Bangladesh has taken a historic step in formalising its microfinance sector with the enactment of the Microfinance Bank Act, 2026 by the interim government. The legislation introduces a new category of financial institution — the microfinance bank — bringing microcredit operations into the mainstream banking framework under formal regulatory oversight, including deposit mobilisation, central bank supervision, and adherence to social business principles.
Previously, most microfinance institutions (MFIs) in Bangladesh relied heavily on donor support, wholesale borrowing, and limited oversight from the Microcredit Regulatory Authority (MRA). Under the new law, microfinance banks will be legally empowered to accept deposits not only from borrowers but also from other individuals and institutional investors. This development aims to strengthen financial inclusion, enhance sector stability, and create a sustainable model for low-income populations.
The law stipulates higher capital requirements and formal governance standards. Smaller MFIs may need to merge or restructure to meet these thresholds, while larger institutions are expected to benefit from improved operational clarity and regulatory legitimacy.
Key Provisions of the Microfinance Bank Act, 2026
| Feature | Provision |
|---|---|
| Authorized Capital | BDT 5,000 million (50 million shares × BDT 100) |
| Minimum Paid-Up Capital | BDT 2,000 million; ≥60% held by borrower-shareholders, remainder by other investors |
| Ownership Structure | Borrower-shareholders must hold ≥60% of capital post-establishment |
| Social Business Model | Investors recover only capital; surplus profit directed to social development funds |
| Board Composition | 10 members: 4 borrowers, 3 investors, 2 independent directors nominated by Bangladesh Bank, + Managing Director (non-voting) |
| Loan Recovery Policy | 15-day notice required; rescheduling, restructuring, or alternative dispute resolution encouraged; coercion prohibited |
| Small Enterprise Definition | ≤25 employees, assets ≤ BDT 15 million |
The Act incorporates the social business model pioneered by Nobel laureate Professor Muhammad Yunus, emphasising poverty alleviation, financial self-reliance, and support for small enterprises. Microfinance banks are mandated to channel any surplus earnings into social development projects rather than private profit, ensuring a dual focus on economic growth and social welfare.
Mandatory 15-day notices for loan recovery, structured rescheduling, and non-coercive dispute resolution mechanisms will protect borrowers’ rights while maintaining financial discipline. By bringing deposit-taking under formal regulation and embedding social responsibility into banking operations, the Microfinance Bank Act is poised to establish a transparent, accountable, and sustainable financial ecosystem for Bangladesh’s low-income communities.