COAST WarnsDraft Microfinance Bank law poses serious risks for the poor

COAST Foundation has raised serious concerns over the government’s draft Microfinance Bank law, warning that it could undermine the unique features and flexibility of microfinance institutions (MFIs), putting Bangladesh’s most vulnerable at risk.

For decades, MFIs have provided affordable loans, skill development, and essential social services to support low-income communities. Experts fear that the new draft law could disrupt these proven systems.

Under the proposed legislation, MFIs would face strict banking regulations, which could reduce their operational autonomy and restrict flexible lending models. Sections 2(1)(t), 4(3), 6(1), and 20(2) in particular may limit institutional independence and hinder local initiatives, directly affecting the benefits available to poor borrowers.

The draft law also allows new entrants with minimal oversight, raising concerns about unfair competition and market instability.

COAST emphasizes that the current MFI system is both effective and well-tested. Implementing the draft law without safeguarding MFIs’ unique features and social programs could expose customers to financial risks, reduce social services, and harm the livelihoods of vulnerable communities.

The foundation calls on policymakers to ensure that any new regulations protect MFIs’ autonomy, maintain social services, and minimize risk to the poor.

COAST will continue to publicly advocate its position to ensure decision-makers and citizens understand the potential threats posed by the draft law.

According to the foundation, protecting the independence and social mission of MFIs is essential to safeguarding Bangladesh’s poorest and ensuring sustainable financial inclusion.