Microfinance sector urged as new pillar of Bangladesh economic growth
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Microfinance must be elevated as a primary driver of Bangladesh’s economic growth, standing alongside the ready-made garment industry and remittance inflows as a pillar of national development, according to experts. Despite its critical role in fostering inclusive economic transformation, the sector remains under-recognized in national policy discourse.
The call for a strategic shift in perception came during a roundtable discussion in Dhaka, titled “Challenges and Expectations of the Microfinance Sector: Perspective for the 2026-27 Budget.” The event, jointly organized by the Credit and Development Forum (CDF) and the newspaper Prothom Alo, featured insights from Hossain Zillur Rahman, former adviser to the caretaker government and executive chairman of the Power and Participation Research Centre (PPRC).
বিজ্ঞাপন
Rahman underscored the vast scale of the microfinance industry, which serves approximately 40 million clients and has distributed roughly 3 trillion taka—a figure equivalent to $16 billion to $18 billion. When adjusted for value addition, this sector is comparable in size to the garment industry and annual remittance inflows. Despite this, Rahman noted that the industry suffers from a “branding crisis,” urging a move away from the generic “NGO” label in favor of the more accurate “Microfinance Institution” (MFI) designation.
Highlighting the evolution of the industry, Rahman described a shift toward a “new rural economy.” He explained that while microfinance was once limited to small-scale, subsistence-level activities in the 1970s, it has matured into a sophisticated engine for dynamic agriculture and large-scale enterprise. With nearly 85% of the informal sector remaining beyond the reach of traditional commercial banks, MFIs serve as the primary institutional link for marginalized populations.
বিজ্ঞাপন
To harness this potential for national economic growth, Rahman proposed several policy adjustments for the upcoming budget. He suggested that the 10-billion-taka agricultural refinance fund managed by the Bangladesh Bank should be channeled directly through MFIs rather than commercial banks, which he characterized as inefficient intermediaries.
Further recommendations included creating a dedicated financing window for climate-resilient agriculture through MFIs and simplifying the tax refund process for funds held by these institutions in fixed deposits. Additionally, experts proposed a three-to-five-year VAT waiver on crop insurance to help farmers mitigate climate risks, as well as a call to streamline savings collection regulations to reduce operational costs for microfinance providers.
Rahman warned that as the government pursues the vision of a trillion-dollar economy, these ambitions will remain theoretical without the active empowerment of field-level stakeholders. He concluded that through strategic policy support, financial inclusion, and formal recognition, microfinance institutions are uniquely positioned to bridge the gap between national growth targets and the realities of rural economic development.
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