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Digital Lending in Bangladesh: A Legal Guide for FinTech Investors

Introduction: a real opportunity, a regulated activity

Digital lending in Bangladesh is legal and growing, but only when a Bangladesh Bank-regulated lender sits behind the app. Investors who build around that rule can scale; those who copy unlicensed apps face criminal liability, frozen payment channels and app removal.

Demand is real. City Bank and bKash launched the country's first digital nano loan, and Bangladesh Bank has extended its digital nano loan refinance scheme until 30 June 2028. Banks such as BRAC Bank, Dhaka Bank and Bank Asia now offer app-based small loans.

Enforcement is also real. In August and September 2026, the Bangladesh Financial Intelligence Unit (BFIU) and Bangladesh Bank named around 30 unauthorised loan apps and ordered banks, MFS providers and payment service providers to cut them off. This guide explains the law behind that action and the lawful routes open to foreign FinTech investors.

The core rule: lending is a licensed activity

No person, company, app or platform may lend to the public in Bangladesh without authority from Bangladesh Bank (or, for microcredit, the Microcredit Regulatory Authority). Four statutes carry this rule.

1. Payment and Settlement Systems Act, 2024

This is the law Bangladesh Bank relied on against unlicensed loan apps in September 2026.

Section 4(2): no person, institution or company may operate a payment system or provide payment services without a Bangladesh Bank licence.

Section 15(2): no person may operate an online or offline platform involving investment collection, lending, fund custody or financial transactions without Bangladesh Bank approval.

Section 37(1): breach of these provisions is a punishable offence.

Directions power: Bangladesh Bank used its directions power under the Act to order banks, MFS providers and PSPs to stop serving the apps. It also warned that institutions facilitating such lending could be treated as involved in the offence.

2. Finance Company Act, 2023

This Act replaced the Financial Institutions Act, 1993 and governs non-bank lenders (NBFIs).

Section 2(1): "financing business" includes taking term deposits, providing loans, investing and leasing.

Licensing: apart from scheduled banks, a financing business may be carried on only under a Bangladesh Bank licence.

Section 42: Bangladesh Bank may investigate anyone it believes is operating, or has operated, a financing business without a licence.

Section 58: operating a financing business without a licence is a criminal offence.

Section 25: finance companies are limited in granting unsecured loans (reported at Tk 10 lakh, adjustable by Bangladesh Bank).

3. Bank Company Act, 1991

Section 31: no entity may carry on banking business without a Bangladesh Bank licence. An app that also collects "savings" or deposits from users risks breaching this provision.

4. Microcredit Regulatory Authority Act, 2006

Section 15(1): no private institution may conduct microcredit activities without a certificate from the Microcredit Regulatory Authority (MRA).

The MRA licence is designed for non-profit institutions, so it is generally not a route for a foreign-owned commercial company.

Practical point: if your company decides who gets a loan, funds it, and collects it in its own name, it is lending. Branding, terms of use or an offshore holding company do not change that.

Lessons from the 2026 crackdown on illegal loan apps

The 2026 enforcement shows regulators will act against the whole chain: the app operator, the payment channels and the app stores.

What drew the regulators' attention:

lending without Bangladesh Bank approval;

high interest rates and hidden fees;

harvesting borrowers' contacts, photos, videos and messages;

blackmail, threats to publish data and harassment on default.

The lesson for investors: an app that looks independent to customers is not proof of a lawful model. Before benchmarking any competitor, verify who the lender of record is and whether it holds a Bangladesh Bank licence.

Lawful structures for foreign investors

A foreign-owned company has three lawful routes. For most FinTech investors, partnering with a licensed lender is the fastest and least capital-intensive.

Route A: Lending Service Provider partnership (recommended)

Your Bangladeshi subsidiary provides the app, onboarding, credit scoring and servicing. A scheduled bank or licensed finance company is the lender of record, funds the loans from its own balance sheet and signs every loan agreement with the borrower. Your subsidiary earns service fees under a partnership agreement.

This mirrors the City Bank–bKash nano loan model. Under Bangladesh Bank's nano loan refinance scheme, a participating bank signs a participation agreement with Bangladesh Bank and an MoU with its digital partner.

Your subsidiary may:

operate the app under the lender's name or a co-brand;

carry out e-KYC and onboarding on the lender's behalf;

run credit scoring and recommend decisions, with final approval resting with the lender;

send repayment reminders and provide customer support.

Your subsidiary must not:

lend in its own name or appear as lender in loan documents;

receive disbursements or repayments into its own accounts;

fund the loan book directly or give informal first-loss guarantees without regulatory clearance;

use coercive collection or access borrowers' contacts, photos or messages.

Route B: Finance Company licence

A licence under the Finance Company Act, 2023 lets your company lend in its own name. Expect a paid-up capital requirement of about Tk 100 crore, fit-and-proper tests for sponsors and directors, capital adequacy and provisioning rules, and ongoing Bangladesh Bank supervision.

Route C: Digital Bank licence

Bangladesh Bank's Guideline to Establish Digital Bank (2023) created branchless banks with a minimum paid-up capital of about Tk 300 crore. This is usually disproportionate for a lending-only business.

Licences that do not permit lending

A Payment Service Provider (PSP) licence covers e-money and payments, not credit.

MFS providers are prohibited from lending from their own funds and must partner with banks.

Bringing capital in and taking profits out

Foreign investors can fund a Bangladeshi FinTech subsidiary and repatriate post-tax profits, but the paper trail must be clean from the first remittance.

Governing laws

Foreign Private Investment (Promotion and Protection) Act, 1980: protects foreign investment and guarantees repatriation rights.

Foreign Exchange Regulation Act, 1947: all cross-border flows are regulated by Bangladesh Bank and routed through authorised dealer (AD) banks.

Companies Act, 1994: the subsidiary is incorporated with the RJSC and registered with the Bangladesh Investment Development Authority (BIDA).

Income Tax Act, 2023: governs corporate tax and withholding on dividends, royalties and fees.

Capital inflow

Remit share capital through an AD bank in the subsidiary's name.

Obtain the encashment certificate; it is the evidence Bangladesh Bank will ask for before any later repatriation.

Register the investment with BIDA.

Avoid shareholder loans unless necessary: foreign loans need BIDA approval, and long-term ones generally also need Bangladesh Bank approval.

Profit repatriation

In practice, AD banks often ask for audited accounts, tax clearance certificates and proof of the original inflow. Investors should keep these records from day one.

Ongoing compliance and criminal exposure

Licensing is only the entry ticket. The conduct that triggered the 2026 crackdown (data harvesting and abusive collection) is separately unlawful under general criminal and consumer laws.

Directors and officers should note that liability is personal. Under the Finance Company Act, 2023, penalties for breaching licensing conditions rise to Tk 50 lakh, and banks or payment providers that facilitate unlicensed lending risk being treated as party to the offence.

Your roadmap, and how The Justice Corner can help

A compliant digital lending launch follows six steps:

Choose the structure (LSP partnership, finance company or digital bank).

Select a partner bank or finance company and agree commercial terms.

Incorporate the subsidiary, remit equity capital and register with BIDA.

Sign the service agreement, data-processing terms and IP licence with the parent; register royalty arrangements with BIDA.

The partner lender obtains any Bangladesh Bank approval needed for the product.

Pilot, then launch with compliance monitoring in place.

The Justice Corner advises foreign investors at every stage:

regulatory structuring and written legal opinions;

due diligence on competitors and prospective partner lenders;

drafting lending partnership, service, data-processing and IP agreements;

company formation, BIDA registration and foreign exchange filings;

engagement with Bangladesh Bank and other regulators;

dispute resolution and representation before the courts of Bangladesh.

Contact: Mohammad Imam Hossain (Tareq), Advocate, Supreme Court of Bangladesh; Barrister-at-Law (Middle Temple); Head of Chamber, The Justice Corner, Dhaka.

This article is general information current as of October 2026, not legal advice. Laws, circulars and capital requirements change; please seek specific advice before acting.