Borrowers will hold a 60 percent ownership stake in the new Microfinance Bank, which the interim government launched on Wednesday through an ordinance.
The bank aims to consolidate the country's microfinance sector, create employment, alleviate poverty, and ensure ownership for micro-loan borrowers.
According to the ordinance issued by the Legislative Division of the Ministry of Law, Justice and Parliamentary Affairs, the bank has an authorized capital of Tk 500 crore, with at least 60 percent ownership allocated to general borrowers.
The bank to be developed as a 'social business' institution in which personal profit and dividends will have to be reinvested in social and poverty alleviation activities.
The ordinance said this bank can be established for a specific geographical area by obtaining a license from Bangladesh Bank (Licensing Authority). The bank can operate in one or more districts or divisions, or even the whole of Bangladesh.
The authorized capital of the bank will be Tk 5 billion and the initial paid-up capital to be at least Tk 2 billion. No 'microfinance bank' formed in the country will be able to enlist in the stock market.
The ordinance states that the board of directors of the bank will have 9 members. Out of these, four directors will be elected from among the borrower shareholders. In addition, there will be three nominated directors, two independent directors and one managing director. No director will be able to serve more than two terms at a time. In this case, one term will be three years.
The ordinance defines this bank as a 'social business' institution. Regarding social business and dividend policy the ordinance further states that investors will not receive any additional money from their original investment as dividends. Provision has been made for the use of the remaining net profit in the social sector.
The ordinance states that loans will be provided to new entrepreneurs for self-employment and poverty alleviation; accepting deposits and providing 'venture capital' for small entrepreneurs to invest in their businesses; providing technical and administrative assistance to small entrepreneurs free of charge and providing loan assistance for industrial and agricultural products, livestock and machinery. In the case of recovery of defaulted loans, this bank will be able to follow the 'Financial Loan Court Act, 2003'. However, social sensitivity must be maintained in the recovery of loans and no coercive or abusive methods can be adopted.
According to the ordinance, Bangladesh Bank will act as the licensing authority of this bank and will have the power to cancel its board of directors or remove the bank chairman or director if necessary.
