Bangladesh has secured $450 million in World Bank financing to strengthen its banking sector, with bad loans and weak capital buffers putting pressure on confidence in a financial system central to the country’s growth plans.
The World Bank Board of Executive Directors approved the financing on June 24 for the Financial Sector Support Project II. The project is aimed at improving deposit protection for small savers, building Bangladesh Bank’s supervisory capacity and laying the groundwork for bank resolution and reform of state-owned banks.
The development matters for businesses because banks account for about 90 percent of Bangladesh’s financial-sector assets, according to Jean Pesme, World Bank Division Director for Bangladesh and Bhutan. When banks are under stress, credit to companies, exporters and households can tighten.
The World Bank said Bangladesh’s banking sector faces problems linked to weak corporate governance, regulatory capture and related-party lending. Non-performing loans stood at 32.6 percent at the end of March 2026, compared with a South Asian average of 7.9 percent. The system-wide capital-to-risk-weighted assets ratio was negative 2.6 percent at the end of December 2025.
Pesme said Bangladesh’s goal of becoming a trillion-dollar economy depends on a stable and inclusive financial sector. “But the banking sector, which accounts for about 90 percent of total financial sector assets, faces mounting stress,” he said.
The financing will also support the deposit protection fund, help establish an emergency liquidity assistance framework and upgrade Bangladesh Bank’s technology systems. That includes work to address cybersecurity risks and improve data used for supervision.
Markets are watching whether the reforms can restore trust while keeping credit flowing to employers. Toshiaki Ono, World Bank Senior Financial Sector Specialist and project task team leader, said the project “supports measures to bolster crisis preparedness and build the authorities’ capacity to manage banking sector stress.”
