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Mobile Financial Service in Bangladesh
Guidelines on Mobile Financial Services (MFS) for the Banks
1. Introduction: The banking industry of Bangladesh has shown tremendous growth in
volume and complexity over the recent years. Despite making significant improvements
in all the areas relating to financial viability, profitability, innovation and
competitiveness, there are concerns that banks have not been able to include vast segment
of the population, especially the underprivileged sections and rural people into the fold
of basic banking services. On the other hand, rapid growth of mobile phone users and
wider range of the coverage of Mobile Network Operators (MNOs) has made their
delivery channel an important tool‐of‐the‐trade for extending banking services to the
unbanked/banked population. In order to ensure the access of unbanked people by
taking advantage of countrywide mobile network coverage, Bangladesh Bank has
brought out these operating guidelines for adoption by the commercial banks of
Bangladesh.
2. Issuance: Bangladesh Bank is issuing this guidelines as per the Article 7A(e) of Bangladesh
Bank Order, 1972 and Section 4 of Bangladesh Payment and Settlement Systems
Regulations, 2009.
3. Purpose: The purpose of these Guidelines is to:
I. Provide regulatory framework for the Mobile Financial Services [MFSs] which will
create an enabling environment for innovations in financial services;
II. Minimize the usage of cash and its associated costs;
III. Ensure compliance with Anti‐Money Laundering and Combating Financing of
Terrorism
(AML/CFT) standards set by AML/CFT rules, regulations, guidelines and instruction
issued by Bangladesh Bank; and
IV. Promote accessibility to formal financial services especially to the poor and
unbanked population at an affordable cost.
4. Scope: The guidelines shall apply to the scheduled commercial banks and their
subsidiaries operating in Bangladesh.
5. Mobile Financial Services: Bangladesh Bank may allow the following Mobile Financial
Services (in broad categories) ‐
I. Disbursement of inward foreign remittances,

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II. Cash in /out using mobile account through agents/Bank branches/ ATMs/Mobile
Operator’s outlets.
III. Person to Business Payments ‐ e.g. a. utility bill payments, b. merchant payments
IV. Business to Person Payments e.g. Salary disbursement, dividend and refund
warrant payments, vendor payments, etc.
V. Government to Person Payments e.g. Elderly allowances. Freedom‐fighter
allowances, subsidies, etc.
VI. Person to Government Payments e.g. tax, levy payments.
VII. Person to Person Payments (One registered mobile Account to another registered
mobile account).
VIII. Other payments like microfinance, overdrawn facility, insurance premium, DPS,
etc.
6. Permissible Models: Depending on the operation, responsibility and relationship(s)
among banks, MNOs, Solution
Providers and customers mainly two types of mobile financial services (Bank led and Non-
Bank led) are followed worldwide. From legal and regulatory perspective, only the bank‐led
model will be allowed to operate. The bank‐led model shall offer an alternative to
conventional branch‐based banking to unbanked population through appointed agents
facilitated by the MNOs/Solution Providers. Customer account, termed “Mobile Account" will
rest with the bank and will be accessible through customers’ mobile device. Mobile Account
will be a non‐chequing limited purpose account.
7. Regulatory Issues:
7.1 Approval from Bangladesh Bank
1. Without having approval from Bangladesh Bank no bank is allowed to do such
business.
2. Banks willing to provide Mobile Financial Services shall seek prior approval
from Bangladesh Bank, with full details of the services including tentative
implementation schedule.
3. Banks shall have to submit agreement(s)/MOU(s) containing Service Level
Agreement (SLA) signed between banks and their partners/agents before launching the
product.
4. The Cash Points/Agents shall have to be selected by the bank and a list of the Cash
Points/ Agents with their names and addresses shall have to be submitted to the
Department of Currency

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Management and Payment System (DCMPS), Bangladesh Bank and will be updated on
monthly basis.
5. At any point of time, the relevant balance in bank book shall be equal to the virtual
balance of all registered mobile accounts shown in the system. Banks will be the
custodian of individual customers' deposits.
6. The inward foreign remittance (credited to Nostro Accounts of Banks) transfer
arrangement through designated Cash Points/Agents will be used only for delivery in
local currency.
7. The platform should not be used for cross border outward remittance of funds without
prior approval from Bangladesh Bank.
8. Bangladesh Bank may withhold, suspend or cancel approval for providing MFS
services if it considers any action by any of the parties involved in the system
detrimental to the public interest.
7.2 Opening of Mobile Accounts: Banks must ensure that a 'Mobile Account' has been opened
for each customer seeking to avail Mobile Financial Services with all the required documents
(as per KYC form of Annexure 1).
7.3 Transaction Limit: Bangladesh Bank will fix the transaction limit as well as overall cap
(per customer/ per month) For Person to Person Payments as and when needed.
7.4 Charge for the Services: For these products and services Banks may fix up charges which
will be under Bangladesh Bank Oversight.
7.5 Interest/Profit: Banks shall pay interest/profit on the deposits lying with the customers’
mobile accounts.
7.6 Antimony Laundering Compliance:
1. Banks and its partners shall have to comply with the prevailing Anti‐Money
Laundering (AML)/Combating the Financing of Terrorism (CFT) related laws,
regulations and guidelines issued by Bangladesh Bank from time to time.
2. Banks shall have to use a new 'Know Your Customer (KYC)' format as given in
Annex I. The Bank will be responsible for authenticity of the KYC of all the customers.
3. Banks shall have to follow full KYC format issued by Anti Money Laundering
Department (AMLD) of Bangladesh Bank for the cash points/agents/partners.
4. Banks shall ensure that suspect transactions can be isolated for subsequent
investigation. Banks shall develop an IT based automated system to identify suspicious
activity/transaction report (STR/SAR) before introducing the services.
5. Banks shall immediately report to Anti‐Money Laundering Department of
Bangladesh Bank regarding any suspicious, unusual or doubtful transactions likely
to be related to money laundering or terrorist financing activities.

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7.7 Risk Mitigation
1. Banks shall be responsible for mitigation of all kinds of risks such as liquidity
risk,
operational risks, fraud risks including money laundering and terrorist financing
risks. Technical risks should be covered by the solution provider.
2. The banks bear all the liabilities that arise from improper action on the part
of their subsidiaries/cash points/agents/partners.
7.8 Record Retention
MFS transaction‐records must be retained for six (06) years from the origination date
of the entry. The Participating Bank(s) must, if requested by its customer, or the
Receiving Bank(s), provide the requester with a printout or reproduction of the
information relating to the transaction. Banks should also be capable of reproducing the MFS
transaction‐records for later reference, whether by transmission, printing, or otherwise.
8. Selection of Partners/Agents
It is the bank’s responsibility to identify, contract, educate, equip and monitor activities of the
agents on a regular basis. There must be clear, well documented Agent Selection Policy and
Procedures. The agreement signed between the banks and the agents will primarily include
business hours of the cash points/agents, standard of performance, fees permissible by
Bangladesh Bank, customer service, dispute resolution procedure and proper signage.
Those who have country‐wide branch network such as NGOs, the MNOs or Govt. Postal
Department may act as partner/agent. Banks should publish list as well as addresses of cash
points/agents/partners in their website.
The following issues should be taken into account for selection of partners/agents:
1. Competence to implement and support the proposed activity
2. Financial soundness;
3. Ability to meet commitments under adverse conditions;
4. Business reputation;
5. Security and internal control, audit coverage, reporting and monitoring environment;
9. Oversight Issues: Banks shall have to follow rules, regulations, guidelines and instructions
issued by Bangladesh Bank .From time to time and preserve records as per Annex II, III,
IV and V for Bangladesh Bank oversight.
10. Security Issues
1. Banks shall have to follow the Guidelines on ICT Security for Scheduled Banks and
Financial Institutions, 2010 issued by the Bangladesh Bank and ICT Act, 2006 to address
the security issues of Mobile Financial Services.

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2. The following properties need to be addressed to offer a secure infrastructure for
financial transactions using mobile technology:
a. Confidentiality: Property that ensures transaction information cannot be viewed by
unauthorized persons.
b. Integrity: Property that the transaction information remains intact during
transmission and cannot be altered.
c. Authorization: Property that the authentic user has proper permission to perform
the particular transaction. It ensures how the system decides what the user can do.
d. Non-repudiation: Property that the particular transaction initiated by a user
cannot be denied by him/her later.
3. All the transactions must be authenticated by the account holders using their respective
Personal Identification Number (PIN) or similar other secured mechanism. To facilitate the
mobile financial services, the said PIN may be issued and authenticated by the bank
maintaining proper protection and security features.
4. The banks should ensure that a proper process is put in place to identify the customer when
the service is being enabled.
5. A second factor of authentication should be built‐in for additional security as chosen by the
bank.
11. Interoperability
1. Banks may link their mobile financial services with those of other banks for the convenience
of the users.
2. Mobile account may be linked with customer's bank account (if any).
12. Customer/Employee Education and Awareness
Banks shall take appropriate measures (may issue proper guidelines for dealing with customer
service and customer education) to raise awareness and educate their customers and employees
for using Mobile Financial Services.
13. Complaints and Grievance Redressal Procedure
1. Banks shall be held responsible to protect consumer rights and dispute resolution.
Banks may address dispute resolution with the assistance of selected partners/agents.
2. Banks shall have to disclose the risks, responsibilities and liabilities of the customers
on their websites and/or through printed material. Customers must be made aware of the risks
prior to sign up.
3. Bilateral contracts drawn up between the payee and payee’s bank, the participating banks
and service providers should clearly define the rights and obligations of each party.

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4. The grievance handling procedure including the compensation policy should be disclosed.
5. Whenever any consumer is dissatisfied by the action of the bank, the consumer can
register
Complaint with Bangladesh Bank to mediate the dispute. In that case decision from
Bangladesh Bank will be final.
As in the previous guidelines, the latest regulations (According to updated guideline announced
on 03 August, 2018) 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.
The Current State of Mobile Financial Services in Bangladesh:
Bangladesh has a rapidly
growing mobile financial
services industry, with at least
10 providers already offering
services on the market, that
represent more than 8% of the
total registered mobile money
accounts globally. All this has
happened in less than four years
since the launch of the first
mobile financial service
products in 2011. Yet despite
this rapid growth, uptake among
development organizations in
Bangladesh remains low.
A baseline study conducted by mSTAR on the status of mobile money usage by USAID
implementing partners in June 2014 found that 86% of respondents (representing 24
organizations) were not using mobile money.
Since then, the mSTAR project at FHI 360 has helped several IPs make the transition to digital
payments, and they are already seeing positive results. For instance, the Aquaculture for
Income and Nutrition project has reduced the amount of time its staff wastes processing cash
payments by 600 days per year, while Dnet has reduced processing times for payments to its
health workers from 30 to 8 days.

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Recently, the mSTAR project completed a survey of current services, regulations, and usage
of mobile financial services in Bangladesh for USAID. Key findings from the report include:
 Despite having a very clear mobile financial service (MFS) market leader, competition is
growing quickly with at least 10 banks now offering services and third-party agent networks
helping them to close the agent gap.
 All of the USAID IP staff and 89% of beneficiaries surveyed own or have access to a mobile
phone.
 More than 80% of MFS users agreed that the services are safe, easy, and convenient.
 Among those staff and beneficiaries who had not used MFS, more than 80% said they did not
have a need to use MFS. At the beneficiary level, lack of knowledge about the existence of
MFS and how to use MFS were key reasons for why they were not using them.
 The cost of MFS is by far the most important priority for customers, with 91% of MFS users
and 88% of non-users ranking ‘low transaction costs’ at the top.
 A majority of respondents were interested in using MFS for bill payments (77%), savings
(76%), airtime top-ups (70%), education fee payments (60%), and merchant payments (55%).
 The most common borrowing was happening through family members (46% for staff and 64%
for beneficiaries) and friends (48% for staff and 39% for beneficiaries). Less than 25% of
USAID IP staff borrowed from a traditional bank or MFI. Among beneficiaries, 24% borrowed
from a traditional bank and 32% from an MFI.
 71% of MFS users live within one kilometre of an agent, compared to just 41% of those who
live that close to a bank branch.
 People with both bank and MFS accounts are generally using the two accounts in similar ways.
Which bank provide the Mobile Financial services:
1. Brac Bank Limited
2. Dutch Bangla Bank Limited
3. ONE Bank Limited
4. United Commercial Bank Limited
5. Mercantile Bank Limited
6. Prime Bank Limited
7. Bangladesh Commerce Bank
8. Agrani Bank Ltd
9. National Credit & Commerce Bank Limited
10. First Security Islami Bank
11. IFIC Bank IFIC
12. Islami Bank Limited
13. Trust Bank Limited
14. AB Bank Limited
15. The City Bank Limited
16. Eastern Bank Limited
17. Dhaka Bank Limited
18. Al Arafa Islami Bank
19. EXIM Bank Limited
20. Bank Asia Limited

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Facilities
Mobile convergence: The immense adoption/usage of internet and mobile phones, and the
convergence of mobile with highly secured and robust technology solutions for mobile banking
have boosted the confidence of both banks and their customers alike. As a result, 2018 will see
a boost in mobile banking in emerging markets.
Ease of banking at minimum OPEX: Access to Mobile financial services reduces the
dependency of customers on Banks/bank staff for banking activities. Also, banking processes
become less time consuming and paperless. Transaction costs drop down drastically when they
shift from traditional to digital. According to PwC, a traditional bank transaction costs around
$4, when this is done digitally an online transaction costs 9 cents and mobile transaction costs
19 cents.
Hybrid model business strategy: While some banks go completely branchless, banks in
emerging markets prefer a hybrid business strategy. Technology platforms that allow easy and
secure customer onboarding, mobile wallet, mobile banking, agent banking and the facility to
make merchant payments address all the needs of customers. Besides, interactive, fast and an
efficient digital experience is supplemented by personal bank interaction for complex products
and services, thus customers get the best of both models.
Blockchain technology: Blockchain is not just a technology that reduces the cost of
transactions. It makes each transaction highly secure and eliminates the need for payment
processors, custodians and reconciliation bodies. It keeps cybercriminals at bay and makes data
manipulation impossible.
API’s are pushing the boundaries: Strong APIs have fuelled the creation of highly digitized
banking experience. Building APIs that support real-time payments is a top priority today. A
strong API architecture allows banking services across various channels, thus add value to
services.
Mature application of FinTech: Today's consumer is well-informed and demanding. Banks are
under pressure to provide banking at fingertips to this millennial customer. Mature application
of FinTech, combined with the government support for digitization in both emerged and
emerging markets has led to the culture of Digital first for both banks and their customers.
Technology partner advantage: All the above reasons have led banks to adopt Mobile financial
services model and go digital. However, the best part is that banks do not need to develop this
technology themselves. They can simply partner with a mobile financial service technology
provider and bring their bank to the customer on a mobile phone.
Limitations:
Belief: People living in rural have limited access to information technology. Thus they have
limited trust on technology. IN this scenario acceptance of virtual money instead of hard cash
is difficult proposition
Error rectification: If one person sends money to other wrongly, there is no way the person can
get the money back unless the other person send-back the money to him. The population who
is basically using MFS is not that educated, as a result the possibility of typing error is high.
Charging: The charges of MFS are very high compare to conventional banking system. And
this is one of the prime constraints on the way of MFS popularity in Bangladesh.

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Medium of communication: In MFS system the transaction takes place trough mobile phones
and the process is completely in English. By taking our educational level into consideration,
communicating in process which is in English is not convenient at all.
Regulatory constraints: Absence of supportive policies, guidelines, rules and regulations
relating to e-transactions are barrier to development in MFS. There are 19 banks already
launched their service in the market, but till now no interbank transaction guideline or
regulation policy established among those. So, it’s not possible to avail the MFS facilities of
bkash through DBBL or TBL. As no supportive mobile transaction policy is available it’s very
easy to involve in money laundering activities.
Agent Banking:
Agent Banking means providing limited scale banking and financial services to the
underserved population through engaged agents under a valid agency agreement, rather than
a teller/ cashier. It is the owner of an outlet who conducts banking transactions on behalf of a
bank. Globally these retailers are being increasingly utilized as important distribution channels
for financial inclusion. Bangladesh Bank has also decided to promote this complimentary
channel to reach to the poor segment of the society as well as existing bank customer with a
range of financial services especially to geographically dispersed locations.
Agent banking opportunities in Bangladesh:
With agent banking, banks are optimistic to target the outmost population of the country. The
instruction provided by Bangladesh bank is as such banks will only have their agent banking
operation in rural areas and pouroshova, Metropolitan cities and City corporation will be
excluded from agent banking operation. The ration of agents in rural and pouroshova is 2:1 that
means if a bank opens one agent point in pouroshova it needs open two agents in rural places
according to the guideline of Bangladesh Bank.
The main target customers will be,
 Rural families having one member working in different cities
 Rural families having one member working in abroad
 Rural families have members studying in the city
 Farmers who buys fertilizers and seeds from distant market
 Farmers who normally do contract farming
 Rural families who receive funds from different national and international NGOs
 Freedom fighters and other group who receives grant from the government
 Workers participating in food for work program of Bangladesh Government
Agent banking challenges in Bangladesh:
Challenges of agent banking operations
1. Challenges likely to be encountered by bank agents in regard to agent banking operations:

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In all the 5 banks sampled, bank agents view challenges likely to be brought about by agent
banking operations as various risks. 5.90% of the bank agents are of the opinion that agent
banking operations result in liquidity risk; 20.60% felt that there is a mild increase in credit
risk; 73.50% felt there is the operational risk.
2. Challenges likely to be encountered by commercial banks in regard to agent banking
operations:
In all the 5 banks sampled the commercial banks are likely to encounter challenges in agent
banking operations as follows: Reputational risk at 16.6%; some retail agents underperformed
and some have been robbed, and as a result the bank’s public image suffered. This operational
risk mentioned has caused reputational risk, and liquidity shortfalls in the retail agent’s cash
drawer. Consumer protection, including resolution of consumer grievances at 73.5%. Use of
retail agents is likely to increase the risk that customers are unable to understand their rights
and press claims when aggrieved. Customers are protected against fraud by laws and
regulations. But it is not clear to customers how they are protected against fraud when they use
retail agents to conduct financial transactions. For instance it may not be obvious whether the
customer should hold the bank or its retail agents liable if they suffer a loss.Anti – money
laundering and combating financing of terrorism (aml/cft) at 5.9%. Whenever account opening
and transaction processing is outsourced to retail agents aml/cft regulations generally require
agents to conduct some aspects of customer due diligence and suspicious transaction reporting.
The bank bears the risk that customers are improperly identified and that they use the retail
agent to launder money or channel funding to terrorists. Legal risk at 4% whereby financial
service providers have invested in a new delivery model they can predict and manage how
relevant laws, regulations and legal agreements will be applied and enforced and how these
things may change over time.
Besides there are several challenges in here
 Agent banking is a totally new service to the banking sector so customer may find it
difficult to understand the service system.
 Information about agent banking is very less descriptive as its structure also new.
 Lots of work and activities at the office
 Some of my colleagues went to training and it became more pressure of work for me at
the office
 Hardly got any leave from my internship program as we were two people working
instead of six
 Hardly got any time for my report researching in office.
 Got no access to the computer and no ID and password was given to me.
 In the front desk only one computer can access in the internet and I was not allowed to
use it.
 As the Bank time schedule, rules and regulation is so tight and I had to maintain the
regular attendance.

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