Six reasons for opposition to the proposed microfinance bank

Six reasons for opposition to the proposed microfinance bank have been identified. These reasons are discussed in detail in this report.

(1) There is a need for broad stakeholder input before rushing to establish a microfinance bank (MCB).

The Financial Institutions Division of the Ministry of Finance announced the draft ordinance for the formation of microfinance banks on December 15, 2025, and gave time until January 15, 2026 for public comment.

Currently, there are about 700 microfinance institutions (MFIs) operating under the MRA in Bangladesh. Although large MFIs dominate the market, small and medium MFIs operate mainly in the remote areas of the country. They not only provide loans, but also carry out 'plus' activities such as health, disaster management and education in a sustainable manner. They raise funds from within and outside the country to work in an integrated or 'holistic' manner, which is under the control of the NGO Affairs Bureau. The MRA also allows spending up to 20% of the surplus on social development.

In this context, such a rapid bank formation process is questionable.

(2) Why is it important to get everyone's opinion, including small and medium MFIs:

If microfinance institutions are converted into banks with their surplus funds, how will they continue their 'integrated and holistic' social activities is a very important question.

The foundation of microfinance in Bangladesh was integrated development. Converting microfinance institutions into banks is essentially a 'mission drift'.

According to a recent World Bank report, a large number of people are being pushed below the poverty line due to climate change. In this situation, it is necessary to focus on people's risks and vulnerabilities, rather than measuring poverty based solely on income.

(3) What will be the impact of microfinance banks for Bangladesh post-2026:

About 40 million families are involved in this sector and 500,000 workers are working. Out of the total loan of 13 billion dollars, members' savings are 5 billion dollars (43%). PKSF has 7 percent and commercial banks have 18 percent share here.

Foreign aid will further decrease if Bangladesh becomes a middle-income country in 2026. Foreign aid in this sector has been almost non-existent in the last two decades.

MFIs are developing a skilled workforce through entrepreneurship and technical education. The initiative of microfinance banks can reduce this progressive role, which is largely dependent on the surplus of microfinance.

(4) There is no connection between the priority of the microfinance sector and the proposed bank:

The real problems in this sector need to be identified and solved. As an activist, I think the current problems are:

A. Duality and overlapping of debts.

B. Embezzlement by employees.

C. Increasing trend of defaulted loans.

D. Lack of subsidized capital for small and medium MFIs.

E. Complexity and unusual delay in RJSC registration.

The work on the CIB and SIB software proposed by MRA is progressing slowly. On the other hand, the capital constraints of PKSF and the high interest rates and stringent conditions of commercial banks are not conducive to the microfinance sector.

If the interim government wants to help this sector, it should address these five issues. Forming a bank will not solve these issues, but may lead to the disappearance of small NGOs.

(5) Microfinance banks will create unequal competition for small and medium MFIs:

According to the draft ordinance, the proposed banks are being given some 'super powers' that MFIs do not have:

A. This bank will be able to file a certificate case for debt recovery under the 'Public Demand Recovery Act 1931', which a general MFI cannot.

B. The bank can take mortgage or hypothecation of immovable property.

C. Like commercial banks, they can accept deposits from the general public and make investments, which is limited to MFIs.

4. The bank license has to be obtained from Bangladesh Bank, which may create legal complications and conflicts between the MRA and Bangladesh Bank as the regulatory body.

E. The role of dedicated leadership in the development of MFIs is immense (e.g. Fazle Hasan Abed or Shafiqul Haque Chowdhury). Imposing only mechanical democratic rules can destroy such institutions.

(6) International experience in establishing microfinance banks is not positive:

In countries where microfinance banks have been established, it has been found to marginalize microfinance institutions. In many countries, founding entrepreneurs have been displaced and small and medium MFIs have collapsed.

Therefore, we should review these issues very carefully.