Nagad, the fastest growing Mobile Financial Service (MFS) provider, is still operating without acquiring a licence from the Bangladesh Bank even two years into its inception because of an ownership crisis, presenting a risk to its 3.8 crore registered customers.

Since its beginning on 26 March 2019, Nagad, operated by the Third Wave Technologies Limited, has been branding itself as a state-run MFS provider with the Bangladesh Post Office having the ownership of it. But in reality, the government has no stake in it.

Nagad, in which Sigma Group has majority investment, is providing services through the MFS agreement with the Bangladesh Post Office, which is not acceptable to the Bangladesh Bank for availing a licence.

The Bangladesh Post Office requires at least 51% share of Nagad to get the MFS licence, according to the MFS guidelines of the Bangladesh Bank.

As the shareholding process has not been done yet, the Bangladesh Post Office has not been able to even apply for the licence in the past two years.

The Bangladesh Bank issued a no objection certificate on request of the Bangladesh Post Office in March last year on a temporary basis to operate the MFS. But, it took a third-time extension to its NOC, which will expire in June for completing the licensing process.

Nagad is now the second-largest MFS provider in Bangladesh with daily transactions amounting to Tk400 crore.

The number of Nagad's customers and its market share are growing fast but the company's transactions have remained unregulated, which is vulnerable for customers, said a senior executive of the central bank.

Nagad obtained more than 30% market share in its two-year journey but nobody knows whether the company is compliant with the MFS regulations as the Bangladesh Bank has no monitoring on it, the official said, seeking anonymity.

Explaining the ownership issue, Nagad's Managing Director Tanvir Ahmed Mishuk said the venture started with the Bangladesh Post Office under a revenue-sharing model.

In the model, Nagad would share only revenue with the government. But they now have to adopt the shareholding model as per the MFS guidelines to get a licence from the Bangladesh Bank.

In the shareholding model, the Bangladesh Post Office will get 51% ownership, said Mishuk, also a shareholder of Nagad on behalf of Sigma Group.

"We are facing some difficulties in the shareholding process because the company now is in losses. So, the Bangladesh Post Office has to take a share of the losses. Previously, they would get income from Nagad as per the revenue-sharing model," he said.

On the other hand, taking ownership by a government organisation is a long process, which is delaying the licensing, he added.

In September last year, Nagad handed over Tk1.12 crore to the government as part of the service revenue, which was counted towards the postal department's net income for the fiscal 2019-20.

By sharing the revenue income, Nagad made history by becoming the only income-generating service for the postal department.

Mishuk claimed that the valuation of Nagad now crossed $1 billion or around Tk10,000 crore based on daily transactions amounting to Tk400 crore. They conducted a valuation by a third-party foreign company in June last year when the valuation was Tk2,300 crore based on daily transactions of Tk80 crore.

However, he did not disclose the name of the company that did the valuation.

The postal department's 51% shareholding will be based on the valuation of the company, he said.

But the government will not invest in the company in the cash form but the value will be measured on their goodwill and assets, he added.

When asked about the ownership crisis of Nagad, Md Siraz Uddin, director general of the Directorate of Posts, Bangladesh Post Office, said a company formation with the Third Wave Technologies is under process.

"We will have two or three more meetings to settle some issues. After that, we will send a proposal to the law ministry for vetting," he said.

He said the postal department will hold 51% share of the company, but they will not have any investment in it.

A committee consisting five members was formed under the Information and Communication Technology Division and the Post and Telecommunication Division for valuation of investment of the postal department, said Md Shafayet Alam, executive director of Nagad and also a member of the committee.

He said the committee has already made a roadmap on how the postal department can convert its infrastructure into value for investment in Nagad.

Although Nagad is the second-largest digital money transaction channel, the transaction value is not being reflected in the total MFS statistics of the B