For the first time, the government has taken an initiative to establish a “microcredit bank” in the country. The bank will primarily provide loans to new micro-entrepreneurs and existing small enterprises.
The microcredit bank will be able to collect deposits from the general public. At present, private microcredit institutions or NGOs can take deposits from their members as savings, but they are not allowed to collect deposits from the general public in the way banks do.
The Financial Institutions Division of the Ministry of Finance has drafted the Microcredit Bank Ordinance, 2025. According to the draft, the bank will operate as a social business institution aimed at job creation and poverty alleviation. However, it will not be allowed to be listed on the capital market, meaning shares of such banks will not be tradable on the stock exchange.
Officials of the Financial Institutions Division said that microcredit institutions have long been demanding the establishment of a microcredit bank, but no government had taken the issue seriously.
On 17 May, chief adviser Professor Muhammad Yunus, while inaugurating the new building of the Microcredit Regulatory Authority (MRA) in Agargaon, Dhaka, emphasised the need to establish a microcredit bank in the country to develop young people and marginalised groups as entrepreneurs.
On that day, Professor Yunus said microcredit is the future of banking. This bank will not operate like conventional banks. It will be based on trust and confidence, where loans will not require collateral. At the same time, a major objective of the bank will be to expand social business.
Sources said that following the chief adviser’s remarks, the initiative to prepare the draft ordinance was taken. However, the draft was prepared by the Office of the Chief Adviser. Bangladesh Bank, the Financial Institutions Division, and the MRA did not make additions or amendments to the draft.
Financial Institutions Division secretary Nazma Mobarek told Prothom Alo, “A preliminary draft of the law has been prepared. A meeting with the relevant stakeholders will be held on Thursday (today). After that, work on the final draft will begin.”
What will the microcredit bank do
Currently, microcredit in the country is provided by NGOs. According to MRA data, there are 683 microcredit institutions in the country. As of 30 June 2024, 32.3 million members had taken loans from microcredit institutions, about 91 per cent of whom are women. Members have received loans amounting to approximately Tk 2.64 trillion. Their total savings balance stands at around Tk 670 billion, while outstanding loans amount to Tk 1.56 trillion.
The country’s top ten microcredit institutions are BRAC, ASA, BURO Bangladesh, TMSS, SSS, Sajeda Foundation, Uddipan, Jagorani Chakra Foundation, Paddakhep Manobik Unnayan, and Shakti Foundation.
Hossain Zillur Rahman, chairperson of BRAC, the country’s largest microcredit institution, told Prothom Alo that a microcredit bank may be established in the interest of the sector’s growth and to make it more time-appropriate. However, it must be considered what microcredit institutions want and whether it will be beneficial for borrowers. He cautioned that drafting regulations should not be rushed.
According to the draft law, the authorised capital of a microcredit bank will be Tk 3 billion, while the paid-up capital will be Tk 1 billion. Of the paid-up capital, 60 per cent will be provided by borrower–shareholders of the bank, and the remaining 40 per cent by entrepreneurs.
Sources said that in conventional banks, wealthy groups are the main sponsors, whereas in this bank, 60 per cent ownership will be in the hands of the poor. In conventional banks, sponsors take the dividends. In this bank, entrepreneurs holding 40 per cent ownership will be able to take dividends only in proportion to their investment.
The draft law states that the proposed microcredit bank will have a seven-member board of directors. Three directors will be nominated by borrower–shareholders, and another three by shareholders who are not borrowers. The managing director (MD) will be an ex-officio member of the board.
In addition to providing loans, the microcredit bank will offer business management, marketing, technical, and administrative advice to entrepreneurs, according to the draft.
In compliance with laws and regulations, the bank will be able to receive local or foreign assistance and grants. However, it will not be allowed to conduct transactions in foreign currency. Sources said that the bank’s final name may not remain “microcredit bank” and may instead be renamed “microfinance bank,” as is the case in other countries.
Who Will Issue the Licence
The draft states that a separate division or office will be established under the MRA to issue licences for the bank. The new division will be managed by a chief executive.
Under the existing Bank Companies Act, only companies engaged in banking business in Bangladesh are allowed to use the word “bank” as part of their name. Bankers say that using the word “bank” requires approval from Bangladesh Bank, but the draft ordinance does not mention this issue.
Bangladesh Bank Executive Director and spokesperson Arif Hossain Khan told Prothom Alo, “A microcredit bank can be established. However, using the word ‘bank’ will require approval from Bangladesh Bank.” He expressed hope that the issue would be considered before finalising the draft.
Microcredit Banks in Other Countries
In 2014, India’s central bank, the Reserve Bank of India (RBI), granted a banking licence to Bandhan, which had been operating as an NGO, allowing it to become Bandhan Bank. Bandhan Bank is India’s first microcredit bank.
Its founder and managing director, Chandra Shekhar Ghosh, earned a master’s degree in statistics from the University of Dhaka in 1984. He worked at BRAC for 12 years before moving to Kolkata in 1997.
India has several other microcredit banks similar to Bandhan, including Ujjivan Small Finance Bank. Ujjivan began operations in 2005 with support from the Grameen Trust, and Professor Muhammad Yunus inaugurated it as a bank in 2017. Other microcredit banks in India include AU, Capital, Equitas, ESAF, Fincare, NorthEast, and Unity. Each of their names ends with the words “Small Finance Bank.”
Through ASA International, the private organisation ASA operates microcredit banks in several countries, including Sri Lanka and Nigeria. Enamul Haq, former chief executive officer of ASA International, told Prothom Alo that microcredit banks also exist in Pakistan, Sri Lanka, Ghana, Nigeria, Kenya, Vietnam, the Philippines, Indonesia, Uganda, Ethiopia, Egypt, and other countries.
Senior officials of several large microcredit institutions have welcomed the government’s initiative. However, some believe that the paid-up capital requirement of Tk 1 billion should be reduced.
Former chief economist of Bangladesh Bank Mustafa K. Mujeri told Prothom Alo that microcredit banks are not a new concept. To expand the scope of the sector, microfinance banks are necessary, but they must be established in compliance with laws and regulations. He said that amendments to the Bank Companies Act would be required and emphasised that, above all, a study is needed to assess the benefits of such a move.