Written by The Banking Post
Bangladesh’s plan to establish a separate Microcredit Bank has sparked strong concern among civil society groups and development experts, who warn that the move could threaten the financial security of the country’s poorest people.
In a joint statement issued on Saturday, COAST Foundation, BDCSO Process and EquityBD said the proposal—being promoted as a “social innovation”—may undermine Bangladesh’s long-standing and successful microfinance model. Instead of helping the poor, they argue, it could expose low-income borrowers to new and unnecessary financial risks.
The groups collectively represent a wide grassroots network across the country. BDCSO Process works with 545 local NGOs, while EquityBD partners with 70 organisations. They said their concerns are rooted in real experiences and feedback from communities that rely heavily on microfinance services.
Development economists point to global evidence showing that when microfinance institutions are converted into banks, they often face “mission drift.” Studies by the World Bank and CGAP indicate that such transitions typically lead to larger loan sizes, reduced social programmes at the field level, and shrinking access for women and marginalised groups.
Although the draft ordinance labels the proposed institution as a social enterprise, critics note that banking laws are primarily designed around profit, capital adequacy and regulatory compliance. This, they argue, leaves little room for core social objectives such as poverty alleviation and community development.
The claim that poor borrowers will hold 60 per cent of the bank’s shares has also been questioned. The organisations said this ownership would be largely symbolic, as real decision-making power would remain with professional boards and regulators—potentially putting the savings and investments of low-income people at risk.
Bangladesh’s microfinance sector, overseen by the Microcredit Regulatory Authority (MRA), is widely regarded as one of the largest and most stable in the world. The groups warned that hastily transforming microfinance institutions into banks could introduce financial instability into a system that is already functioning effectively.
“This is not real innovation. It is a risky regulatory experiment wrapped in social language, and the poorest people will suffer the most,” development experts familiar with global microfinance practices said.
