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Digital Lending in Bangladesh: A Guide for Foreign Companies - 2027

Regulatory landscape, market-entry options, operating requirements and a practical roadmap

Contents

1. Key Points

2. Digital Lending Models and How They Are Treated

3. Regulatory Framework

4. Matrix of Market-Entry Options

5. Analysis of Each Option

6. Operating Blueprint for the Partnership Route

7. Structuring Credit-Risk Exposure

8. Repatriation of Returns and Tax

9. Practical Roadmap

10. Key Legal Documents

11. Developments to Watch

12. How The Justice Corner Can Help

1. Key Points

Foreign companies regularly ask whether they can lend their own funds to Bangladeshi borrowers through an app, make their own credit decisions and keep the returns. The short answers:

Lending to the public is licensed business. A foreign company cannot lend directly to Bangladeshi borrowers unless it, or its local entity, holds a licence from Bangladesh Bank (as a bank or finance company) or the Microcredit Regulatory Authority (MRA). Using only your own capital, or absorbing all losses, does not remove the need for a licence.

Cross-border lending to individuals is not possible. Foreign exchange controls prevent an offshore company from lending in taka to Bangladeshi residents and freely remitting collections abroad.

Direct licences are slow and capital-heavy. A digital bank needs BDT 300 crore of paid-up capital and an IPO within five years of licensing. New finance company licences are rarely granted. MFI licences are designed for non-profit entities.

Partnering with a licensed lender is the practical route. A bank or finance company is the lender of record. The foreign company's local subsidiary provides the app, credit scoring, servicing and collections support for a fee. Bangladesh Bank's May 2026 e-loan circular expressly allows scheduled banks to offer fully digital loans of up to BDT 50,000.

Credit risk can be shared, but carefully. Fee holdbacks and cash collateral deposits are workable. If the subsidiary funds loans or buys them, it risks being treated as an unlicensed lender.

Returns flow out as dividends and fees, not interest. Royalties and technical fees are generally capped at 6% of the previous year's sales without approval from Invest Bangladesh. Dividends can be repatriated after tax.

Expect about 9–15 months from set-up to commercial launch through a partner bank, including the mandatory six-month pilot.

2. Digital Lending Models and How They Are Treated

The label a business uses does not decide its legal treatment. What matters is who provides the funds, who is the creditor, and whether money is taken from the public.

3. Regulatory Framework

3.1 Regulators

3.2 The licensing rule

Bank Company Act, 1991 (s. 31): No company may carry on banking business without a Bangladesh Bank licence. Banking business centres on accepting deposits from the public. Lending-only businesses are therefore governed mainly by the Finance Company Act. However, any feature that holds money for customers (savings pots, wallet balances, prepaid credits) risks being treated as deposit-taking.

Finance Company Act, 2023: This Act replaced the Financial Institutions Act, 1993. Non-bank entities need a Bangladesh Bank licence to carry on financing business, including term lending, instalment credit and leasing, and the Act carries penalties for operating without one.

Microcredit Regulatory Authority Act, 2006 (s. 15): No organisation may conduct microcredit operations without an MRA licence.

Enforceability: A loan agreement made in breach of a licensing requirement risks being void under s. 23 of the Contract Act, 1872, because its object is forbidden by law. An unlicensed lender also cannot use the Artha Rin Adalat (Money Loan Court), which is available only to banks and financial institutions.

3.3 Foreign exchange controls

Governing law: The Foreign Exchange Regulation Act, 1947 and Bangladesh Bank's Guidelines for Foreign Exchange Transactions (GFET), as amended by circulars.

No direct cross-border retail lending: The capital account is not convertible. Residents need approval to borrow from abroad, and an offshore company cannot lend in taka to Bangladeshi individuals.

Inward investment: Equity must come in through an Authorised Dealer (AD) bank. The encashment certificate the AD bank issues is the evidence needed later to repatriate capital and dividends.

Outward payments: Dividends, royalties and service fees to a foreign parent must fall within GFET categories, with tax deducted at source (Section 8).

3.4 Payment infrastructure

Disbursement and repayment run over BEFTN, NPSB, RTGS and mobile financial services such as bKash, Nagad and Rocket. Only licensed banks and payment operators under the Payment and Settlement Systems Act, 2024 can connect to these systems. In a partnership, the licensed lender provides the payment rails.

3.5 The e-loan framework (May 2026)

Under BRPD Circular No. 11 dated 11 May 2026, Bangladesh Bank allowed scheduled banks to commercially launch fully digital "e-loans". As reported, the key conditions are:

Businesses should review the full circular, and any later Bangladesh Bank instructions, before designing a product.

3.6 Data, cyber security and consumer protection

Personal Data Protection Ordinance, 2025 (gazetted November 2025): requires explicit consent to collect, store, transfer and use personal data, and imposes penalties for breaches. A National Data Governance Ordinance, 2025 created a data authority.

Cyber Security Ordinance, 2025 (in force 21 May 2025): replaced the Cyber Security Act, 2023. Parliament reviewed interim-government ordinances in 2026, so check the current status of both ordinances.

Data localisation: Bangladesh Bank's ICT Security Guideline and the e-loan circular require customer data to be held in Bangladesh. Lenders pass this obligation on to their technology partners by contract.

AML/CFT and credit bureau: The licensed lender carries out e-KYC under BFIU rules, checks the borrower with Bangladesh Bank's Credit Information Bureau (CIB), and reports to both.

Debt collection conduct: Harassment, threats, contacting a borrower's contacts or public shaming expose both the lender and its service provider to regulatory action and to criminal and civil liability.

4. Matrix of Market-Entry Options

These are the ten principal routes available to a foreign company. Capital and timelines are indicative only.

5. Analysis of Each Option

Category A: Partnerships with licensed lenders

Option 01: Bank–fintech digital lending partnership

Structure: The foreign company incorporates a Bangladeshi private limited subsidiary (OpCo). OpCo signs a master services and technology agreement with a scheduled bank. The bank is the lender of record: it approves, books and disburses each loan in its own name and owns the receivable. OpCo provides the borrower app, onboarding, credit-scoring model, servicing and collection support.

Precedent: Banks have offered digital nano-loans with MFS and fintech partners since 2021, starting with City Bank and bKash, and several banks now run app-based programmes. The May 2026 circular moves these onto a commercial footing.

Credit decisions: OpCo's model can drive approvals through an API. The bank must still approve the scoring policy, keep the right to override it, and keep the product within its board-approved product programme guidelines. The foreign company has practical control of underwriting, but not legal control.

Economics: The bank earns interest. OpCo earns service fees, typically a fixed origination or servicing fee plus a performance fee linked to portfolio quality. Describing OpCo's income as the "residual interest" suggests OpCo is the economic lender, and should be avoided. The 9% cap on refinanced e-loans makes refinancing unattractive for most fintech-led programmes.

Advantages and constraints: This is the fastest compliant route, and it uses the bank's licence, payment rails, CIB access and e-KYC. The constraints are bank onboarding time, the mandatory pilot, and dependence on a partner (reduced by signing two).

Option 02: Finance company partnership

Operationally the same as Option 01, but the partner is a finance company supervised by DFIM. This suits consumer-durable loans, BNPL and merchant working capital.

Finance companies may approve products faster. However, their funding is more expensive, and the e-loan circular is addressed to scheduled banks, so the regulatory basis for the digital product must be confirmed separately.

Partner selection is critical. Bangladesh Bank has publicly identified a number of finance companies in severe financial distress. Due diligence on capital, non-performing loans and governance should come before any exclusivity.

Option 03: MFI digital partnership

Partner with an established MRA-licensed MFI to digitise origination, scoring and collections through MFS disbursement and repayment.

This gives the best access to rural and unbanked borrowers. However, MRA caps microcredit pricing, NGO boards can be slow to approve foreign technology partners, and foreign funds reaching an NGO-MFI may engage the Foreign Donations (Voluntary Activities) Regulation Act, 2016.

Category B: Holding a licence directly

Option 04: Digital bank licence

Licensed under s. 31 of the Bank Company Act, 1991 and Bangladesh Bank's Guidelines to Establish Digital Bank. The bank must be a public limited company incorporated in Bangladesh with BDT 300 crore paid-up capital, and must make an IPO within five years of licensing. Sponsors must pass Bangladesh Bank's fit-and-proper assessment.

Licences are issued only in application rounds, and only a few letters of intent were issued in the 2025 round. This is a long-term option once an investor has a Bangladesh track record.

Option 05: New finance company

Licensed under the Finance Company Act, 2023, with minimum paid-up capital set by Bangladesh Bank. Given the consolidation of the sector, very few new licences have been granted. This is not a realistic near-term route.

Option 06: Strategic investment in an existing bank or finance company

Acquire a significant or controlling stake in a licensed institution. Shareholdings above prescribed thresholds need Bangladesh Bank's prior approval, and limits on individual and family holdings apply.

This avoids licensing lead time, but requires deep due diligence into legacy bad loans, related-party exposures and governance. Recapitalisation commitments are common.

Option 07: Sponsoring an MRA-licensed MFI

MFIs are typically societies, trusts or non-profit companies under s. 28 of the Companies Act, 1994, and they cannot distribute profits. MRA licensing involves a provisional period with portfolio targets. This option suits a social-impact investor, not one seeking a commercial return.

Category C: Funding, payment and sandbox routes

Option 08: Wholesale foreign loan to a licensed lender

The foreign company lends in foreign currency to a Bangladeshi bank, finance company or large MFI, which lends on to retail borrowers. The foreign borrowing needs approval (and MRA/NGOAB approval for MFIs), and the local institution bears the currency risk.

This is a pure funding role with no customer relationship or control over scoring. It works well as a complement to Option 01, for example by funding a partner bank's e-loan book.

Option 09: Payment licence (PSO/PSP)

A payment licence lets a company operate the wallet, gateway or repayment-collection layer, but it does not permit lending. It is useful later, to own customer relationships and payment flows alongside a lending partner. Capital and eligibility depend on the licence category.

Option 10: Bangladesh Bank regulatory sandbox

Run by Bangladesh Bank's Payment Systems Department for innovative products, such as alternative-data scoring. Testing is time-bound with a limited customer group, and the product must then move to a licensed or partnership framework. The sandbox does not authorise unlicensed lending.

6. Operating Blueprint for the Partnership Route

6.1 Process flow

6.2 Corporate set-up

Incorporate a private limited company with the RJSC under the Companies Act, 1994. 100% foreign ownership is generally permitted for technology services.

Register with Invest Bangladesh through its BanglaBiz platform. Obtain a trade licence, an e-TIN and a VAT registration (BIN).

Bring in share capital through an AD bank and keep the encashment certificate. Size the capital to cover operating costs and any risk-sharing deposit.

Put the technology licence and fee arrangements with the parent in writing, within the remittance limits (Section 8).

6.3 Underwriting and data

Acceptable data: alternative data the borrower has consented to, such as MFS transaction history, telco data, utility payment behaviour, and device data limited to fraud prevention.

Unacceptable practices: harvesting contact lists, photo galleries or SMS content, or using contacts to pressure borrowers. These conflict with explicit-consent requirements and lenders' obligations, and are the main cause of digital lending enforcement action in the region.

Hosting: keep personal data, KYC records and transaction records in Bangladesh. Use only anonymised or tokenised data for any offshore model training, and only where the lender and the data protection rules allow it.

6.4 Collections and consumer protection

Agree a written collection code with the lender covering contact hours and frequency, no third-party contact, no threats, and escalation only through lawful recovery.

Disclose pricing clearly, including annualised cost, fees and late charges, and provide a complaints channel linked to the lender's grievance process.

7. Structuring Credit-Risk Exposure

Many foreign fintechs want to share in credit performance. How that exposure is structured decides whether the local company stays a service provider or becomes an unlicensed lender.

A fee holdback combined with a cash collateral deposit, funded locally from the subsidiary's equity, gives economic exposure to credit performance while keeping the licensed institution as the lender in law and in substance. Partners should agree the structure at board level before launch.

8. Repatriation of Returns and Tax

A local technology subsidiary earns service fees in taka from its lending partner. Value reaches the foreign parent mainly in three ways:

Corporate tax: a non-listed company pays 27.5% (25% if all transactions are cashless). Banks and finance companies pay 37.5–40%. A minimum tax of generally 1% of gross receipts applies.

Treaties and transfer pricing: Bangladesh has more than 40 tax treaties, but treaty relief needs an NBR procedure before tax is withheld at the reduced rate. Payments between group companies must be at arm's length and documented under the Income Tax Act, 2023.

Rates are drawn from PwC Worldwide Tax Summaries (reviewed July 2026) and Bangladesh Bank remittance rules. They change with each Finance Act.

9. Practical Roadmap

10. Key Legal Documents

11. Developments to Watch

Implementation of the e-loan circular: further Bangladesh Bank guidance on pilots, outsourcing and partnerships with fintechs.

Data protection: the final form of the 2025 data protection and cyber security ordinances after parliamentary review, and any implementing rules.

Invest Bangladesh: how registrations, remittance approvals and work permits move onto the new authority and its BanglaBiz platform.

Digital banks: progress of the licensees from the 2025 round, which will become both competitors and potential partners.

LDC graduation: scheduled for 24 November 2026. The UN Committee for Development Policy and ECOSOC have backed an extension to November 2029, and the final decision rests with the UN General Assembly.

12. How The Justice Corner Can Help

The Justice Corner advises foreign fintechs, lenders and investors on entering the Bangladesh digital lending market. Our work includes:

Structuring advice on licensing, partnership and risk-sharing models

Incorporation, Invest Bangladesh registration and foreign exchange documentation

Drafting and negotiating partnership, technology, data and collection agreements

Borrower documentation, privacy notices and consumer-protection compliance

Regulatory engagement with Bangladesh Bank and other authorities, and dispute resolution

To discuss a proposed digital lending business in Bangladesh, contact The Justice Corner, Dhaka, at [email / phone / website].

The Justice Corner

Head of Chamber

Mohammad Imam Hossain (Tareq), 

Barrister-at-Law (Middle Temple);

Advocate, Supreme Court of Bangladesh; 

Dhaka, Bangladesh.