This is a presentation on the regulatory framework of mobile money in Bangladesh and how it can boost growth of mobile money in Bangladesh, prepared as part of the Mobile Money for Financial Inclusion course.

1. REGULATORY ECOSYSTEM
IMPROVEMENT CAN BOOST
MOBILE MONEY IN BANGLADESH
Md AshrafulAlam
ashraful.alam@uncdf.org

2. Bangladesh Mobile MoneyContext
■ Bangladesh is country of more than 160 million people
■ Adult population - 110 million
■ Internet subscriber - 73.347 millions
■ Mobile phones subscribers -136 millions
■ Mobile money subscribers - 53.70 millions
■ Active mobile money users - 27.4 millions
■ Total number of operators - 17
■ Total number of agents – 758,570
■ Major players
– bKash
– Rocket
– Sure cash
– UCB Cash

3. Cont..
■ Bangladesh conducts 4.4 billion transactions annually, 94% are in cash
■ $44 billion annually flows through electronic channels - 12% of all value
■ Mobile money transactions have grown from nothing in 2011 to over 1
billion per year
■ OPPORTUNITIES EXISTTO INCREASE ELECTRONIC PAYMENTS By
– digitizing major social transfers - Bangladesh could save $146 million
annually
– Reduction in operating Costs -Retail payments make up half of all
transactions and less than 3% are made electronically
■ 17 banks are operating mobile financial services as of December 2015 and
transactions have grown an average of 120% since 2011
■ The increase in the number of MFS (mobile financial services) accounts
indicates a trend in changing consumer behavior regarding digital
payments.
■ Bangladesh’s mobile financial services market is currently heading toward a
damaging monopoly situation, which may lead to price increases and other
negative consequences for consumers
■ The smaller players do not have a sufficiently strong voice to advocate
effectively for greater interoperability
- 50.00 100.00 150.00 200.00
Inward Remittance
Salary Disbursement (B2P)
Others
MM usage in Bangladesh in
million USD
Decmber, 2013 Decmber, 2014 Decmber, 2015
Decmber, 2016 June, 2017

4. Mobile money markets of Bangladesh
■ Bangladesh MFS market is now 5 years old.
■ The top 2 operators bKash and Rocket together accounts for
an estimated 74% of the market, with bKash leading since
launch in 2011.
■ A recent CGAP study estimates that 30% of Bangladeshi
adults have used bKash while 4% have used the Rocket
service.
■ bKash users are more likely to be active, with 81% account
holders active, compared with 67% for Rocket users.
■ Rocket users are more likely to be registered users with 44%
registered as compared to 23% for bKash.
■ As of June 2017, there are 58.70 million registered and 27.4
million active users compared to 36.2 million mobile banking
registered accounts but only 13.3 million are active users in
2016. This means 62.15% and 106% increase in registered
and active users respective.
■ This indicate usage is increasing in greater rate than access
now.
0
5
10
15
20
25
30
0
10
20
30
40
50
60
Amount in
December,
2013
Amount in
December,
2014
Amount in
December,
2015
Amount in
December,
2016
Amount in
Juner, 2017
Registered and active user growth in MM
No. of registered clients in million
No. of active accounts in million
0
50
100
150
0.00
1,000.00
2,000.00
3,000.00
4,000.00
Amount in
December,
2013
Amount in
December,
2014
Amount in
December,
2015
Amount in
December,
2016
Amount in
Juner, 2017
Yearly total and daily average
transaction of MM
Total transaction in (in Million USD)
Average daily transaction (in Million USD)

5. Mobile Money is a policy priority
■ MFS has always been a key focus for the regulators, specially Bangladesh Bank as well as the
government.
■ MFS has the huge potential to grow and reach the remotest corners of Bangladesh to boost
financial inclusion of the bottom of the pyramid people
■ Despite the phenomenal growth in both mobile phones and registered mobile money
accounts, Financial inclusion via mobile banking has yet to reach its full potential.
■ OTC or unregistered use of MFS is one of the biggest drawbacks of the service.
■ Despite the priority current regulation lacks proper incentives for prospective private sector
investors.

6. Regulatory Framework of Mobile Money in Bangladesh
■ The 2009 and subsequently updated in 2014 ‘Bangladesh Payment and Settlement System
Regulations’ provide the basis for Payment System Operators (PSOs) and payment Services
Providers(PSPs). PSPs are entity who provide payment services to the general public. MFS or
mobile money providers are a kind of PSPs. However it has separate prudential guidelines
■ Mobile Financial Services Providers (MFSPs) provide mobile based selected payment services to
its customer under a separate ‘Mobile Financial Services for the Banks guidelines’ issued in
2011.
■ In Bangladesh under the current guidelines in effect only banks or its subsidiaries can apply for
MFSP.
■ The current regulations allows simplified KYC but daily and monthly transactions limits are in
place
■ Cross border remittances are not allowed through MFS in Bangladesh

7. Cont..
■ Even though regulators demand that Bangladesh follow bank led model but critics are
critical about bKash of not being a bank led model and also of being an undue privilege
receiver.
■ The market lacks unified USSD access and pricing policy, USSD is the most widely used
channel for transaction effecting in MFS
■ The market is dominated by one too big pioneer, no plan for mediating interoperability in
the near future
■ Tiered KYC is absent
■ Unique ID is not place

8. Regulatory Framework and financial access
■ A enabling and good regulatory framework for mobile money should have the following key
features:
– Open and level playing field
– Store value and safeguards of funds
– Customer due diligence
– Distribution and outsourcing
– Consumer protection and
– Interoperability and ecosystem development
■ Critical analysis of Bangladesh mobile money regulatory frameworks shows limitations in the
following areas:
– Open and level playing field for all
– It also has potential risk regards to safeguards of funds
– It also has limitations around customer due diligence, customer protection and
interoperability

9. Regulatory improvement can boost MM in Bangladesh
■ Bangladesh Bank- the mobile money regulator and central bank
of the country have published a draft revised guidelines for the
MM in 2014 and opened for public comments.
■ In 2015 the draft regulation supposed to be issued however the
draft was widely criticized by the private sector as it proposed a
weird capital structure restricting MNOs to maximum 30%
ownership in a MFS providers
■ The existing and proposed both regulations lack appropriate
provisions for open and level playing field, interoperability and
appropriate customer due diligence process.
■ Improvement in the regulatory framework which ensures open
and level playing field, investment and innovation, risk
proportionate regulations and promotes interoperability would
have transformative impact on the growth of mobile money in
Bangladesh
■ In a short survey of 95 people during the MMFI course, the key
issues identified also reflects the need for improvement in the
MM regulatory framework for MM growth in Bangladesh.
19.54
7.5
7.5
13.75
10.38
12.26
8.25
8.54
6.66
RE S P ONS E %
KEY ISSUES FOR MM GROWTH
IN BANGLADESH
MFS Regulation that promote level playing field and open access
Tiered KYC
Risk management and Supervision
Interoperabilty
Linking wallet to bank accounts
Financial Literacy
USSD Access and pricing
Regtech and Sasndbox
Thired parties and open API

10. Recommendations
■ Government of Bangladesh and MM regulator in Bangladesh should consider the following
recommendations to improve and leverage MM for rapid financial inclusion of the bottom of
the pyramid people:
– Develop an Unique Identification Program using the national ID that both public and private
sector can use to match and verify identities.This will drive MM and digital payments and
financial inclusion.
– Frame regulations that incentivize competition and innovation while ensures responsible
practices
– Broker the need and establish a regulatory guidelines for interoperability in a digital
payments ecosystem to let open the restricted functionality of digital payments.
– Establish use cases of MM through promoting merchant acceptance infrastructure across
MSMEs and for other sectors for boosting adoption.
– Promote and mandateG2P, P2G and corporate payments to build a digital payments
ecosystem.
– Incentivize digital payments to enhance usage and promote access.

11. Thank you all.