Khabor Wala Desk
Published: 30th January 2026, 3:00 AM
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.
Table of Contents
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.
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 |
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.
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.
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.
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