Guide to Obtaining a Microcredit License in Bangladesh
Your comprehensive resource for navigating the Microcredit Regulatory Authority (MRA) licensing framework.
Regulatory Overview
To ensure transparency and accountability in the operations of microcredit institutions in Bangladesh and to efficiently regulate microcredit activities, the government enacted the Microcredit Regulatory Authority Act, 2006, and established the Microcredit Regulatory Authority (MRA). According to section 15(1) of this Act, it is illegal for any private institution to operate microcredit activities without the MRA’s certification. Any ongoing illegal activities will disqualify an institution from applying for certification.
Governing Law
The cornerstone of regulation is the Microcredit Regulatory Authority Act, 2006. This Act empowers the MRA, defines what constitutes a microcredit organization, and establishes the complete framework for licensing, supervision, and governance. All rules, circulars, and directives stem from this primary law.
Regulatory Body
The Microcredit Regulatory Authority (MRA) is the exclusive government agency authorized to issue licenses and oversee all MFI activities in Bangladesh. No organization can legally conduct microcredit operations without a certificate of license from the MRA.
Core Objectives
The MRA's mandate is twofold: to protect the financial interests of low-income households by ensuring fair practices, and to promote the overall health and sustainable growth of the microfinance sector as a key tool for poverty alleviation and economic development.
Mandatory Legal Registration
Before applying for an MRA license, an institution must be legally registered and in good standing under one of the following laws of Bangladesh. The choice of registration depends on the organization's structure and objectives.
As a Society or Foundation
Register under the Societies Registration Act, 1860. This is suitable for organizations focused on social, cultural, and educational activities.
See detail guide →As a Charitable Trust
Established under the Trust Act, 1882. This is appropriate for entities aiming to provide financial assistance, healthcare, and educational support.
See detail guide →As a Social Welfare Organization
Register under the Voluntary Social Welfare Agencies Ordinance, 1961. This is for organizations primarily focused on voluntary social work.
See detail guide →As a Non-profit Company
Incorporated under the Companies Act, 1994 (usually Sec 28). Suitable for non-profits intending to operate on a larger scale without issuing shares.
See detail guide →Application Rules & Provisional Targets
The MRA follows a structured evaluation process. Applications are scored, and successful candidates are granted provisional approval with specific performance targets that must be met to secure a full license.
Evaluation & Capital Requirements
- ①100-Point Evaluation: Applications are evaluated on a scale of 100 points. A score below 49 leads to rejection. Institutions scoring 49 or above get 3 months to correct any issues.
- ②Initial Capital Deposit: Satisfactory applicants must deposit a minimum of 1 crore taka as initial loanable funds in a bank account.
- ⚠Fund Usage Restriction: This deposited capital can only be used for microcredit activities. Withdrawing funds without prior MRA approval before receiving provisional approval will lead to application rejection.
3-Year Provisional Approval Targets
Once provisional approval is granted, the MFI must achieve the following targets:
| Time Frame | Minimum Borrowers | Loan Balance (Taka) |
|---|---|---|
| End of 1st Year | 600 | 1.5 crore |
| End of 2nd Year | 1,000 | 2.5 crore |
| End of 3rd Year | 1,200 | 3 crore |
Key Conditions: At least 70% of total customers must be borrowers, and the deposit balance must not exceed 30% of the loan balance. Failure to meet these targets can lead to cancellation of provisional approval.
The Application Process: A Step-by-Step Timeline
The MRA license application process is systematic, starting with an online submission and followed by several stages of verification and approval. Click on each step for more details.
Step 1: Online Application & Fee
Submit Prescribed Form Online
Step 2: MRA Evaluation
Scoring and Document Verification
Step 3: Capital Deposit Instruction
Instruction to Deposit Funds
Step 4: Provisional Approval
3-Year Provisional License
Step 5: Full Certification
Issuance of Final License
Core Responsibilities of the MRA
The MRA is tasked with a wide range of responsibilities to ensure the stability, growth, and integrity of the entire microfinance sector in Bangladesh.
- ✓ Issuing licenses for microfinance operations.
- ✓ Formulating policies for the microfinance sector.
- ✓ Inspecting microfinance institutions.
- ✓ Addressing irregularities found during inspections.
- ✓ Protecting clients’ interests.
- ✓ Analyzing financial and management reports from MFIs.
- ✓ Approving MFI policy changes (e.g., name, address).
- ✓ Certifying eligibility for foreign/domestic loans.
- ✓ Providing NOCs for capital market fundraising.
- ✓ Providing training for MFI human resources.
- ✓ Publishing research related to the sector.
- ✓ Implementing ease of doing business and online services.
- ✓ Implementing national goals like SDGs and APA.
- ✓ Providing NOCs for agent banking, mobile financial services etc.
- ✓ Coordinating among MFIs, Banks, and other stakeholders.
Recent Regulatory Developments & Key Circulars
The MRA continuously updates its regulations through circulars to adapt to the evolving microfinance landscape. Staying compliant with these directives is mandatory for all licensed institutions. Here are some of the most critical recent provisions.
Maximum Service Charge
The service charge (interest) on loans cannot exceed 24% per annum. (Circular 50)
Minimum Deposit Interest
A minimum interest rate of 6% per annum must be paid on member deposits. (Circular 5)
Loan Repayment Terms
Weekly loans must have a 15-day grace period and be repaid in at least 46 installments. (Circulars 5 & 8)
Miscellaneous Costs
Total fees for forms, passbooks, etc., shall not exceed BDT 25. (Circular 23)
Bad Debt Write-Off
Bad debts can be written off after two years, provided 100% Loan Loss Provisioning is made. (Circular 21)
Use of Surplus Funds
A maximum of 35% of cumulative surplus can be used for purchasing immovable property, with prior MRA approval. (Circulars 33, 47, 48)
CEO & Office Rules
The CEO must work from the Head Office. Liaison offices cannot be funded by microfinance surplus. (Circular 35)
Financial Records
Printed hard copies of the General Ledger and Cash Book must be maintained annually. (Circular 52)
AML/CFT Compliance
All MFIs must strictly implement the Money Laundering Prevention Act, 2012 and associated rules.
Capital Market Fundraising
MRA-licensed MFIs are permitted to raise funds from capital markets. (Circular 61)
Inter-MFI Financing
MFIs are authorized to receive financing from other MFIs. (Circular 73)
MRA's Key Initiatives & Achievements
The MRA has some significant achievements that have paved the way for forging robust accountability in Bangladesh’s microfinance ecosystem.
- ➤ Microcredit Regulatory Authority Rules, 2010
- ➤ Microcredit Regulatory Authority Staff Regulations, 2009
- ➤ Depositors’ Safety Fund Rules, 2014
- ➤ Microfinance Information Rules, 2020
- ➤ Rationalized Service Charge & Savings Rates
- ➤ Capital Raising via Bonds
- ➤ Introduction of KYC & Inspection Manuals
- ➤ Ensured Loan Grace Periods & Reduced Costs
- ➤ Human Resources Development & Training
- ➤ Membership of AFI & APRACA
Documents & Fee Structure
Assembling a complete and accurate set of documents for the online application is critical. The fee structure is determined by the MRA and is non-negotiable.
Application Fee Payment Details
A fee of 1,000/- Taka must be deposited into the MRA's bank account. The deposit slip must be attached to the online application.
- Bank: Sonali Bank Limited
- Branch: Moghbazar Branch
- Account No: 0119803000029
- Routing No: 200274186
Essential Document Checklist
- ✓ Attested copy of the society/trust/company registration certificate.
- ✓ Attested copy of the certified Constitution/Bylaws/Memorandum.
- ✓ Audited financial statements.
- ✓ Profiles of all Executive/Governing Board members (NID, Photo, TIN).
- ✓ Board Resolution authorizing the MRA license application.
Standard Certification Fees (BDT)
These are indicative fees for full certification and renewal, separate from the initial 1,000 Taka application fee.
How LegalSeba Can Help with Microcredit Licensing
At LegalSeba, we provide a robust suite of services to facilitate your microcredit licensing process in Bangladesh. Our offerings include:
Expert Consultation
We assess your business requirements and guide you through the eligibility criteria set by the Microcredit Regulatory Authority (MRA).
Document Preparation
Our team assists in collecting and preparing all necessary documentation to ensure compliance with MRA regulations.
Application Management
We handle the entire application process, from submission to approval, ensuring all steps are meticulously followed.
Continuous Follow-up
We maintain regular communication with the MRA to track your application status and address any queries or additional requirements promptly.
Inspection Preparation
We help you prepare for MRA inspections to ensure your infrastructure and operations meet all regulatory standards.
Lobbying with Authorities
We facilitate effective communication with government authorities to smoothen the licensing process.
By choosing LegalSeba, you can navigate the complex regulatory environment with confidence, allowing you to focus on expanding your microcredit operations.
Contact Us
For personalized assistance and more information on obtaining your microcredit license, book a consultation with our experts by visiting LegalSeba.com/book-now or contact us at:
Phone/WhatsApp: +8801753718223
Email: [email protected]
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