Microcredit Bank plan threatens BD’s Poorest: Experts

COAST Foundation, BDCSO Process and EquityBD have jointly raised alarm over the government’s proposal to establish a microcredit bank, promoted as a “social innovation,” could undermine Bangladesh’s proven microfinance system and put the poorest at serious financial risk.

The coalition represents an extensive network of grassroots organizations: BDCSO Process connects 545 local-level NGO’s, while EquityBD works with 70 partner organizations, ensuring that the concerns reflect voices from communities across the country.

Development economists and international studies warn of “mission drift”—a common trend when microfinance institutions become banks. World Bank and CGAP ( Consultative Group to Assist the poor) research shows that such transitions often lead to larger loans, reduced field-level social programs, and limited access for women and marginalized communities.

While the draft ordinance labels the bank a social enterprise, banking laws prioritize profitability and capital adequacy, leaving minimal room for social objectives. The claim that poor members will hold 60% of shares is largely symbolic, as decision-making authority rests with professional boards and regulators, putting the savings and investments of the poor at risk.

Bangladesh’s microfinance sector, regulated by the Microcredit Regulatory Authority (MRA), is one of the most extensive and stable in the world. Experts warn that rushing to convert existing institutions into banks could impose unnecessary financial hazards on a functioning social system.

“This is not innovation; it’s a regulatory experiment cloaked in social language, and the poorest stand to lose the most,” said development experts familiar with global microfinance trends.

With global evidence of repeated pitfalls in bankified microfinance, the coalition urges the government to pause, conduct broad stakeholder consultations, and explore safer reforms before proceeding.

Without caution, the proposed microcredit bank risks turning a successful social sector into a profit-driven system, leaving the most vulnerable behind.