Proposed Microcredit BankA risky shift threatening BD’s proven social finance system

Development experts warn the new bank framework could destabilize the successful microcredit plus model, disrupt pro-poor financing, and undermine essential grassroots services.

Bangladesh’s microcredit sector is not a conventional banking system; it has evolved over decades through social movements and social innovation, delivering not only loans but also integrated services in health, education, disaster preparedness, and women’s empowerment—a model globally recognised as “microcredit plus.”

This socially embedded approach has made Bangladesh a global reference point for inclusive finance.

Experts warn, however, that the proposed Microcredit Bank (MCB) could destabilize this proven model, restricting foreign funding, creating unequal competition, and undermining essential grassroots services that have long empowered rural communities.

Against this backdrop, development organisations have expressed serious concern that the proposed MCB framework would introduce new risks for low-income communities and compromise the country’s established financial inclusion ecosystem.
In a statement, the organisations noted that NGO–MFIs are not beyond government oversight.

“The sector is already regulated under the Microcredit Regulatory Authority (MRA), the NGO Affairs Bureau, and is subject to rigorous scrutiny by international development partners,” the statement said.

It further emphasised that foreign funding has not declined; rather, long-standing transparency and social accountability have strengthened international confidence in the sector.

The Executive Director of the organisation warned, “If a Microcredit Bank is introduced, access to foreign development funds may become more difficult. It would also create a new and uncertain ecosystem that could disrupt the continuity of pro-poor financing.”
Concerns were also raised about unequal competition under the proposed structure.

“A Microcredit Bank would be able to raise funds easily from individual and institutional sources and enjoy legal privileges under a banking licence—advantages that are not available to NGO–MFIs,” he noted.

The organisation expressed particular concern for small and medium-sized NGOs, which play a critical role at the grassroots level. A senior official stated, “These organisations are often the first responders in rural and marginalised areas—providing health services, education support, and disaster response. Imposing a banking framework would place them under severe pressure and could seriously weaken these essential social services.”

The statement also drew attention to Bangladesh’s broader experience with the banking sector. “Money laundering, rising non-performing loans, and repeated banking crises demonstrate that the banking model is not suitable for every sector,” it said.

Finally, the organisation argued that the real challenges of the microfinance sector—such as misappropriation, duplication, and limited capitalisation—do not require the creation of a new bank.

“These issues can be addressed more effectively through targeted reforms within the existing NGO–MFI framework, which has already proven its value,” the statement concluded.

The organisations further highlighted that their position reflects realities on the ground. The BD-CSO Process engages 545 local NGOs, while the EquityBD network includes 70 partner organisations, collectively representing the experiences and perspectives of diverse communities across the country.