The interim government has enacted the Microfinance Bank Ordinance, 2026, introducing a new category of financial institution in Bangladesh: the microfinance bank. The move marks a significant shift in the microcredit sector, bringing deposit mobilisation, formal banking regulation, and social business principles under one legal framework.
The ordinance allows licensed operators to accept deposits not only from borrowers but also from individuals and organisations outside the borrower base, a departure from the previous regulatory framework under which most microfinance institutions (MFIs) functioned. Until now, MFIs primarily relied on donor funding, wholesale loans, and limited oversight by the Microcredit Regulatory Authority (MRA).
Framed as a strategy to strengthen financial inclusion, the ordinance imposes stricter governance standards and central bank supervision, fundamentally altering a sector historically operating outside the mainstream banking system. While large MFIs may benefit from the new regulatory clarity, smaller institutions have expressed concern that higher capital requirements and compliance obligations could force consolidation, potentially marginalising NGO-run microcredit programmes.
Key Provisions of the Microfinance Bank Ordinance
| Feature | Provision |
|---|---|
| Authorised Capital | Tk500 crore, divided into 5 crore shares of Tk100 each |
| Minimum Paid-Up Capital | Tk200 crore, jointly contributed by borrower shareholders (≥60%) and other investors |
| Ownership | Borrower shareholders gradually acquire ≥60% of paid-up capital after bank establishment |
| Social Business Model | Investors recover only principal; profits go to reserve funds for social purposes |
| Board Composition | 10 members: 4 from borrower shareholders, 3 from other shareholders, 2 independent directors nominated by Bangladesh Bank, plus a managing director (non-voting) |
| Loan Recovery Rules | 15-day notice before recovery; permissible restructuring or alternative dispute resolution; coercion prohibited |
| Microenterprise Definition | Up to 25 employees, assets ≤ Tk1.5 crore |
The ordinance enshrines the social business model championed globally by Nobel laureate Professor Muhammad Yunus, who now serves as Chief Adviser to the government. Under this model, microfinance banks primarily aim to alleviate poverty by fostering entrepreneurship, self-reliance, and financial inclusion among low-income individuals and microenterprises.
In terms of loan management, banks are required to issue a 15-day notice before initiating recovery actions. Rescheduling, restructuring, or alternative dispute resolution mechanisms are encouraged, and coercive measures are strictly prohibited.
Profits generated beyond the return of principal are to be channelled into social development funds. A 10-member board will oversee operations, with borrower shareholders having a strong voice in governance alongside other investors and independent directors nominated by Bangladesh Bank.
By institutionalising deposit-taking and formal regulation in the microfinance sector, the ordinance seeks to create a sustainable financial ecosystem for low-income communities while ensuring transparency, accountability, and social responsibility.