The landscape of financial reporting in Bangladesh is standing on the precipice of a seismic shift. As the nation eyes a “Smart Bangladesh” by 2041 and deeper integration with global capital markets, the transition to IFRS 9 (Financial Instruments)—locally adopted as BFRS 9—is no longer a choice, but a strategic imperative.
For decades, the Bangladeshi banking sector operated under an “incurred loss” model. This reactive approach meant that banks only recognized losses on loans after a default event had occurred. In practice, this often led to “too little, too late” provisioning, masking the true extent of non-performing loans (NPLs) and eroding the capital base during economic downturns.
The Paradigm Shift: From Reactive to Proactive
The core of the IFRS 9 transition is the Expected Credit Loss (ECL) model. This forward-looking framework requires financial institutions to estimate potential losses from the moment a loan is granted, incorporating macroeconomic forecasts such as GDP growth, inflation, and unemployment rates.
Under the Bangladesh Bank (BB) roadmap, the implementation follows a three-stage impairment model:
Stage 1 (12-month ECL):
For assets with no significant increase in credit risk.
Stage 2 (Lifetime ECL):
For assets where credit risk has increased significantly since origination.
Stage 3 (Credit-Impaired):
For assets in default, requiring full lifetime loss recognition.
Key Milestones on the Roadmap
As of early 2026, the sector is in the midst of a rigorous implementation phase. Based on recent Bangladesh Bank circulars (including BRPD Circular No. 15 and 03):
| Phase | Timeline | Key Deliverables |
| Phase 1 | June 2026 | Pilot implementation in branches covering at least 50% of the loan portfolio. |
| Phase 2 | June 2027 | Pilot implementation expanded to 75% of the portfolio. |
| Phase 3 | Dec 2027 | Full Implementation of ECL-based provisioning and classification. |
Opportunities: Strengthening the Core
The adoption of IFRS 9 is expected to act as a “clean-up” mechanism for the financial sector:
Enhanced Transparency:
By recognizing losses earlier, financial statements will more accurately reflect the health of a bank’s balance sheet, boosting confidence among international investors and depositors.
Improved Risk Management:
Banks are forced to upgrade their data analytics and risk modeling capabilities, moving away from subjective “checklist” auditing to objective, data-driven forecasting.
Global Integration:
Aligning with IFRS 9 makes Bangladeshi banks more “bankable” for foreign investment, easing access to global funding and trade finance.
The Hurdle Race: Implementation Challenges
Despite the benefits, the path to 2027 is fraught with challenges:
Capital Impact:
The shift to ECL will likely lead to a “Day 1” spike in provisioning requirements. For banks already struggling with capital adequacy, this could strain their Capital to Risk-weighted Assets Ratio (CRAR).
Data Scarcity:
Robust ECL modeling requires years of historical “default and recovery” data, which many local banks lack or have not digitized.
The “Higher Of” Rule:
During the transition, Bangladesh Bank has mandated that banks maintain provisions equal to the higher of current regulatory requirements or IFRS 9 ECL. This ensures a safety net but adds a layer of complexity to financial reporting.
Conclusion:
The future of IFRS 9 in Bangladesh is ultimately about credibility. While the short-term transition may be painful—characterized by higher provisions and the need for significant IT investment—the long-term reward is a resilient, transparent, and globally competitive financial sector. As the “parallel run” period continues through 2026, the collaboration between the Bangladesh Bank, the Financial Reporting Council (FRC), and the Institute of Chartered Accountants of Bangladesh (ICAB) will be vital in ensuring the sector doesn’t just comply with the law, but truly embraces the spirit of sound risk management.
FineIT supports financial institutions in Bangladesh with end-to-end IFRS 9 solutions — from ECL model development and validation to data architecture, parallel run support, and regulatory reporting alignment.
If your organization is preparing for the 2026–2027 milestones, now is the time to act.
Let’s build a resilient, audit-ready IFRS 9 framework together.
Muzammal Rahim Khan is the CEO and Co-Founder of FineIT, bringing over 15 years of expertise in software development, implementation, and technical consulting across global markets including the U.S., U.K., Europe, Africa, and Asia. He has led the design and delivery of enterprise-grade solutions that modernize compliance, risk management, and financial reporting for banks and financial institutions. Under his leadership, FineIT has built flagship platforms such as Estimator9 (IFRS 9) and ContractHive (IFRS 16), empowering clients with automation, accuracy, and audit-ready confidence. Muzammal combines deep technical knowledge with strategic vision, driving innovation that bridges regulatory requirements with practical, scalable technology. His focus remains on building resilient, future-ready solutions that strengthen trust and efficiency in financial services.