Govt issues Microfinance Bank Ordinance

The much-talked-about microcredit banks are set to become a reality in Bangladesh, as the interim government has issued an ordinance on the establishment of such institutions to carry out microcredit operations for employment generation and poverty alleviation.

Termed the Microcredit Bank Ordinance 2026, the new law authorises the Bangladesh Bank (BB) to issue licences for microfinance banks.

Activities of the microfinance banks may be operated either in one or multiple districts and divisions, or throughout Bangladesh, according to the notification issued by the law ministry yesterday.

As per the ordinance, which was drafted by the Financial Institutions Division (FID) under the finance ministry, the authorised capital of a microfinance bank will be Tk 500 crore, while the minimum paid-up capital at inception will be Tk 200 crore.

These banks will also be allowed to accept deposits from borrowers, other individuals or institutions.

A microfinance bank will have a 10-member board, including three directors from borrower-shareholders, two nominated by the BB and three from other shareholders. The managing director of the bank will also be a director, but will have no voting power, according to the notification.

The law was issued two weeks after the Advisory Council approved the move allowing microfinance institutions, shareholders and individuals to establish such banks.

Earlier, leading microfinance institutions, including BRAC and ASA, raised concerns that the draft law undermined the sector’s role in poverty alleviation and financial inclusion.

However, speaking to The Daily Star today, Asif Saleh, executive director of BRAC, one of the largest microfinance institutions, welcomed the move as a positive step, saying it formally recognises startup and venture capital within Bangladesh’s regulated financial system.

“Innovation finance has long needed a clear policy framework,” he said.

He added that it is encouraging to see the balance the regulation seeks to strike by enabling risk capital for startups while maintaining strong safeguards for financial stability. “Whether the regulators will understand risk for such an initiative and be more flexible and innovative is another question,” he also noted.

Stating that for entrepreneurs, especially younger founders, access to patient and appropriate capital has been a major constraint, Saleh said this framework creates the possibility of addressing that gap over time.

He said, “It is also important to be realistic. This is not an overnight solution. Its impact will depend heavily on how it is implemented in practice, how it will be regulated within the current realities of the banking sector and whether an entrepreneur will be able to raise institutional capital for such a venture soon.”

“Considering the current scenario of the banking sector, I don't see major private or impact capital flowing in this direction at this stage,” he added.