New Delhi, Jan 19 (NationPress) The proposed Microfinance Bank Ordinance 2025 in Bangladesh aims to transform the nation's microcredit framework into fully regulated microfinance banks under the oversight of the Bangladesh Bank. However, this initiative may inadvertently exclude numerous smaller NGOs and impoverished households from obtaining credit, according to a recent report.

The new microfinance banking regulations have faced significant backlash from 17 prominent Microfinance Institutions (MFIs) in Bangladesh, including BRAC (Building Resources Across Communities), ASA (Association for Social Advancement), and TMSS (Thengamara Mohila Sabuj Sangha), as reported by Finance Today.

Experts indicate that these regulations could centralize authority within a few large organizations, sidelining hundreds of smaller NGOs.

The draft ordinance sets steep capital requirements—BDT 500 crore in authorized capital and BDT 200 crore in paid-up capital—which critics argue are beyond the reach of most microfinance institutions.

According to the report, "In reality, only a select few large entities, such as BRAC, ASA, BURO Bangladesh, and TMSS, will meet these criteria. Smaller NGOs, even with their vast local connections, will be effectively shut out of participation."

Analysts advocate for a more gradual approach, suggesting a lower initial paid-up capital of BDT 50–100 crore to enable a greater number of organizations to operate as microfinance banks.

“A balanced strategy—one that incorporates flexible capital thresholds, phased compliance, and avenues for small NGOs to adapt incrementally—is urgently required,” the report emphasizes.

The report also underscores the essential role of microfinance in promoting financial inclusion in Bangladesh, where approximately 731 licensed MFIs operate across 25,000 branches, providing credit to over 45 million individuals.

Microfinance's inherent strengths have always been its proximity, trust, and adaptability, allowing for loans without conventional collateral and aiding the most vulnerable households.

In the fiscal year 2023, MFIs disbursed around BDT 2,49,000 crore (approximately $28 billion) in loans, achieving a remarkable 98 percent repayment rate, with nearly 91 percent of borrowers being women.

Critics argue that this policy primarily benefits large institutions, while the grassroots NGOs—who have empowered millions of impoverished families for decades—are marginalized.

The reforms "risk becoming a silent death knell for Bangladesh's small NGOs, while delivering a windfall for the largest organizations," the report cautions.

aar/na