The microcredit sector plays a major role in driving Bangladesh’s economic growth, poverty alleviation and improving the living standards of marginalised communities. However, the sector is currently facing challenges due to the prevailing macroeconomic situation and high interest rates. To overcome this crisis, special policy and financial support for the microcredit sector is necessary in the budget for the upcoming fiscal year.
Speakers made such remarks at a roundtable titled ‘Challenges and Expectations of the Microcredit Sector: Budget 2026–27 Perspective’, jointly organised by the Credit and Development Forum (CDF) and Prothom Alo at its office in Karwan Bazar, Dhaka, on Tuesday.
Hossain Zillur Rahman, former advisor to the caretaker government and Executive Chairman of the private research organisation, Power and Participation Research Centre (PPRC), was the chief guest at the roundtable.
Md. Abdul Karim, Executive Director of UCEP Bangladesh, attended as the special guest.
Representatives of the country’s leading microcredit and non-government development organisations spoke at the discussion, including CDF Chairman Murshed Alam Sarkar, PMK Senior Advisor Enamul Huq, development sector expert Dewan AH Alamgir, SKS Foundation Executive Director Russell Ahmed, Pidim Foundation Executive Director Edwin Baron Banerjee, Disha Chief Executive Md. Shahid Ullah, CDF Executive Director Sajjad Hossain, and Economic Reporters Forum (ERF) President Daulat Akter. The event was moderated by Firoz Choudhury, Assistant Editor of Prothom Alo.
Microcredit as the new driver of growth
During the event, Hossain Zillur Rahman stated that microcredit is another sector as vital to the country's economy as ready-made garments (RMG) and remittance. However, while the first two sectors dominate discussions on growth, microcredit has not received similar attention.
He argued that to ensure inclusive economic growth, the microcredit sector must now be considered a new driver of growth.
Highlighting a lack of promotion and branding, the PPRC Executive Chairman noted that the entire sector is currently suffering from a ‘branding crisis.’
The PPRC executive chairman urged stakeholders to prioritise the terms ‘MFI’ (Microfinance Institution) or ‘Microcredit Institution’ over the word ‘NGO.’
Hossain Zillur Rahman proposed several policy changes for the upcoming budget. He suggested that the Tk 10,000 crore (100 billion) refinancing fund announced by the Bangladesh Bank for the agricultural sector should be disbursed directly through MFIs.
His other recommendations included waiving the 15 per cent VAT imposed on farmers for crop insurance for three to five years to combat climate risks. He also called for simplifying savings collection regulations to reduce costs for microcredit institutions and ensuring the representation of sector representatives in the decision-making process of the Microcredit Regulatory Authority (MRA).
At the meeting, UCEP Bangladesh Executive Director Md. Abdul Karim said that the MRA’s role should not be limited to regulation alone. The agency must also function as a developmental institution for the sector.
Noting that 85 to 90 per cent of microcredit borrowers are women, he said the government is keen on women's empowerment as well.
He emphasised that it is the government's responsibility to provide policy and financial support to NGOs.
Financing remains the biggest hurdle
The microcredit sector is currently mired in a severe funding crisis, Murshed Alam Sarkar, Chairman of the Credit and Development Forum (CDF), told the meeting.
“We are not asking for charity from the government. We want loans at low interest rates. We will repay this money on time. It will not be defaulted or laundered. Instead, it will create employment for millions of people,” he said.
Pointing to the discrimination in savings policies, Enamul Huq, Senior Advisor at Palli Mangal Karmashuchi (PMK), said, “A bank can lend 100 per cent of the money it collects from the public, but our hands are tied. Our demand is that the limit on savings collection be lifted.”
Development expert Dewan AH Alamgir addressed the widespread criticism of high interest rates in microfinance. He explained that MFIs face high costs primarily because they borrow from commercial banks at steep rates.
Allowing large and successful microcredit institutions to collect deposits or savings would make it possible to bring down the interest rates for the poor, he argued.
Edwin Baron Banerjee, Executive Director of Pidim Foundation, spoke about the unique struggles of coastal communities. When natural disasters strike, people cannot pay their installments, yet the microcredit institutions must still pay high interest to the banks. This creates a one-sided financial risk, Banerjee said, proposing a special refinancing fund in the upcoming budget to tackle this crisis.
Demanding recognition for the sector’s work, Russell Ahmed, Executive Director of SKS Foundation, noted that microcredit institutions work with the most marginalized people, mostly women in the poorest and most disaster-prone areas. Despite this, the sector remains neglected in national policy-making.
Shahid Ullah, Chief Executive of Disha, noted that loan defaults are rising in the NGO sector, yet there is a lack of concern. He said that when bank defaults rise, the government allows them to reschedule loans for 12 years with just a 2 per cent down payment. But no such facility exists for microcredit customers.
Sajjad Hossain, Executive Director of CDF, argued that the goal of a budget is to collect money from surplus regions and distribute it to deficit areas. Microcredit is a major deficit sector. But instead of an allocation, higher taxes are collected from here.
Daulat Akter, President of the ERF, noted that the government is prioritising the creative economy and innovation, where women play a major role. She suggested that microcredit institutions could be leveraged to channel the special tax benefits expected for these sectors in the next budget.