Startups, venture capital can now hold shares in microfinance banks
Staff Reporter :
The government has issued the long-awaited Microcredit Bank Ordinance 2026, paving the way for microfinance banks to be established in Bangladesh.
The ordinance allows microcredit institutions, startups, and venture capital firms to become shareholders alongside individual entrepreneurs, marking a major step toward integrating innovation finance into the country’s regulated financial system.
Under the new law, microfinance banks will operate as social business entities, capping investor dividends at the level of their investment, while borrower-shareholders will remain eligible to receive returns.
These banks will be permitted to take deposits from individuals, organisations, and borrowers, and they can borrow funds by pledging assets as collateral.
The primary objective of the banks is to support job creation and poverty reduction by lending to new entrepreneurs with or without collateral.
They will also make direct capital investments in small and young entrepreneurs’ businesses.
The banks may finance activities including the purchase and storage of industrial and agro-based products, fisheries and livestock, as well as machinery and spare parts.
The Bangladesh Bank will issue licences for the new institutions, which can operate at district, divisional, or national levels.
Prospective banks must first be registered under the Bank Company Act 1994 before applying for a licence.
The ordinance sets the authorised capital of a microfinance bank at Tk 500 crore, with a minimum paid-up capital of Tk 200 crore at inception.
Each bank will be governed by a 10-member board, consisting of three directors from borrower-shareholders, two nominated by the Bangladesh Bank, three representing other shareholders, and the managing director, who will sit on the board without voting rights.
Industry responses have been largely positive but cautious.
Asif Saleh, executive director of BRAC, said the ordinance formally recognises startups and venture capital in the regulated financial system.
He noted that while it strikes a balance by enabling risk capital for startups while safeguarding financial stability, its effectiveness will depend on regulatory flexibility and practical implementation.
Saleh also emphasised that access to patents and capital has long constrained young entrepreneurs, and the ordinance could help bridge this gap over time.
Murshed Alam Sarkar, chairman of the Credit Development Forum, said the law opens a new window for social business, though operational details will only become clear once the rules under the ordinance are formulated.
Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development (InM), observed that microfinance banks will operate as specialised institutions rather than conventional banks, potentially creating competition in deposits and lending, and prompting restructuring within the banking sector.
He suggested issuing licences on an experimental basis to gauge impact.
Prof Mohammed Helal Uddin, executive vice chairman of the Microcredit Regulatory Authority (MRA), noted that investors in these social business ventures will recover dividends only up to their investment, and it may take 10–15 years to recoup capital.
Adjusted for inflation, investors may recover only a portion of the real investment.
He added that, given the current strains on the banking and microfinance sectors, the operational dynamics of these hybrid entities will only become evident after implementation.
The ordinance represents a significant shift in Bangladesh’s financial landscape, potentially enabling startups and venture capital to play a more active role in supporting entrepreneurship and financial inclusion while maintaining safeguards for stability.