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Course Name: Global Business Strategy

Course: INB 480
Section-01
Report On
BKASH

Submitted To:
Mahmud Habib Zaman

Senior Lecturer

Department of Marketing and International Business,

North South University

Submitted By:
Redwan Ahmed Shopan
Id: 1921857630
Serial number-6
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bKash Limited
Introduction
Mobile Financial Services (MFS) is a way of offering financial services that combines both
banking and mobile wireless networks which enables users to conduct banking transactions.
This means the ability to make deposits, withdraw, and to send or receive funds by using
mobile. Often these sorts of services are enabled by agents that allow mobile account holders
to transact at independent agent points.bKash is one of the very first Mobile Financial
Services (MFS) in Bangladesh. And it started its journey with only 12 people in 2011, since
then it has come a long way. In a span of few years of time bKash has become the leading
MFS (Mobile Financial service) of Bangladesh. bKash has created an impact in the life of not
only the rural but also the urban people of Bangladesh. The credit of the success of bKash
goes totally to its management and dedicated employees. 70% of our population lives in the
rural areas and they do not have proper access to traditional banking systems. That’s why
only 15% of people from our huge population are privileged to have bank accounts and the
rest are still deprived from the banking service. bKash’s main aim was to include this huge
unbanked population into financial inclusion.In 2011 BRAC Bank launched a 51% owned
subsidiary called bKash combined with an investment from Money in Motion an USA based
company granted permission by Bangladesh bank to jointly operate MFS in Bangladesh. In
April 2013, International Finance Corporation (IFC), a member of the World Bank Group,
became an equity partner and in April 2014, Bill & Melinda Gates Foundation became the
investor of the company. In 2017, bKash Limited, the largest mobile financial service
provider in Bangladesh was ranked 23rd on Fortune’s third annual ‘Change the World’ list
which recognizes top fifty companies that are changing the world through solving a multitude
of societal problems (bKash, 2017).bKash provides one service menu for MNOs which
includes Robi, Banglalink,Grameenphone and Airtel. bKash is the largest MFS in Bangladesh
with a network of over 200000 agents scattered through the urban and rural areas of
Bangladesh touching the unbanked communities with over 35 million registered accounts.
bKash has also collaborated with big organizations as business partners such as Aarong, Bata,
Lotto etc. which are known as merchants. By providing various banking services such as cash
in/out, buying airtime, making payments, sending money and remittances through mobile
networks bKash has already reached to almost every district of Bangladesh and has provided
affordable banking services to people who could not afford banking services and is
contributing a large portion to the country’s growing economy.Bangladesh Bank plays a huge
role in shaping the regulations of bKash’s operations.

Mission of bKash
bKash is in a mission of providing financial service which will be convenient, affordable and
reliable. It aims to include both the banked and unbanked population to widen the net of
financial inclusion and bring them into their network. Initially, their main mission was to give
financial services to unbanked and under privileged population of Bangladesh and introduce
the non-conventional or the alternative of traditional banking which is MFS (Mobile
Financial Service) in Bangladesh.

Vision of bKash
bKash is neither a bank-led nor Telco-led company, rather its business model is totally
different from the traditional banking system. Unlike traditional banking bKash does not
focus on credit or savings instead what it does is it drives transactions and earns revenue from
the fees. In our country banks are mostly situated in urban areas and they mainly focus on
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well to do customer based. But 70% of our population lives in the rural areas and they do not
have proper access to traditional banking systems, so bKash’s vision was to introduce MFS
(Mobile Financial Service) particularly to this segment of our population.

Product and Services of bKash:

bKash has 176,000 active agents all over Bangladesh who offer cash-in and cash-out services
to the users. bKash’s agents basically act as depository of electronic money while the
transactions are being done through the customer's cell phone. While there is a collaboration
done between the bKash and its distribution companies to give services to the customer. With
passing time digital payment is getting more and more popular among the people of
Bangladesh. That’s why bKash is continuously innovating and trying to come up with new
product and services which will create a positive impact in the consumer’s life and also will
be financially beneficial for them.
The product and services of bKash are given below:
Cash In: Through the agent points bKash users can deposit money into their accounts.
Cash Out: bkash users can withdraw money from any authorized agent points.
Cash Out from BRAC Bank ATM Booths: bkash users has the privilege to do cash out
from any BRAC bank booth.
Send Money: bKash users can transfer money from their account to any other account.
Payment: It is possible to make payments through bKash.
Buy Airtime: bKash also offers recharging of mobile airtime.
Remittance: Western Union, MasterCard and bKash have formed a partnership for giving
convenient service to Bangladeshi people so that they can receive international remittance
without any hassle.
Others Remittance: People living abroad can send remittance in the easiest possible ways
through nominated and registered bkash account holders.
Interest on Savings: bKash offers interest on saving for its customer accounts. Customers
need to have at least 1000 taka balance in their accounts for being eligible for the interest.
Current No. of Users of bKash:
bKash currently has 18,50,000 Agents. More than 25,000 Marchants.3,000,0000 personal
accounts.Everyday Transaction 5.5 million.22% of the Adult Population of Bangladesh uses
bKash 55.11% transaction in MFS is done by bKash.
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Bangladesh Mobile Financial Services (MFS) Regulations, 2022

The financial sector in Bangladesh is continuously growing in response to the evolving

needs of the growing economy. Rapid expansion of mobile phone users, modernization
of payments and financial systems based on IT infrastructure, country-wide reach of
mobile network and internet have boost up the opportunities for enhancing Mobile
Financial Services (MFS) to offer convenient payment mode which is cost efficient and
prompt for the underserved, unbanked/under-banked and low income group of
population of our country.Since the inception of MFS in 2011, the
Board of Directors of Bangladesh Bank (BB), in terms of Section 7A(e) and section 82 of
the Bangladesh Bank Order, 1972 and in terms of Section 26 (cha) of Bank Companies
Act, 1991 has decided to issue Bangladesh Mobile Financial Services (MFS)
Regulations, 2022 replacing the Bangladesh Mobile Financial Services (MFS)
Regulations, 2018 issued in July 2018 and its subsequent amendments. Bangladesh
Mobile Financial Services (MFS) Regulations, 2022 will be in effect along with the
Bangladesh Payment and Settlement Systems Regulations, 2014, Guidelines for Trust
Fund Management for Payment and Settlement Services or any other law(s) shall come
into effect regarding these regulations.

The purposes of these Regulations are to:

(i) Provide regulatory framework to create an enabling and competitive environment
to cater cost efficient and prompt MFS;
(ii) Promote convenient access to formal financial services at an affordable cost
especially for the poor and unbanked population segments; and
(iii) Ensure compliance with Anti Money Laundering and Combating Financing of
Terrorism (AML/CFT) standards set by AML/CFT rules, regulations, guidelines
and instructions issued by Bangladesh Financial Intelligence Unit (BFIU).

Agent/ Retail Agent/ Authorized Agent: An entity authorized by MFS provider to carry
out financial transactions for mobile financial services on behalf of MFS providers.
Bank/Financial Institution/Government Entity-led (Bank/FI/Government Entitled) MFS
Model: Subject to the provision of their concerned law/Act,
Bank/FI/Government Entity-led MFS is a model where Mobile Financial Services
Provider (MFSP) will be a subsidiary of a scheduled commercial Bank/FI licensed by
Bangladesh Bank or Government Entity with at least 51% of the share held by the
Bank/FI/ Government Entity with control of the board.
Bangladesh Mobile Financial Services (MFS) Regulations, 2022

Government Entity: Any agency, division, directorate etc. under jurisdiction of

Executive Division of Government of the People‟s Republic of Bangladesh.
Government Security: A debt instrument issued by the Government of Bangladesh.
Interoperability: Interoperability refers to the set of arrangements/procedures that
allows participants in different systems to conduct and settle payments or securities
transactions across systems while continuing to operate only in their own respective
Operational Account: Account maintained by MFS providers with scheduled
commercial banks for operational purposes other than custody/settlement purposes.
Oversight: The activities carried out by BB to monitor and analyze the key indicators of
MFS as part of the national payment systems, assessing them against payment systems
objectives and where necessary, inducing change to promote safety and efficiency.
Parent Bank/FI/Government Entity: One single bank/FI/Government Entity that holds
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at least 51% of the equity share capital along with controlling voting rights in the board
of directors of the MFS providing subsidiary.
Payment Services Provider (PSP): "Payment services provider" refers to an entity
licensed by Bangladesh Bank to provide electronic money services to its customers and
keep the aggregate balance of the issued e-money to a Trust Cum Settlement Account in
a scheduled commercial bank.
Principal(s): Banks and financial institutions licensed by Bangladesh Bank (BB), Micro
Finance Institutions (MFIs) licensed by the Microcredit Regulatory Authority (MRA),
Insurance Companies licensed by Insurance Development and Regulatory Authority of
Bangladesh (IDRA) for which MFS provider is acting as an agent for disbursing loans
and in accepting repayments.
Technology Partner: A technology partner provides technical support to MFS
providers.
Trust Cum Settlement Account/Custodian Account: Trust cum Settlement Account
(TCSA) means a custody account where the legal tender shall be stored against the
issuance of e-money by a Payment Service Provider, or where the legal tender that
received from the service recipient of the Payment System Operator or any other
authorized entity for maintaining such account, and the balance of the account shall not
be used for any purpose other than the approved ones.
Trust Fund: Trust Fund will comprise of any fund held by a payment service
participants or any entity authorized by Bangladesh Bank to do so, that creates a liability
of the service providing entity to its customers and, or participants.
Valid Identity: The documents determined as per the directive of Bangladesh Financial
Intelligence Unit (BFIU) to open an MFS account.

Bangladesh Bank will allow only scheduled commercial Bank/Financial Institution/

Government Entity-led MFS (Bank/FI/Government Entity-led MFS) in Bangladesh. The
provision of these regulations shall apply to MFS providers in Bangladesh. MFS Provider
will act as a Payment Service Provider (PSP) as defined in the Bangladesh Payment and
Settlement Systems Regulations, 2014. To provide MFS, a scheduled commercial bank or
financial institution licensed by Bangladesh Bank or Government Entity, will establish a
subsidiary with bank or non-bank entity as equity partner and take license as PSP from
Payment Systems Department of Bangladesh Bank. 5.0 Products of MFS 5.1 BB permits
Bank/FI/ Government Entity-led MFS providers as PSP to deliver the following broad
categories of payment services in Bangladesh:

(i) 'Cash-in' to and 'Cash-out' from MFS accounts through agent locations, bank branches,
ATM, Cards, linked bank accounts and other methods approved by BB;
(ii) Person to Business payments like utility bill payments, educational institutional fees
payment, merchant payments, mobile top up, deposits into savings accounts/schemes with
banks/non-bank financial institutions (NBFIs), loan repayments to banks/non-bank financial
institutions (NBFIs)/non-governmental organizations-microfinance institutions (NGO-MFIs),
insurance premium payments to insurance companies and so forth;
(iii) Business to Person payments like salary disbursements, dividend/refund warrant/
discount payments etc.
(iv) Person to Person payments such as one MFS personal account to another MFS personal
account with the same MFS provider or another MFS provider as well as the payments from
one MFS account to a bank account and vice versa;
(v) Business to Business payments like vendor payments, supply chain management
payments etc.
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(vi) Online and e-commerce payments;

(vii) Government to Person payments such as pension payments, old age allowances,
freedom-fighter allowances, subsidy payments to farmers and so forth;
(viii) Person to Government payments such as tax, fee, levy payments, toll charge, fine etc.
(ix) Disbursement of inward foreign remittances in accordance with 7.6 of this regulations;
(x) Loan disbursements to borrowers, vendor payments etc.
(xi) Other payments approved by the Bangladesh Bank.

While performing duties as PSP and as authorized agent, the MFS providers will
be under direct supervision of BB‟s Payment Systems Department (PSD).
Whereas, the regulatory compliance of deposit taking, lending and other financial
services in which MFS providers will act as agent, will rest with the principal(s)
that have engaged the MFS providers as their authorized agents.Permissible model for MFS
providers.MFS providers in Bangladesh will be led by scheduled commercial banks or
financial institutions licensed by Bangladesh Bank or Government Entity. To
provide MFS in Bangladesh, scheduled commercial banks that are already in
MFS operation are permitted to continue with the existing license or may form a
subsidiary. In case of new applicants, scheduled commercial bank(s) or financial
institution(s) or Government Entity shall have to form a subsidiary. The
scheduled bank(s)/FI(s)/Government Entity interested to form a subsidiary, for
the purpose of providing MFS, shall focus entirely on providing mobile financial
services. In case of a subsidiary following models are permitted:
(i) Subject to the provision of their concerned law/Act, one single
bank/FI/Government Entity, known as the parent bank/FI/ Government
Entity should have at least 51% of the equity of MFS providing
subsidiary. Parent bank/FI/Government Entity will also have majority in
Board of Directors along with controlling shares.
(ii) Subject to the provision of their concerned law/Act, parent
bank/FI/Government Entity may conduct the operation of subsidiary alone
or may take equity partners from the following business entities:
(a) Bank(s), financial institution(s) and Government Entity;
(b) NGOs, investment and fintech companies (local and foreign
incorporated) who have experience of working in financial market
except Mobile Network Operators (MNOs).
(iii) MFS provider will act as the primary driver of the products and services,
manage customer relationships and distribution channels and mitigate
associated risks.
(iv) However, any entity whether it is a bank/FI/Government Entity or a non
bank entity, can hold equity in only one MFS providing subsidiary.

 The minimum paid-up capital requirement of a subsidiary model-based MFS

The provider is Bangladeshi Taka Forty five (45) Crore. However, the total capital of
a Mobile Financial Services Provider (MFSP) can‟t be less than Bangladeshi
Taka Forty five (45) Crore at any point of its operation. A further cushion of
„capital reserve‟ equal to the amount of paid up capital will have to be built up
from retained earnings, at a rate not less than ten percent (10%) of annual after
tax profits, to mitigate risks. Loss incurring MFS providers must be required to
inject additional capital to maintain the minimum paid up capital requirement.
However, in any case, parent bank/FI/Government Entity has to maintain at least
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51% of the equity capital.

Bangladesh Bank may determine additional capital requirement for an existing or

new MFSP depending on the scale of its operation and risk. If so, the MFSP must
be required to maintain the capital in its business. Failure to maintain required
capital will be subject to penalty imposed by Bangladesh Bank as it deems fit or
cancellation of license.

Approval of application, commencement of business, operational modalities for

MFS providers:

(i) Scheduled banks, already running MFS operations (with approval of BB)
may continue with their existing structure. Scheduled banks, already
running MFS operations (with approval of BB) which are interested in
forming subsidiary, shall restructure their MFS units as subsidiary
company exclusively as MFS providing PSPs, in terms of Regulation 6 of
these regulations. More than one scheduled banks, already in MFS
operations, canceling their individual license, may also form a subsidiary
setting up one of the banks as a parent bank.
(ii) Scheduled banks/FIs/Government Entity having no MFS operations of
their own may join any of the running MFS providing subsidiaries by
acquiring equity therein. Besides, two or more scheduled commercial
banks/FIs/Government Entities may jointly form a new MFS (with or
without non-bank equity participants to begin with) setting up one of the
banks/FIs/Government Entities as a parent bank/FI/Government Entity
and seek BB‟s approval to provide mobile financial services.

MFS applicants, approval will be provided in two phases

At the first phase, no objection certificate (NOC) will be granted to set up the infrastructure.
At the second phase, a license will be issued to commence the operation. Before
launching proposed service, MFS provider will have to seek permission for
commencement of business from BB‟s PSD, within one year of getting NOC for
setting up a MFS infrastructure, with the following documents:

(i) MOU(s) with MNOs and other technology partners, specimen of Service
Level Agreements (SLA) to be entered into with intermediaries in the
service delivery chains, including the distributors/super agents and field
level retail agents;
(ii) Lists of names and field level locations of retail agent outlets/cash points
(to be) appointed by the MFS provider, to be updated subsequently on
regular monthly basis;
(iii) MOU with the settlement bank(s);
(iv) Other documents (as required by BB).
(i) Transactions in MFS will be conducted only through non-cheque limited
purpose accounts termed "MFS Accounts" in name of customers,
accessible with bearer‟s mobile phone or through alternative digital
process or device by ensuring authenticity of the transaction.
(ii) Minor beneficiary entitled with government/other approved facility
through MFS may get the benefit primarily through his/her mother‟s MFS
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account. Where necessary s/he may get the benefit through his/her father‟s
or legal guardian‟s MFS account.
(iii) Opening of MFS accounts in names of individual, business and other
entity will however require complete observance of KYC and CDD drills
as prescribed by competent authority from time to time. Opening of MFS
accounts in names of service delivery intermediary at wholesale and retail
levels (distributors, super agents, agents, merchants etc.) will likewise
require complete observance of KYC and CDD drills as prescribed by
competent authority from time to time.
(i) Aggregate of e-money balances in all MFS accounts of an MFS provider
must at the end of the day be in agreement with or be less than the total
real cash balances in nominated trust cum settlement accounts of the MFS
provider with scheduled commercial bank(s) and invested amount in
Government Securities. No loan is permissible against the Trust Fund
and/or any other instruments that are derived from the Trust Fund. This
shall be monitored by the MFS providers on daily basis and any shortfall
shall be immediately reported to the Payment Systems Department,
Bangladesh Bank. Banks holding trust funds of the MFS providers are
supposed to be entitled with the role of a custodian. The MFS providers
may, if necessary, choose other scheduled commercial bank(s) to be their
custodian of trust fund which is subject to prior approval from PSD of
BB. Balances and transactions at the custodian end must at all times
remain separate from and never be commingled with other operational
accounts of the MFS providers.
(ii) a) Bank(s) providing mobile financial services without forming a
subsidiary but MFS account holders are not under deposit insurance
coverage of Bangladesh Bank; b) MFS provider under subsidiary model need to maintain the
balance of all MFS account in trust cum settlement account and need to invest not less than
25% of the physical cash balance
in Government Securities on the basis of calculation on the last working
day of June and December each year. Remaining cash balance has to be
kept with settlement bank(s).
(iii) Bank(s) providing mobile financial services without forming a subsidiary
and MFS account holders are under deposit insurance coverage of
Bangladesh Bank, will be waived from investing in Government
Securities.

 MFS providers will handle foreign inward remittances only if received through
Credits in Nostro Accounts of scheduled commercial banks in Bangladesh and
pay out the same only in Bangladeshi Taka (BDT) to MFS accounts of the
beneficiaries. No outward or cross-border payment transactions shall be
undertaken by MFS providers, as these can only be handled by the AD branches
of scheduled banks in Bangladesh.
 MFS providers are strictly prohibited to engage in taking deposit and lending
from their own funds.
 MFS account holders are free to mobilize balances of their MFS accounts to their
deposit accounts with scheduled commercial banks and MFS providers will act
immediately on request of customers for transferring balances from their MFS
accounts to their deposit accounts with scheduled commercial banks.
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 MFS providers will draw up annual accounts and financial statements in

accordance with prevailing accounting and reporting standards and submit the
ones duly audited by reputed audit firm(s) to PSD of BB within 3(three) months
after the end of the accounting year.
 Suspension and cancellation of MFS providers by BB
BB reserves the right of withholding, suspending and cancelling its approval for
operation of an MFS provider, if BB deems actions of the accused MFS to be detrimental
to public interest. Moreover, BB will take appropriate steps towards protecting legitimate
interests of the MFS account holders and other stakeholders of the accused MFS
provider.
 Schedule of Charges
The rate of charges realizable from various financial services offered by the MFS
providers to their clients shall be set in a competitive, non-collusive manner. Besides,
keeping BB‟s PSD fully apprised of all rate settings and rate revisions, MFS providers
will ensure prominent display of the rates of charges in all their retail agent outlets to
inform all customers. Information about all products with schedule of charges should
also be available for all stakeholders in the customer care centers and websites of MFS
Providers

 Distribution Channel
(i) MFS shall appoint distributors/super agents under contract adhering to the
existing law according to clear and well-documented selection policies
and procedures reported to BB‟s PSD and shall have clear description of
roles and responsibilities of both parties in all relevant aspects. MFS
providers may install retail service outlets or appoint delivery agents
under contracts adhering to the existing law according to clearly stated
roles and responsibilities including business hours for the service outlets,
required standards of customer services, rates of commission/fee payable
to agents, transaction reporting routines, authorizations for signing,
customer interest protection, dispute resolution and settlement and so
forth.
(ii) Agents are only allowed to take part in 'cash-in' (i.e. converting physical
money to e-money), 'cash-out' (i.e. converting e-money to physical money) and other
transaction(s) approved by Bangladesh Bank. To do the
'cash-in' and 'cash-out' customers may need to show valid identity to
agents. Any transfer transactions involving third party MFS accounts at
the sending or receiving end are prohibited. MFS providers will have to
sensitize the agents properly about AML/CFT risks inherent in their
transactions and also to monitor transaction patterns carefully towards
identifying possible unauthorized/suspicious transaction activities.

 Entities with extensive networks of service delivery outlets, such as NGO-MFIs,

MNOs and Government‟s Postal Department etc. will inter alia be eligible for
engagement as distributors/super agents/retail agents and field level service
delivery agents. Agreements with such distributors/super agents/retail agents
should include reporting clauses requiring full visibility of transactions of the
agent network as well as at individual service outlet level as and when necessary.
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An agreement with a network already in agency relationship with other MFS

providers should include clause requiring clear separation of transactions handled
for each MFS provider, avoiding any co-mingling of the e-money of different
MFS providers. The distributors/super agents like NGOs, MNOs, and
Government‟s Postal Department etc. will be able to operate in any geographical
location in Bangladesh. However, individual (a person) distributors/super agents
are bound to work in a certain limited geographical boundary.

 Criteria of selecting partners and agents by MFS providers should inter alia
include:
(i) Inclusivity of Distributors/super agents and Agents;
(ii) Technical competence for and track record of the intended role;
(iii) Financial soundness, business reputation and no record of bankruptcy;
(iv) Standards of security and internal control, audit coverage, monitoring and
reporting;
(v) Capability of meeting commitments under adverse conditions;
(vi) A self declaration that partners and agents do not have a past criminal
record.

 MFS providers shall comply with the provisions of existing Money Laundering
Prevention Act, Anti Terrorism Act and respective Rules issued therein under,
instructions and guidelines issued by Bangladesh Financial Intelligence Unit
(BFIU) from time to time.
 MFS providers shall remain responsible for authenticity and timely updating of
the KYC records as per the instructions of BFIU as and when required.
 Processes to be followed in ensuring authentication of MFS transactions and
security
 MFS providers shall follow the ICT Act, 2006 (amended in 2013) and the
Guidelines on ICT Security for Scheduled Banks and Financial Institutions, 2010
issued by BB, in addressing ICT security issues in respect of MFS.

 The following properties need to be addressed fully in offering a secure

infrastructure for financial transactions using mobile technology:
(i) Confidentiality: Property ensuring that transaction information cannot be
viewed by unauthorized persons.
(ii) Integrity: Property ensuring that the transaction information remains
intact during transmission and cannot be altered.
(iii) Authorization: Property ensuring that the authentic user has proper
permission to perform the particular transaction. It ensures how the
system decides what the users can do.
(iv) Non-repudiation: Property that the particular transaction initiated by a
user cannot be denied by him/her later.

All transactions must be authenticated by the account holders using their

respective Personal Identification Numbers (PINs) or similar other secured
mechanism. MFS providers should ensure that proper protection and security
features are maintained in issuing and authenticating the PINs and other secured
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mechanisms.MFS providers shall ensure that proper process is in place for identifying
customers while the service is being enabled/executed. Besides the PIN, a
suitably chosen second authentication factor would be encouraged to add as an
additional security.

 MFS providers shall encourage linking of the MFS accounts of customers with
their existing or new accounts in banks; maximizing access of customers‟ credit,
deposit and other financial services through the MFS accounts. MFS providers
shall cooperate and work together in promoting interoperability among the
providers towards ensuring widest possible access for customers.
 The MFS providers shall design their systems and procedures such that all MFS
providers are capable of providing fund transfer service in a completely
interoperable way which may include fund transfer from one personal MFS
account to another MFS account with the same MFS provider or another MFS
provider as well as the payments from one personal MFS account to a bank
account with the same bank or another bank and vice versa.

Risk management and internal controls

For effective management and containment of the substantial operational risks in
providing Mobile Financial Services, the MFS providers shall put in place robust
internal governance frameworks with internal control and compliance processes
featuring clear description of roles, responsibilities and accountabilities. Internal control and
compliance processes of MFS providers shall include oversight routines on operations of
wholesale and field level retail agents and on customer satisfaction levels. Customer,
Employee, Agent, Distributor/Super Agent education and awareness MFS providers shall
develop and pursue sustainable programs for continual heightening of awareness and
knowledge about various aspects of Mobile Financial Services among their employees,
agents, distributors/super agents and target customer segments to enhance financial literacy
and combat against fraud and forgery.

World View of Mobile Banking

According to Mas (2010) a financial revolution is happening in money transactional world
and it is not only happening only in the skyscrapers of rich countries but also in the slums of
developing countries. This revolution is happening through the branchless banking system of
mobile banking. Mobile Banking first introduced in 2001. From 2001 to 2006 there were only
10 Mobile Banks were in world. In 2009 it increased up to 25, in 2010 it increased up to 38
and in the middle of 2011 this number of mobile bank increased up to 50. Surprising by the
end of 2011 this number reached up to 140 m-commerce organizations. The major
mcommerce boom has happened in African region following by Asian countries (Michael U.
Klein, 2011) In African Nations, different mobile companies are coming with the
mcommerce business. Orange mobile company is running an m-commerce business with
brand name of Orange Money mobile banking. They are running this business in Mali,
Senegal, Madagascar, Kenya, Ivory Coast and Niger. Since 2008 they have signed up 1
million people. Though there are multiple mobile banks are working in African nations but
the real impact has been made by M-Pesa. M-Pesa is a mobile bank which is a subsidiary of
Vodafone. Only in Kenya, M-Pesa register more than 13 million customer, while in
Tanzania, M-Pesa has 6 Million customers and in 2010 in total 670 million transactions
generated through this mobile banking service. In Latin America potion Telefonica is giving
the service of mobile banking in four countries. Among those countries in Brazil, mobile
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banking is establishing its place in good speed. It is believed that after Africa, Latin America
is the place where mobile bank will have greater success. In Latin America only 35 percent
people have bank account while 90 percent people have mobile phones. In northern American
side, in USA almost 20% people are using mobile banking service in regular purpose. In
Asian side mobile banking is also on the way of success. In Pakistan, where are only 14%
regular banking subscribers in there already 500,000 customers are already subscribed with
mobile banking (http://www.thecitizen.co.tz). This mobile banking is also successful in South
Korea, Japan, China and Malaysia. In Japan, there are already more than 1.5 million active
mobile banking users and it is increasing. Maldives and Bangladesh are also joining in this
race. In India till now 77 banks have received the approval for mobile banking. Though
mobile banking have a greater success in world-wide it is not seen the success in the
European region yet. It’s already failed in Spain, Austria and some Scandinavian countries. In
Germany, in 2003 there were 22 banks were giving mobile banking service but in 2006 it
reduced into 14. It is believed that after the establishment of 3G service in all over the
Europe, then mobile banking may have success in Europe.

Infrastructure for Mobile Banking

Mobile Banking service can be provided in two different processes. One of these are Banks
can directly give the mobile banking service towards the customer. In this process banks are
having their own network system. On the other hand, in other process banks are using the 3rd
party for giving this mobile banking service. In this process banks are having only the
database system and the service providing duty is relying on the 3rd party. Now, based on
these services providing process, service can be delivered in two different ways. These are
application based (GPRS protocol) and the other one is SMS based. In most of the countries
especially in the developing countries, SMS based mobile banking is using widely. It requires
very low cost and low bandwidth and also it is easy to understand.

Mobile Banking in Bangladesh Banking

Bangladesh is 8th largest populated country in the world with around 161 million
populations. In Bangladesh, almost 31.5% populations are living under poverty (The Central
Intelligence Agency (CIA), 2013). From this huge population only 13% people have bank
account. On the other hand, there are almost 90 million mobile phone subscribers in
Bangladesh. From the point of view of Bangladesh, the expansion of e-banking is opposed by
the problem of institutional, infrastructure and regulatory problems. Absence of central
networking system, unskilled people and absence of proper policies are lacking behind the
whole system. Bangladesh Bank is developing country’s payment system but by that time all
the banks are not able to improve their ICT system. In this scenario, it’s hard to reach to mass
people with current banking system. From this plot, the concept of mobile banking emerged
to reach the banking facility to the unbanked people. People also take this system as good one
as 69% people believe this “mobile banking” has prospect in Bangladesh (Bank, July 2012)
Mobile banking is a new banking concept in Bangladesh. Bangladesh Bank is influencing
banks to operate this mobile in a serious manner to reach to the unbanked people of
Bangladesh. Bangladesh Bank believes that mobile is the easiest way to reach to the rural part
of the country with the banking service.
Still now, Bangladesh Bank has given license to 23 banks to run this mobile banking
operation. Among these, 14 banks have full Mobile Financial Service permission and other 9
banks have the permission for international remittance transaction only through mobile.
(Bank, July 2012)
13

Comparative Analysis of bKash Limited

Market Analysis
Mobile Financial Services (MFS) is an approach to offering financial services that combines
banking with mobile wireless networks which enables users to execute banking transactions.
This means the ability to make deposits, withdraw, and to send or receive funds from a
mobile account. Often these services are enabled by the use of bank agents that allow mobile
account holders to transact at independent agent locations outside of bank branches. MFS is
still new in Bangladesh and this report aims to capture its early development and learn
lessons.
Access to formal financial services can help households to better plan and manage their lives.
MFS offers the opportunity to build another channel beyond the bank branch and ATM
network to enable millions to have easier access to the formal banking system. Bangladesh
Bank aims to build a commercially viable, competitive and safe MFS market. Bangladesh has
a big market for mobile telecom business and the industry is expanding quickly. This MFS
services is given by the mobile operators. The estimated total population of Bangladesh was
152,518,015 on 16th July and the total numbers of active mobile phone subscribers are
92,120,000 at the end of May 2012, i.e. around 60.40% of total population use mobile
phones. So MFS have the opportunity to reach around 60.40% of total population in
Bangladesh. (Bank, July 2012)
The MFS market is at an early stage of development as the newest providers are seeking to
stabilize their technology, build out agent networks and acquire new customers. This involves
a complex, sequenced set of activities that includes: (1) finding and training agents, (2)
marketing to bring attention to the service, (3) acquiring customers using know ‐your ‐
customer (KYC) and account opening processes while at the same time helping new
customers to begin to transact. The deployments that are most active today are seeking to
expand their customer bases during 2012. (Bank, July 2012) For example, BRAC
Bank/bKash and DBBL aim are aiming for multi‐fold growth during 2012 which could push
their combined customer accounts to between 2 and 3 million within a year’s time, possibly
more. It is hoped that other providers entering the market might also grow and provide more
alternatives and competition. It is still early and much more will be learned about MFS in
Bangladesh over the coming year.

Findings on the MFS Market Structure

The MFS guidelines and the ‘honest broker’ role taken on by Bangladesh Bank have been
instrumental in the recent growth of this sector. After several years of uncertainty, the firm
move by Bangladesh Bank to establish MFS guidelines provided a positive signal that is
enabling market growth. Bangladesh Bank has also been proactive in bridging differences
between commercial banks and MNOs, and this ‘honest broker’ role has been instrumental to
the recent rapid growth of BRAC Bank and Dutch‐Bangla Bank in this sector.
Banks and MNOs share the view that the potential for MFS lies initially with P2P, small
merchant payments and mobile top-ups. Interviews and surveys with banks and MNOs
presents a consistent picture that the expectations are for small payments to be the early
drivers of MFS. At the same time some also see the benefits of safekeeping of funds.
14

Importantly, banks and MNOs don’t expect large volumes of inward foreign remittances to
be received over MFS. They recognize that mobile accounts will need to have more usability
before clients will want to receive inward foreign remittances into a mobile account.
Deployments focusing on establishing mobile accounts and driving small domestic payments
are the priority. BRAC Bank/bKash and Dutch Bangla Bank are the early leaders in the
market. Both Dutch Bangla and BRAC Bank/bKash launched in 2011 and have moved to
activate agent networks in nearly all districts. They have built these initial agent networks
through NGO partners or other third party distribution companies. Both have opened several
hundred thousand mobile accounts and their transaction volumes since launch are higher than
others so far. DBBL and BRAC Bank/bKash rely primarily on making contracts with MNOs
for the use of USSD channels.
The most significant efforts are currently on identifying, quantifying and negotiating
mutually beneficial partnerships between banks and MNOs. MNOs have opened up their
USSD channels to banks and more such agreements are being actively negotiated. These
negotiations are complicated because of several factors. One is that banks appear to have a
regulatory advantage given the clear decision for a bank‐led market. At the same time, banks
tend to want MNOs to be a vendor of wireless connections rather than equal business partners
in a joint venture. MNOs believe they have more to offer than wireless connectivity. They
feel they bring distribution power, an understanding mass market client behaviors and skills
in how to manage a business’s involving millions of users. On the other hand, MNOs may not
fully appreciate the regulatory risks or business case for the banks. For instance, MNOs may
over‐estimate the float revenue banks might gain. These differences of perception are
common in other countries as well. Even with agreements in place the further negotiation of
adjustments and additions to the partnerships will remain important for market development.
The challenge of forging partnerships is compounded by different expectation of the total size
of the MFS market and the timeline to generate an attractive ROI. Some are targeting only
several hundred thousand users, while others see the market opportunity to be tens of millions
of users. Some market players want to see a positive return on investment in a matter of 1 ‐2
years. (Bank, July 2012)
Others feel that the micro‐payments business must be very large to succeed and therefore
estimate that the market may take up to 5 years to develop. The different perceptions of
market size and timelines make the process of partnership negotiation complicated.

Comparative Analysis of Performance

BRAC Bank was founded in 2001 by the large development organization BRAC. While
BRAC Bank went public after its first three years in operation it remains affiliated with the
broader BRAC group. A third generation bank, BRAC Bank has built its profile based on a
core business of lending to the SME market, but added more retail and corporate work in
recent years.
In 2011 BRAC Bank launched a 51% owned subsidiary called bKash combined with an
investment from the USA based Money in Motion. Bangladesh Bank granted permission to
BRAC Bank and bKash jointly to operate the MFS business. The MFS guidelines specifically
allow banks and their subsidiaries to carry out the MFS business BRAC Bank/bKash
launched its operations in July 2011 and its initial MNO partner was Robi. In January
Grameen Phone (GP) opened a USSD channel to bKash opening the service to GP
subscribers. BRAC Bank/bKash’s service is delivered over the Fandom platform initially
developed in South Africa which has since been acquired by Visa. BRAC Bank/bKash has
agents in all districts of Bangladesh and its aspiration is to be a large scale provider of MFS
reaching tens of millions of Bangladeshis in a few years’ time. BRAC Bank/bKash are
cautious that the service would not be profitable for another 4 ‐5 years. BRAC Bank/bKash
15

has also received a $10 million grant from the Bill and Melinda Gates Foundation and
technical assistance from Shore Bank International to support the launch of its MFS services.
BRAC Bank/bKash also partners with BRAC to identify and train new agents in addition to
receiving agents from Robi and also searching for agents directly. From BRAC Bank/bKash
perspective, the main challenge is to establish sound commercial agreements with MNOs.
The other challenge is to motivate agents and clients to begin to use the service more
actively. BRAC Bank/bKash believes building the business will take more time, scale and
awareness building.
DBBL has long been a strong advocate for the use of technology in banking. Along with its
113 branches, DBBL has been active building a wide payments infrastructure with 2,000 5.5
ATMS and 4,000 POS terminals, 2.3 million debit cards, and an Internet Payment Gateway.
DBBL launched its MFS service branded “DBBL Mobile” in March 2011 using a technology
platform from an international vendor called Sybase 365. Presently DBBL operates this as a
separate platform from its core banking system, but the two systems can be linked in the
future. This platform uses various technologies (SMS, IVR, and USSD) to open accounts and
process payments. The main service is a menu driven service accessed through USSD
channels provided under agreements with Airtel, Banglalink and GP. DBBL also offers an
SMS/IVR based service for Citycell subscribers. DBBL makes its services available through
a network of 3,181 agents provided by a combination of Banglalink, Citycell, Airtel, and
UISC8.
But the largest number of agents DBBL acquires itself through third party distributors. In
total DBBL reports agents in 61 districts serve a total of 172 thousand accounts. Dutch‐
Bangla Bank sees the main challenges in establishing stable commercial relationships to use
the wireless networks of MNOs. It also sees profitability and revenue in the early stages as a
major challenge because the revenues are not sufficient to provide the income necessary to
agents to build the business. An additional challenge is maintaining quality and covering the
high cost of KYC with large numbers of new accounts being opened. (Bank, July 2012)
16

Reference

1.bKash. (2016).
About us. Retrieved November 06, 2016, fromhttps://www.bKash.com/about/company-profileChakma, H. and
May, M. A. (2016).

2. Mobile money in Bangladesh. Dhaka Tribune

. Retrieved November 06, 2016, fromhttp://archive.dhakatribune.com/feature/2016/feb/15/mobile-money-
bangladeshCIA Facts Book (2016).