As the Director of the COAST Foundation, I emphasize that the proposed Microcredit Bank Ordinance could undermine Bangladesh’s microfinance sector and its social objectives. Thoughtful, participatory reform is urgently needed.

Bank-style microfinance institutions could weaken NGO autonomy, distort priorities, and threaten financial inclusion for the poorest.
Bangladesh’s microcredit sector is far from conventional banking. It has evolved through decades of social mobilization, institutional innovation, and a development philosophy where loans are linked to health, education, disaster preparedness, and women’s empowerment.

This socially embedded model has been instrumental in reducing poverty and has positioned Bangladesh as a global example of effective financial inclusion.

In this context, the draft “Microcredit Bank Ordinance” released by the Ministry of Finance’s Financial Inclusion Division on December 15, 2025, warrants serious reconsideration.

While presented as a social innovation, the proposal signals a fundamental departure from Bangladesh’s proven microfinance framework. There is no strong evidence that creating a new class of banks will enhance financial inclusion; instead, it may introduce significant social and institutional risks.

The process of its formulation is equally concerning. Soliciting feedback over just one month is inadequate for a sector involving nearly 700 licensed institutions, four million borrowing households, and half a million employees. Such a non-participatory approach risks overlooking field realities in policy decisions.

Currently, Bangladesh’s microfinance sector manages nearly $13 billion in loans, with member savings of approximately $5 billion. This structure has enabled MFIs to be self-reliant, while surplus funds have supported social programs.

Transitioning to a bank-like framework threatens this balance; financial metrics would take precedence over social objectives, undermining the very philosophy of microcredit.

Many provisions in banking laws still reflect colonial-era structures, prioritizing capital adequacy, profit, and regulatory ratios over community-focused accountability. International experience shows that bank-based microfinance increases loan size but often restricts access for women and marginalized groups, while compressing community-based social initiatives.

If implemented, the ordinance could compromise the institutional autonomy of NGOs. Independent boards and executive decision-making may weaken, with the potential displacement or marginalization of MFI founders and executives. Government intervention and regulatory control are likely to intensify.

Moreover, the proposed microcredit banks would gain powers under the Public Demand Recovery Act, including the ability to take collateral and recover debts. Small and medium MFIs would fall behind institutionally, and the sector could gradually shift toward wholesale lending, reducing access for the most remote and vulnerable communities.

From an economic perspective, the proposal is inconsistent with existing realities. Bangladesh already has 62 banks, and recent bank rescues have cost the government billions of dollars. Introducing a new banking category amid high non-performing loans is incompatible with financial stability.

Furthermore, as foreign aid declines in the post-middle-income era, forcing socially-driven MFIs into a bank structure adds unnecessary risk.

Crucially, the draft ordinance does not address core sectoral challenges—loan over-indebtedness, staff irregularities, defaults, and limited low-cost refinancing for smaller MFIs. Effective implementation of MRA’s data systems and oversight remains the real foundation for meaningful reform.

Against this backdrop, the stance of COAST Foundation, BD-CSO Process, and the EquityBD network is clear: Bangladesh does not need more banks. What is required is a stronger, well-governed microfinance sector that preserves its social objectives. Reform must be strategic, inclusive, and participatory—not rushed. Only this approach can protect financial inclusion and secure the welfare of vulnerable communities.