Dhaka: The Credit and Development Forum (CDF), a national association and network of microfinance institutions, has announced that the proposed Microcredit Bank will function as a social business under the stringent regulation of Bangladesh Bank, explicitly excluding any provision for personal profit.
According to United News of Bangladesh, a detailed examination of the Microcredit Ordinance, 2025 is expected to clarify these points and dispel any existing misconceptions. The CDF emphasized that the signatories, who represent nearly 90% of the country’s microfinance sector, want to underscore that this proposed bank is an advanced and unique concept compared to traditional banking.
The bank, with 60% ownership belonging to the poor and no profit withdrawal beyond the invested capital, is designed to ensure that individuals do not invest for personal gain. The remaining 40% will be contributed by NGOs, institutions, or individuals from their funds to support the mission, ensuring that all generated surplus benefits the members.
Unlike microfinance bank laws in Asia and Africa, which often focus on profit, the proposed bank aims to create a social impact by addressing poverty, generating employment, and supporting new initiatives. “We are confident that this model will serve as a global innovation and a benchmark for others to follow,” said the CDF in a media release.
CDF has acknowledged recent media reports concerning the proposed Microcredit Bank Ordinance, addressing concerns that the microcredit bank might not be sector-friendly and could prioritize profit over social impact. In response, CDF asserted that the Microcredit Bank Act will be a landmark step, reinforcing the structural foundation of microfinance institutions.
The proposed bank will include activities such as accepting public deposits, eliminating the need for capital borrowing from other banks at high interest rates. It will also facilitate credit operations, insurance services, remittances, and the acquisition of domestic and foreign grants/loans, thus expanding credit facilities for micro-enterprises, cottage industries, and the agricultural sector.
Section 9 of the proposed draft clearly states that the bank will operate as a Social Business, where investors aim to solve a social problem without seeking personal profit. Concerns raised by 17 organizations regarding profit-seeking risks or governance crises do not align with the provisions of the proposed bank, CDF stated.
The Microcredit Bank Act will not mandate all NGOs to convert into banks. NGOs have the option to convert entirely or transfer specific branches, forming a bank based on that transferred portion under a separate structure and management. The original NGO will continue to operate under the Microcredit Regulatory Authority (MRA), while the newly formed bank entity will be regulated by Bangladesh Bank.
Regarding asset transfers, only the liabilities and assets associated with the specific portion of the NGO being converted will be transferred to the bank, not the entire organization’s assets. Empowerment of members is a key feature, with 60% of shares in the proposed bank held by poor members, ensuring that general members benefit significantly.
While 17 leading NGOs recognized the Microcredit Bank Ordinance 2025 as a commendable policy initiative, they expressed concerns that it might not be sector-friendly or might deviate from its core mission due to the profit-based nature of traditional banks. CDF countered that this assessment is inaccurate, citing Grameen Bank as a successful model owned by marginalized populations for decades.
Notably, BRAC, one of the signatories, established BRAC Bank in 2001 and holds approximately 47% shares, with other signatories applying for digital banking. CDF concluded that the notion that forming a bank leads to ‘mission drift’ is unfounded, asserting that the proposed bank is a social business without personal profit motives.