Microcredit is an extremely small loan given to those who lack a steady source of income, collateral, or any credit history. It aims to support and kick-start entrepreneurs who are unable to obtain the financial backing needed to start a small business or capitalize on an idea.

Microcredit has been a transformative force in Bangladesh, catalyzing economic empowerment and poverty reduction since its inception in the early 1980s.

At the heart of this movement is the Microcredit Regulatory Authority (MRA), established in 2006, which plays a pivotal role in shaping the legal framework that governs microfinance operations in the country.



The Legal Landscape for Microcredit in Bangladesh


Bangladesh’s legal framework for microcredit is intricate, drawing from various acts such as the Societies Registration Act 1860, Companies Act 1994, Cooperative Societies Act 1984, Charitable and Religious Trust Act 1920, and Trust Act 1882.

These acts lay the groundwork for non-governmental organizations (NGOs) operating microcredit programs, with additional requirements for NGOs eligible to receive foreign donations outlined in the Regulation Ordinance of 1978.

Microcredit programs (MCP) in Bangladesh are implemented by a range of formal financial institutions, including nationalized commercial banks, specialized banks, government organizations, and NGOs. This diverse landscape underscores the collaborative effort required to address the financial needs of various segments of the population.


The Legal Landscape for Microcredit in Bangladesh



The Microcredit Regulatory Authority Act of 2006


The Microcredit Regulatory Authority Act of 2006 is the backbone of the regulatory framework, providing a comprehensive structure for the oversight and governance of microfinance activities in Bangladesh.

This landmark legislation led to the establishment of the MRA, entrusted with monitoring, supervising, and regulating microcredit programs. The primary objective is to ensure efficient regulation, promoting transparency and accountability among organizations involved in microfinance.

A key provision of the Microcredit Regulatory Authority Act mandates that microcredit institutions obtain a license from the MRA to operate within the country.


Microcredit Law In Bangladesh


This licensing process serves as a gatekeeper, ensuring that only legitimate organizations, genuinely committed to the welfare of their borrowers, are permitted to provide microcredit services. The aim is to maintain the integrity of the sector and shield borrowers from potential exploitation.



Crucial Elements of Microcredit Regulation


Interest rate caps represent a critical component of the regulatory framework, preventing usurious lending practices and maintaining a fair and sustainable lending environment. By setting limits on interest rates, vulnerable borrowers are protected from falling into cycles of debt, fostering a more equitable financial landscape.

Loan recovery regulations emphasize ethical practices, discouraging aggressive or coercive tactics. This focus on borrower protection ensures that individuals seeking economic improvement are shielded from harassment or abuse during the repayment process.

Transparency and disclosure requirements are integral to the regulatory framework, obligating microcredit institutions to provide clear and accurate information to borrowers. This commitment promotes informed decision-making, empowering borrowers to make choices aligned with their financial well-being.

The Microcredit Regulatory Authority Act includes provisions to protect borrowers’ rights, preventing discrimination based on gender or social status. It also encourages financial literacy and education among borrowers, recognizing the importance of empowering individuals with the knowledge to manage their finances effectively. 





Lawyers Role in Microcredit Issues in Bangladesh


Lawyers and advocates in Bangladesh play a crucial role in addressing microcredit issues by providing legal advice and representation to individuals facing challenges related to microcredit:

  • Advocating for fair policies and regulations.
  • Conducting awareness programs.
  • Facilitating dispute resolution.
  • Monitoring institutions for compliance.
  • Collaborating with NGOs and advocacy groups.

Through these efforts, they empower microcredit clients, build community capacity, and contribute to systemic change, ensuring that the microfinance sector operates ethically, transparently, and in the best interests of borrowers.



Legal Advice on Microcredit matters at CLP


For any queries or legal assistance regarding Microcredit matters, please do not hesitate to reach out to us. Our dedicated professionals are ready to guide you through the legal complexities, offering tailored solutions to meet your specific needs.

E-mail:  info@counselslaw.com, urgent@counselslaw.com

Phone: +8801700920980. +8801947470606. 

Address: Jamilla Villa (3rd Floor), Flat No-C2, House No. 4/A/1, Road No. 02, Gulshan-1, Dhaka-1212.

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