Pros and cons of MFS regulations 2018  

Mobile banking has now become the most popular medium for monetary transactions in Bangladesh because of its ease and speed. This concept of mobile financial services (MFS) has brought under its fold a huge unbanked segment of the population, especially in rural Bangladesh, within a span of seven years after its launching in 2011. Whereas the proportion of MFS account holders in the population was only 3.0 per cent in 2014, it rose to around 38 per cent this year. This is higher than the South Asian average of 33 per cent and the global lower middle-income country average of 27 per cent. This phenomenal success is transforming the rural economy in many ways and has made Bangladesh the regional leader in the field of mobile banking. The issuance of the Bangladesh Mobile Financial Services Regulations, 2018 by the Bangladesh Bank on Monday has been the latest step in this gradual unfolding of a narrative that has huge potential for promoting socio-economic dynamism, mobility and growth. Although the issuance of the regulations may have been laudable, it seems to have some limitations and drawbacks.  

According to the latest figures from the Bangladesh Bank, the number of banks currently providing MFS services is 18. Registered clients in June 2018 were 618,000, while the number of active accounts was 272 thousand. The number of agents, on the other hand, was around 830 thousand. The average number of daily transactions in June was 192.59 million, while the average value of daily transactions was over Taka 11 billion. Significantly, the number of active accounts grew by 18.8 per cent and the average number of daily transactions rose by 7.3 per cent in just one month. Apart from cash-in, cash-out and person-to-person transactions, the MFS services are also being utilised for utility bill payments, salary disbursements, merchant payments, government payments and inward remittances.

Originally, the central bank provided the framework for MFS operations and their ownership through issuing a guideline on MFS for banks in September 2011. This was followed by a revised guidelines in December 2011 and then regulatory guidelines in July 2015. The recently published regulations appear to be an updated version of the earlier guidelines, which some may even label as 'old wine in a new bottle'.

As in the previous guidelines, the latest regulations stipulate that the MFS providers will be led by only the scheduled commercial banks. The banks already running MFS operations have been allowed to hold on to their existing licence or form a subsidiary for the purpose. On the other hand, the new applicants shall have to form a subsidiary. It is not clear, why the banks that already provide MFS could not be asked to open subsidiaries instead of providing the services on their own. It certainly violates the principles of uniformity and equality. The regulations also stipulate that the parent banks have to own at least 51 per cent of the subsidiary's equity; but they are permitted to take equity partners from other banks and non-bank financial institutions, NGOs, investment and fin-tech companies. The mobile network operators (MNOs) have been kept outside the list of permitted partners, but have been allowed to become distributors or super-agents along with NGOs and the postal department. This appears to be justified as the BTRC, and not Bangladesh Bank, is the controlling authority of MNOs.

Sadly, there are many spelling, grammatical and linguistic errors as well as some unexplained abbreviations in the English language document, which speak volumes of the professional acumen of the current management at the central bank.