The government’s recent initiative to establish a microcredit bank is a positive and commendable step in principle, but the draft Microcredit Bank Ordinance 2025 does not align with the realities of the microcredit sector and the expectations of stakeholders, according to leaders of non-governmental organisations and microfinance institutions.
In a joint statement, 16 top executives of the country’s leading NGOs working on microcredit said the ordinance, if enacted, could seriously undermine the achievements of the microcredit sector over the past decades and weaken its positive role in poverty alleviation and social development in the country.
They said the concept of converting microcredit institutions into banks, as proposed in the ordinance, is not realistic, as microcredit institutions operate as development-oriented, not-for-profit and pro-poor systems, whereas banks are fundamentally profit-driven entities.
According to the statement, such a transformation could create a risk of mission drift in the microcredit sector and gradually exclude poor communities from accessing these services.
The leaders said the ordinance does not provide any clear, specific or implementable roadmap on how existing microcredit institutions would be transformed into microcredit banks.
Instead, they said the proposed ordinance would open the path for domestic and foreign individuals, institutions and even corporate investors to obtain microcredit bank licences.
They warned that this could lead to unethical practices, excessive profit-seeking and governance risks within the microcredit sector.
The statement said there is also a risk that existing problems in the financial sector, such as non-performing loans, corruption and weak governance, could spread into the microcredit sector and severely damage its decades-long achievements.
They said the provision allowing multiple individuals to establish microcredit banks with their own financing introduces the concept of private ownership, which would weaken the sector’s distinctiveness, social responsibility and development-oriented character.
The leaders said it is regrettable that no discussions or consultations were held with Microcredit Regulatory Authority-licensed institutions that may have the potential or interest to transform into microcredit banks before drafting the ordinance.
According to the statement, the actual needs of the microcredit sector are not compatible with the microcredit bank structure proposed in the ordinance.
They said implementing the reforms and proposals already put forward by the microcredit sector to enhance its efficiency and capacity would make the sector more effective and dynamic.
They added that such measures would significantly expand access to financial services for poor communities and further broaden overall socio-economic inclusion.
Overall, the leaders said the proposed Microcredit Bank Ordinance 2025 is not friendly to the microcredit sector and would not resolve existing problems but instead create new challenges.
In this context, they strongly called for a reconsideration of the ordinance-making process and urged that future steps be taken through meaningful discussions and consultations with all relevant stakeholders to ensure the sustainability of the microcredit sector and develop a structure aligned with its real needs.
The signatories included BRAC ED Asif Saleh, ASA President Md Ariful Haque Chowdhury, BURO Bangladesh ED Zakir Hossain, TMSS ED Professor Hosne Ara Begum, Society for Social Services Acting ED Santosh Pal, National Development Programme ED Md Alauddin Khan, Sajeda Foundation ED Zahida Fizza Kabir, Antar Society for Development Principal Adviser Md Emranul Haque Chowdhury, Padakkhep Manobik Unnayan Kendra ED Md Saleh Bin Sams, BASA Foundation ED AKM Sirajul Islam, Ghasful CEO Aftabur Rahman Jafri, COAST Foundation ED Rezaul Karim Chowdhury, PBK ED Khaleda Shams, CDIP ED Mifta Naim Huda, RDRS ED Imrul Kayes Muniruzzaman, and CODEC ED Khurshid Alam, along with FDA Faridpur ED Md Abu Saher Alam.
