepancy between the company’s e-money and real money. However, according to newly appointed Bangladesh Bank Governor Ahsan H. Mansur, Nagad had created more e-money than it had in customer deposits.
Nagad, within just three years of its journey as an MFS (Mobile Financial Service), obtained initial approval to launch an NBFI (Non-Banking Financial Institution) called ‘Nagad Finance PLC.’ On July 12, 2022, Bangladesh Bank’s then-governor Abdur Rouf Talukder granted this approval. According to Bangladesh Bank’s MFS regulations, to provide MFS services, the majority ownership of the relevant institution must belong to a government entity, bank, or financial institution. It was for this reason that Nagad Finance was established to bring ‘Nagad’ under the regulatory framework of Bangladesh Bank. However, after the initial approval of Nagad Finance, discussions arose about whether this NBFI was owned by the MFS Nagad or if the MFS was owned by this new financial institution. But at that time, Nagad’s Managing Director Tanvir Ahmed claimed that they had no relationship with Nagad Finance. Later, it was revealed through national dailies that the real owner of the institution was Summit Group, and the NBFI application under the name Nagad Finance was made by Summit Group’s director, Muhammad Farid Khan. Following this, the Postal Department’s runner icon was abruptly removed from the Nagad logo. In a 2024 interview with Prothom Alo, Tanvir Ahmed Mishuk stated that Nagad had merely used the Postal Department’s brand and that the Postal Department had never actually held ownership of the company. Instead, Nagad had been paying 51% of its revenue to the Postal Department for using its brand. After receiving final approval for Nagad Finance, one of the conditions was that it must bring in over 90% of its investments from foreign sources to increase the flow of foreign currency. According to a financial statement from the 2021-22 fiscal year, the total loan amount for the institution was BDT 6.17 billion. By 2023, Nagad had incurred total business losses amounting to BDT 6.25 billion. To recover these losses, the company issued a bond worth BDT 5.1 billion with approval from BSEC. From the bond amount, BDT 4 billion was used to pay off loans, and the remaining funds were allocated for working capital. Meanwhile, Bangladesh Bank issued a new policy regarding digital banking licenses, prompting Nagad to surrender its NBFI license. From the beginning, Nagad had aimed to establish itself as a digital bank, but at that time, there was no policy in place for such an initiative. Hence, when Bangladesh Bank issued a new policy, Nagad seized the opportunity.
Despite lacking a proper MFS license in recent years and being embroiled in various controversies, no legal action was taken against Nagad, thanks to political patronage. Using this political influence, Nagad managed to secure a digital banking license in June 2024 despite missing documents. However, after the fall of the previous government, actions were initiated against all irregularities involving Nagad. As part of this, Bangladesh Bank launched an investigation into the ownership of Nagad Digital Bank. Bangladesh Bank sent a letter to the Ministry of Foreign Affairs, seeking to verify details about the ownership and citizenship of the five foreign entrepreneurial institutions that hold 94% of the shares of Nagad Digital Bank PLC, including their institutional structures and ownership at the time of formation. In a letter sent to the Foreign Secretary on August 18, Bangladesh Bank also requested information regarding the registration, address, location, business operations, net profit after tax, and net assets over the past three years of the foreign enterprises, as well as the business operations of any subsidiary companies in the case of holding companies. Based on inconsistencies found in this information, Nagad’s digital banking license was revoked on August 22. Upon verifying the shareholder information of Nagad Digital Bank, it was found that three out of five shareholder companies had been in existence for only two years, and another company had been registered in November 2023. Among the three companies, Osiris Capital Partners LLC and Zen Fintech LLC were registered on the same day, using the same address and agent. Another company, Telekom Asia PTE Ltd, had been registered in Singapore in 2011 but was rebranded as Finclusion Ventures PTE Ltd in 2019. According to the company’s website, its CEO is Tanvir Mishuk, and the logo of Finclusion closely resembles Nagad’s original logo. While Tanvir Mishuk is the CEO of Finclusion, Nagad Digital Bank’s representative on the board is Nagad’s Senior Manager, Nakib Chowdhury. Inclusion owns 11% of Nagad Digital Bank, while Osiris Capital Partners LLC holds 49.8%, and Blue Heaven Ventures Ltd holds 24.9%. Tanvir Ahmed Mishuk is also the representative of Osiris Capital Partners on Nagad Digital Bank’s board. On the other hand, Blue Heaven Ventures Ltd, which holds a 24.9% stake, is represented by Muhammad Farid Khan, Director of Summit Group and the younger brother of Aziz Khan, the founder of Summit Group. According to Bangladesh Bank regulations, no individual, institution, or family member can hold more than a 10% stake in a bank in Bangladesh. However, in the case of Nagad Digital Bank, the central bank violated its own policies by allowing Finclusion Ventures, Osiris Capital Partners, and Blue Heaven Ventures to hold more than 10% of the shares.
Since Nagad’s inception, the various conflicting statements from Managing Director Tanvir Mishuk regarding the company’s ownership suggest that Nagad has been operating under the protection of political influencers from the beginning. A company whose ownership was never clearly established was entrusted with important responsibilities such as distributing government allowances, scholarships, and grants. Despite not having a legal basis, the company was allowed to grow. Recently, Bangladesh Bank appointed Muhammad Badiuzzaman Didar as the administrator of Nagad. The central bank has announced that Nagad will continue its normal operations under Bangladesh Bank’s supervision.
However, can Nagad return to its previous position without the unethical privileges and patronage granted by the previous government?
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