The Credit and Development Forum (CDF), a national association and network of microfinance institutions, has said the proposed Microcredit Bank will be a social business, strictly regulated by Bangladesh Bank, with no provision for personal profit.
A thorough reading of the Microcredit Ordinance, 2025 will clarify these points and eliminate any misconceptions, it said.
Respecting the fact that the signatories represent nearly 90% of the country's microfinance sector, the CDF said they wish to clarify that this proposed bank is a much more advanced and unique concept compared to traditional banking.
Since 60% ownership belongs to the poor and there is no scope for profit withdrawal beyond the invested capital, no individual would invest here for personal gain.
The remaining 40% will be invested by NGOs, institutions, or individuals from their own funds to support the mission. Consequently, all generated surplus will ultimately benefit the members.
Unlike microfinance bank laws in Asia and Africa which are often profit-oriented ones, CDF said, this proposed bank aims for social impact 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 noted recent media reports concerning the proposed Microcredit Bank Ordinance.
Concerns have been raised suggesting that a microcredit bank may not be sector-friendly and could prioritise profit over social impact.
In response, CDF asserted that the enactment of the Microcredit Bank Act will be a landmark and positive step, further solidifying the structural foundation of microfinance institutions.
Under the proposed bank, activities will include accepting public deposits, which will eliminate the need to borrow capital from other banks at high interest rates.
Furthermore, CDF said, it will facilitate credit operations, insurance services, remittances, and the acquisition of domestic and foreign grants/loans.
This will enable the expansion of credit facilities for micro-enterprises, cottage industries, and the agricultural sector.
Profit vs. Surplus
Section 9 of the proposed draft explicitly states that the bank will operate as a Social Business. By definition, a social business is an enterprise where investors invest solely to solve a social problem without seeking personal profit.
Therefore, CDF said the concerns raised by 17 organizations regarding risks of profit-seeking or governance crises are inconsistent with the provisions of the proposed bank.
Section 9 further clarifies that the bank shall operate as a social business, and the dividends paid to investors shall not exceed their total investment.
Consequently, CDF said, there is no scope for the sponsors of the Microcredit Bank to withdraw profits beyond their initial investment.
The Microcredit Bank Act will not mandate all NGOs to convert into banks. If an NGO wishes to convert entirely, it will have that option, CDF said.
Alternatively, if an NGO chooses to transfer only specific branches, the bank will be formed based on that transferred portion under a completely separate structure and management.
The original NGO will continue to operate as an NGO under the Microcredit Regulatory Authority (MRA), while the newly formed bank entity will be regulated by the Bangladesh Bank.
It is clear that the proposed bank will not operate under dual control. Conversion is an opportunity, not a mandate-offering a robust and attractive framework for growth, CDF said.
Regarding the transfer of assets, 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: 60% of the shares in the proposed bank will be held by poor members.
As majority shareholders, these members will be empowered, and the bank's dividends will remain open to them.
This structure ensures that general members are not harmed but rather stand to benefit significantly.
A precedent for this model exists in Bangladesh with Grameen Bank, where approximately 90% of shares are held by its borrowers.
While 17 leading NGOs acknowledged the Microcredit Bank Ordinance 2025 as a positive and commendable policy initiative, they expressed concerns that it may not be sector-friendly or might deviate from its core mission due to the 'profit-based' nature of traditional banks.
"This assessment is inaccurate. Grameen Bank, despite being a specialized bank, has sustained itself under the ownership of marginalized populations for decades and is globally recognized as a successful model," CDF said.
Notably, BRAC, one of the signatories, established BRAC Bank in 2001 (holding approximately 47% shares), and other signatories have applied for digital banking.
Therefore, CDF said, the notion that forming a bank leads to 'mission drift' is unfounded. The proposed bank is a social business a multi-dimensional service provider without personal profit motives.