The government has taken the initiative to establish a Microcredit Bank to develop young and marginalized people of the country as entrepreneurs. These banks will provide collateral-free loans with easy conditions and comparatively low interest to entrepreneurs in the cottage, micro, small, and medium enterprise (CMSME) sector.
For this purpose, the government has drafted the Microcredit Bank Ordinance, 2025. This information was obtained from the Financial Institutions Division of the Ministry of Finance.
The CMSME sector contributes about 32 percent to the country’s economy. There are more than 8 million CMSME enterprises in Bangladesh.
However, entrepreneurs in this sector often fail to receive loans from commercial banks due to various limitations. Loans from microfinance institutions carry very high interest rates. As a result, many CMSME entrepreneurs are facing financing challenges, which is also hindering job creation despite the CMSME sector being the largest generator of employment. Given this situation, the government has taken the initiative to establish Microcredit Banks to ensure smooth and effective microcredit operations and to create employment. The government believes this initiative will play a significant role in poverty alleviation.
When asked, an official from the Specialized Banks and Microcredit Subdivision of the Financial Institutions Division told media that commercial banks do not want to lend to small entrepreneurs due to lack of necessary documents and collateral. Moreover, microfinance institutions charge excessively high interest even if they provide loans. Therefore, various sectors had long been demanding a separate bank for small entrepreneurs. In response to these demands and under the guidance of the Chief Adviser, this initiative has been taken.
He further stated that under the proposed ordinance, the door will be opened for establishing Microcredit Banks both in the public and private sectors. The government may also establish a specialized bank alongside private initiatives; however, no final decision has been made yet. He added that the government believes such institutions will ensure easier loan conditions and lower interest rates. The initiative will be implemented based on the opinions of all stakeholders.
According to the draft ordinance, the authorized capital of the bank will be Tk 300 crore, while the initial paid-up capital will be Tk 100 crore. At least 60 percent of this must be paid by borrower-shareholders of the bank, and the remainder may be paid by other shareholders. Borrowers or depositors—individuals or institutions—may become shareholders by complying with the rules. The authorized capital will be divided into 3 crore ordinary shares with a face value of Tk 100 each.
It states that a separate department or office under the Microcredit Regulatory Authority will be established to issue licenses and regulate these banks. The department will be headed by a chief executive. An eight-member board of directors will govern each bank. Three directors will be nominated by borrower-shareholders, and three by other shareholders. These six directors will elect a chairperson. The managing director (MD) will be the remaining board member.
According to the draft, directors may serve for up to three years per term, with a maximum of two consecutive terms. A director’s nomination may be canceled by a three-fourths majority vote of the board, though the MD will not have voting rights in such matters. The board may increase the paid-up capital from time to time with approval from the regulatory authority. These banks will operate as social business institutions. Dividends paid to investors cannot exceed their total investment.
According to the draft ordinance, the bank may provide loans secured or unsecured in cash or other forms for all types of economic activities, especially to new entrepreneurs. Priority will be given to business and quality-of-life improvement for the purpose of self-employment and poverty reduction. The bank will provide technical and administrative support to new entrepreneurs, with or without fees. Income-generating projects will be undertaken for entrepreneurs. Borrowers will receive all forms of insurance benefits in accordance with prevailing laws and regulations. The bank will also offer business management, marketing, technical, and administrative advice, as well as support for establishing and expanding new and small enterprises.
The bank will accept deposits from borrowers or any other individuals for business operations. Following existing laws, the bank may receive local or foreign assistance and grants. Loans may be taken with bank assets or other items as collateral. The bank may purchase shares of any statutory body and invest funds in government securities.
The draft also states that the bank may sell or recover the value of any movable or immovable property acquired in any manner for settlement of its claims, and may manage or retain rights and interests of any property held as collateral.
Additionally, the draft ordinance states that with prior approval from the licensing authority—the bank must invest a certain portion of its deposits in government-guaranteed investment instruments to ensure financial stability. The bank will conduct audits through listed auditors in compliance with existing laws and standards. The draft ordinance also proposes that audit reports include whether adequate measures have been taken to protect the interests of borrowers.
