Bangladesh has taken a decisive step to formalise its microfinance sector with the enactment of the Microfinance Bank Act, 2026, introduced under the caretaker government. The legislation integrates microcredit operations into the mainstream banking system, bringing them under the supervision of the central bank, while granting authorised banks the right to accept deposits and mandating adherence to social business principles.
Previously, most microfinance institutions (MFIs) in Bangladesh operated under limited oversight from the Microcredit Regulatory Authority (MRA) and relied heavily on donor grants and wholesale loans. The new law grants microfinance banks the legal authority to accept deposits not only from borrowers but also from individual and institutional investors, a move aimed at increasing financial inclusion, enhancing sector stability, and establishing sustainable economic models for low-income communities.
The legislation also emphasises high capital requirements, transparent governance, and operational integrity, while providing a framework for the consolidation or restructuring of smaller MFIs. For larger institutions, it ensures clear policy guidelines and formal recognition.
Key Provisions of the Microfinance Bank Act, 2026
| Feature | Introduced Requirement |
|---|---|
| Authorised Capital | BDT 5,000 million (50 million shares × BDT 100 each) |
| Minimum Paid-up Capital | BDT 2,000 million; ≥60% shares held by borrowers, remainder by other investors |
| Ownership Structure | Borrowers must hold at least 60% of shares post-establishment |
| Social Business Model | Investors receive only capital repayment; surplus profits directed to social development fund |
| Board Composition | 10 members: 4 borrower representatives, 3 investors, 2 independent directors nominated by Bangladesh Bank, plus managing director (non-voting) |
| Loan Recovery Policy | 15-day notice mandatory; encourages rescheduling, restructuring, or alternative dispute resolution; coercion prohibited |
| Definition of Small Enterprise | ≤25 employees, assets ≤ BDT 15 million |
The law incorporates Professor Muhammad Yunus’s Nobel Prize-winning social business model, promoting poverty alleviation, financial self-reliance, and small enterprise development. Any surplus revenue generated by microfinance banks must be reinvested into social development projects, ensuring that economic growth is coupled with social welfare.
To protect borrowers, the legislation mandates a 15-day notice period before any action, a structured loan rescheduling process, and compulsory non-coercive dispute resolution. By legalising deposit-taking and embedding social responsibility within banking operations, the Microfinance Bank Act, 2026, aims to establish a transparent, accountable, and sustainable financial ecosystem for Bangladesh’s low-income population.
