Bangladesh’s plan to introduce the ‘Microfinance Bank Ordinance 2025’ has sparked worries about limiting credit access for smaller NGOs and impoverished households. The proposed rules aim to transition the microcredit system into regulated microfinance banks under Bangladesh Bank’s oversight. However, concerns have been raised that these regulations could exclude many smaller NGOs and individuals from obtaining credit.
Seventeen prominent Microfinance Institutions (MFIs) in Bangladesh, including BRAC, ASA, and TMSS, have criticized the new microfinance banking regulations. The rules, which set high capital requirements, may consolidate power among a few major institutions, leaving smaller NGOs at a disadvantage.
Critics argue that the prescribed capital thresholds of BDT 500 crore in authorized capital and BDT 200 crore in paid-up capital are unattainable for most microfinance institutions. This could lead to only a select few large institutions meeting the criteria, while smaller NGOs, despite their extensive local reach, may be unable to participate.
Analysts suggest that a more gradual approach with lower initial capital requirements of BDT 50–100 crore could enable a broader range of organizations to transition into microfinance banks. They emphasize the need for a balanced strategy that includes flexible capital thresholds and pathways for smaller NGOs to adapt gradually to the new regulations.
The microfinance sector plays a vital role in promoting financial inclusion in Bangladesh, with approximately 731 licensed MFIs operating across 25,000 branches and serving over 45 million individuals. Microfinance institutions have traditionally focused on building trust and providing flexible loans without conventional collateral, particularly benefiting women and the poorest households.
In the fiscal year 2023, MFIs disbursed loans totaling around BDT 2,49,000 crore (approximately $28 billion) with a high repayment rate of 98%. Notably, nearly 91% of the borrowers were women. However, experts caution that the new policy may favor larger institutions at the expense of grassroots NGOs that have long supported impoverished families.
The proposed reforms risk disadvantaging small NGOs in Bangladesh while potentially benefiting larger institutions significantly, according to the report’s analysis.
