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Triggering deep apprehension across Bangladesh's internationally renowned grassroots development landscape, leading microfinance institutions (MFIs) announced that they have petitioned the interim government to revoke advance income tax on micro-savings interest. The policy grievance follows recent regulatory directives issued by the National Board of Revenue (NBR) imposing a mandatory ten to fifteen percent withholding tax on interest earned from voluntary microfinance deposits. The Credit and Development Forum (CDF), the apex representative consortium of over five hundred registered microfinance lenders, warned that the fiscal measure threatens to undermine decades of financial inclusion gains. The policy shift has sparked widespread concern among financial inclusion experts.
Under current microfinance sector frameworks regulated by the Microcredit Regulatory Authority (MRA), more than 35 million rural women maintain small weekly savings accounts generating aggregate deposits exceeding Tk 65,000 crore. These modest savings pools serve as rural families' primary emergency liquidity buffer against sudden medical crises, natural crop failures, and educational costs. CDF Executive Director Abdul Awal explained that micro-savers typically deposit small sums ranging from fifty to two hundred taka weekly, yielding minuscule annual interest returns. Taxing these marginal earnings imposes an unfair fiscal penalty on impoverished citizens who fall far below statutory taxable income thresholds.
Field officers and grassroots cooperative managers reported that news of automatic tax deductions has created widespread suspicion and confusion among rural borrowing groups. In several rural upazilas in Rangpur and Mymensingh, village members requested early cash withdrawals, expressing fears that the state was confiscating their private nest eggs. Prominent economist and former Palli Karma-Sahayak Foundation (PKSF) chairman Dr. Qazi Kholiquzzaman Ahmad remarked that taxing micro-savings represents an ill-conceived revenue policy that punishes financial prudence among vulnerable households. Dr. Ahmad emphasized that the revenue generated from micro-savings interest is negligible for the national exchequer but inflicts disproportionate harm on grassroots confidence.
Financial sector analysts noted that driving rural depositors away from formal microfinance institutions risks pushing them into the predatory traps of informal village moneylenders and unregulated cooperative schemes. CDF leaders submitted a formal memorandum to Finance and Planning Adviser Dr. Salehuddin Ahmed, recommending an explicit statutory exemption for microfinance accounts holding deposits below Tk 100,000. Representatives highlighted that formal commercial bank accounts enjoy multiple tax exemptions for small balances, rendering the tax on microfinance members glaringly inequitable. The association urged the revenue board to harmonize tax regulations with social protection objectives.
Senior officials within the Internal Resources Division confirmed that the National Board of Revenue has acknowledged receipt of the microfinance sector's formal memorandum and is reviewing the fiscal implications. Revenue policy experts noted that while the interim government faces steep domestic revenue mobilization targets under international lending programs, fiscal policy must protect vulnerable social safety nets. An inter-agency consultative session between the NBR, MRA, and microfinance leaders is scheduled to take place in Dhaka next week. Sector leaders remain optimistic that the administration will restore full tax exemptions for marginalized rural women savers.
