The interim government of Bangladesh has enacted the Microfinance Bank Ordinance, 2026, a landmark legislative shift that fundamentally redefines the country’s microcredit landscape. By introducing the concept of “Microfinance Banks,” the state aims to transition traditional non-governmental organisations (NGOs) from the periphery of the financial system into a formal, regulated framework under the direct oversight of Bangladesh Bank.
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Bridging the Gap: From NGOs to Banks
For decades, microfinance institutions (MFIs) in Bangladesh operated primarily as NGOs, reliant on donor funding and wholesale borrowing. The new ordinance marks a departure from this model, allowing these entities to operate as social businesses. Unlike the previous regime, where deposit-taking was largely restricted to a firm’s own borrowers, these new banks are authorised to mobilise deposits from the general public and diverse organisations.
The governance of these institutions will be rigorous. A 10-member board will oversee operations, uniquely composed of both borrower shareholders and professional directors, ensuring that the voices of the marginalised are represented at the highest level of decision-making.
Capital Structure and Ownership
The ordinance sets a high bar for entry to ensure financial stability and systemic resilience. The authorised capital is fixed at Tk500 crore, with a minimum paid-up capital requirement of Tk200 crore. In a move that reinforces the spirit of financial inclusion, borrower shareholders are mandated to hold a majority stake.
| Feature | Requirement / Specification |
| Authorised Capital | Tk500 crore (5 crore shares at Tk100 each) |
| Minimum Paid-up Capital | Tk200 crore |
| Ownership Split | Borrowers: At least 60%; Other Shareholders: 40% |
| Regulatory Body | Bangladesh Bank (Central Bank) |
| Business Model | Social Business (Profit-for-purpose) |
| Board Composition | 4 Borrowers, 3 Investors, 2 Independent, 1 MD |
The Social Business Philosophy
Inspired by the “social business” model championed by Nobel Laureate and Chief Adviser Muhammad Yunus, these banks are designed to be “non-loss, non-dividend” entities regarding external investors. Investors are entitled only to the recovery of their initial principal. All surplus profits generated by the bank are diverted into a reserve fund, specifically earmarked for social development projects and the expansion of services for the poor.
Ethical Debt Recovery
A significant portion of the ordinance addresses the often-controversial nature of microloan recovery. To protect the dignity of the poor, the law explicitly prohibits coercive practices.
Mandatory Notice: Banks must provide a 15-day notice before initiating recovery proceedings.
Resolution Hierarchy: Priority must be given to loan rescheduling, restructuring, and Alternative Dispute Resolution (ADR).
Human Rights Protections: The law forbids harassment, humiliation, or any action that violates human dignity.
Legal Recourse: Only after exhausting sensitive mediation can a bank approach the Money Loan Courts.
Market Consolidation Concerns
While the ordinance promises greater security for depositors, it has sparked apprehension among smaller MFIs. The jump to a Tk200 crore paid-up capital requirement and the transition to central bank supervision may lead to a wave of consolidations, potentially squeezing out smaller, community-based NGOs in favour of larger, well-capitalised institutions.