Over 10,000 loan guarantors face default cases
Thousands are discovering that guaranteeing a loan can leave them blacklisted, stripped of assets, and fighting in court
Highlights:
- Guarantors in Bangladesh risk blacklisting, asset seizure, court battles
- Borrower defaults automatically make guarantors legally liable for debts
- Thousands face lawsuits; Dhaka courts list over 10,000 guarantors
- Guarantors' properties frequently auctioned when borrower collateral is insufficient
- Many file writ petitions to clear names from CIB
- Legal experts urge reform, calling guarantor system unfair, outdated
When Shahin Howlader walked into a bank in August last year to open a letter of credit, he expected routine paperwork. Instead, he left shaken.
His name, he was told, was on the central bank's defaulters' list.
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The shock deepened when he later learned that a case had been filed against him in the Money Loan Court – over a loan he had never taken.
Shahin, a medical equipment importer with a spotless banking record, had fallen victim to one of the financial system's least understood dangers: the guarantor trap.
His ordeal is far from unique. Across Bangladesh, thousands of people are discovering, often too late, that guaranteeing a friend's or relative's loan can leave them blacklisted, stripped of assets, and fighting in court for debts they never borrowed.
By law, once a borrower defaults, the guarantor automatically becomes liable. Their names are recorded in the Credit Information Bureau (CIB), and in many cases, courts even allow banks to auction off their assets to recover unpaid loans.
"Under the Money Loan Court Act, banks can sue both the borrower and the guarantor," explained Imran Ahmed Bhuiyan, a Supreme Court lawyer specialising in banking law. "If the borrower's mortgaged property is insufficient, the guarantor's assets can also be auctioned."
The law, however, is silent on how a guarantor who pays off a loan can recover the money from the original borrower.
Bangladesh Bank spokesperson Arif Hossain Khan said banks operate within legal frameworks and rarely require guarantors today. "If the borrower has a clean record, the bank may approve the loan through proper legal channels. In most cases now, the need for guarantors has decreased," he said.
Forcing another person to act as guarantor and subjecting them to undue harassment is a clear violation of human rights
Trapped by trust
Shahin Howlader narrowly avoided financial ruin by filing a writ petition that temporarily removed his name from the defaulters' list.
The trouble began in 2017 when his close friend Anisur Rahman, owner of Golden Fashion in Tongi, took a Tk21 crore loan from Janata Bank against his factory and land. At Anisur's request, Shahin signed on as guarantor, trusting their two-decade friendship.
"I never imagined a friend's loan would drag me into this," Shahin said. "I've never defaulted on anything."
When Anisur's business collapsed, the loan swelled to Tk33 crore by mid-2024. Janata Bank declared both men defaulters and filed a case in the Gazipur Money Loan Court.
"The bank could have recovered the full amount from mortgaged property," Shahin said. "Instead, I was branded a defaulter, and my business froze."
Guarantor to auctioned assets
Others were not so fortunate.
Montajur Rahman lost nearly everything after standing guarantor for his brother-in-law Ataur Rahman's Tk4 crore loan from AB Bank in 2011. When the loan defaulted and swelled to Tk7 crore, the Narayanganj Money Loan Court ordered auctions.
Ataur's mortgaged property raised only Tk3.5 crore. The court then allowed the bank to seize Montajur's property.
"My fuel station and 11 kathas of land were put up for auction," Montajur said. "No one bid, so the bank transferred them to itself. Our life has collapsed."
Montajur's appeals to the High Court and later the Appellate Division failed. "He's my brother-in-law, I wanted to help," he said bitterly. "Now his collapse has destroyed my future."
Former AB Bank chairman Muhammad A (Rumee) Ali said guarantor systems exist globally but should not be entered lightly.
He said banks may not always require a guarantor; it depends on the client's relationship with the bank and their transaction history.
"Anyone asked to be a guarantor should think carefully. If the borrower defaults, the guarantor suffers the same consequences," he warned.
To protect themselves, guarantors are increasingly turning to the High Court
The bigger picture
Court records show the scale of the problem.
As of 31 August, Dhaka's seven Money Loan Courts had 31,309 cases pending to recover defaulted loans, involving nearly Tk200,000 crore.
Of these, 10,211 cases named guarantors as co-defendants, covering about Tk76,000 crore.
Between January and 31 August 2025, the Dhaka Money Loan Courts delivered verdicts in 1,129 cases, covering nearly Tk38,000 crore in defaulted loans, with 408 involving guarantors.
In 2024, courts ruled on 939 cases covering Tk29,000 crore, with guarantors listed in 276. In 2023, 1,428 cases covering Tk34,000 crore included 378 guarantors. In 2022, 1,224 cases covering Tk17,000 crore involved 318 guarantors. In 2021, 1,621 cases covering Tk21,000 crore included 356 guarantors.
Writs to clear guarantor names
To protect themselves, guarantors are increasingly turning to the High Court.
Between January and June 2025, guarantors filed 748 writ petitions to suspend their names from the CIB database, covering nearly Tk7,000 crore in defaulted loans. The High Court granted 554 names.
In 2024, guarantors filed 1,235 writ petitions involving around Tk13,000 crore. The High Court suspended 866 names, leaving the remainder recorded as defaulters.
Between January and June 2025, 231 writs petitions were filed to halt property auctions, involving nearly Tk4,500 crore. The High Court stayed 139 of these auctions. In 2024, 458 similar writs involved around Tk7,500 crore, with 179 auctions stayed.
Legal expert's view
Lawyer Imran Ahmed Bhuiyan said that once a bank takes adequate immovable property as collateral for a loan, there seems little need to appoint a separate guarantor.
"It is now time to amend the law," he added. "Simply put, under the law, if a borrower can't provide proper collateral before taking a loan, no bank or financial institution should approve it. Forcing another person to act as guarantor and subjecting them to undue harassment is a clear violation of human rights."
