Bangladesh’s defaulter problem in the 2026 race

As Bangladesh approaches the February 2026 elections, the "black money" economy that sustained the previous regime appears poised to hijack the transition process. Recent data from the Election Commission reveals a troubling reality. 

Of the 2,574 candidates who submitted nominations for the 300 parliamentary seats, 82 were identified as loan defaulters and had their nominations cancelled. Yet 31 others obtained court stay orders, allowing them to contest despite their defaulter status.

This legal loophole—whereby defaulters can file writ petitions that drag on for years while enjoying full citizenship privileges—represents a fundamental failure of Bangladesh's regulatory architecture. 

As Mustafa K Mujeri, former chief economist of Bangladesh Bank and executive director of the Institute for Inclusive Finance and Development, observed: "This is a great misfortune. In this country, loan defaulters enjoy more privileges, while good borrowers suffer. Defaulters continue to move around with extra benefits, and it is we who have enabled this."

A recent battle in the Comilla-4 (Debidwar) constituency offers a glimpse of how these structural weaknesses play out on the ground. National Citizens Party candidate Hasnat Abdullah, running under the Jamaat-led alliance, successfully challenged the nomination of BNP's Manjurul Ahsan Munshi because Munshi had concealed his status as a loan defaulter. The claim was ultimately upheld by the Election Commission, the High Court, and the Appellate Division.

On the campaign trail, Hasnat went so far as to vow that, if elected, he would make Bangladesh "the next hell for loan defaulters"—a striking message in a polity where powerful defaulters have traditionally enjoyed impunity.

Successful democracies employ multiple safeguards to prevent electoral politics from being corrupted by illegal financing. In the United States, for example, despite serious flaws in campaign finance, donors and donation amounts must be disclosed to the Federal Election Commission (FEC), and violations can result in severe penalties. Although the Supreme Court's Citizens United ruling allowed unlimited spending in support of or opposition to candidates, it did not remove disclosure requirements.

Transparency itself gives voters the information they need to judge whether candidates may face conflicts of interest due to their financial backers.

In Bangladesh, however, the current system fails on every one of these fronts. Spending limits exist, but they are not enforced. Disclosure requirements for political contributions also exist, yet there is no mechanism to verify the information submitted by parties, and disclosures are never made public. Loan defaulters are technically barred from running for office, but judicial stay orders routinely allow them to contest elections regardless.

The finances of political parties remain entirely opaque, despite legal requirements that parties report to the Election Commission. Violations of the electoral code of conduct are rarely enforced. Addressing the intersection of black money, loan defaulters, and electoral politics will require a comprehensive overhaul of laws and regulatory institutions at every level.

The economy beneath politics: a banking system in abnormal danger

When a loan defaulter runs for parliament, the issue is not merely ethical—it is macroeconomic. Bangladesh's banking failures have reached a scale never seen before. By September 2025, non-performing loans (NPLs) had reached Tk6.44 trillion ($54 billion), accounting for 35.73% of all disbursed loans.

This is not simply a domestic crisis; it is a global aberration. The NPL ratio functions as a "fever indicator" for an economy. Lower ratios signal disciplined lending and institutional strength, while high ratios indicate systemic breakdown.

India, for instance, reduced its NPL ratio to 1.7% through aggressive regulatory reform, strict oversight, and legislation such as the Insolvency and Bankruptcy Code. Other emerging economies now maintain NPL ratios at or below the regional average of 1.6%, setting a benchmark for financial stability.

By contrast, Bangladesh's figures are comparable to those of countries at war. Ukraine, amid a brutal conflict, has seen bad debt reach 26%—still significantly lower than Bangladesh's 35.73%. The comparison should serve as a terminal warning. At ratios above 26%, toxic debt chokes economic activity, prevents banks from lending to productive businesses, and triggers a slow-motion collapse of the financial system.

These figures reflect what can only be described as "state-sponsored robbing". The S Alam Group alone is alleged to have extracted at least $10 billion through coercion involving intelligence agencies. Central Bank Governor Ahsan Mansur has stated that intelligence officials held "guns to the heads" of bank CEOs to force them to hand over funds.

Once a banking system is drained to this extent, capital erodes, foreign investors flee, and the cost of international transactions surges.

One of the clearest indicators of systemic decay is the changing profile of Bangladesh's legislators. In 1971, only 18% of MPs were businessmen. By 2024, that figure had risen to 67%. Today, nearly 90% of legislators are millionaires.

This is not evidence of widespread prosperity; it is evidence of regulatory capture.

Politics has become the most profitable business in Bangladesh. During the 2024 election, candidates spent an average of Tk1.57 crore on campaigning—six times the legally permitted limit. Some Awami League candidates reportedly spent more than eleven times the allowed amount.

These "election investments" are both illegal and unethical. Yet the Election Commission remains unable to track spending effectively, lacking the revenue-monitoring mechanisms used by peer countries such as India.

The most serious threat to the 2026 election remains the court stay-order loophole. Although the Representation of the People Order (RPO) bars loan defaulters from contesting elections, the courts have effectively become sanctuaries for them. Of the 82 nominees initially identified as defaulters, dozens have already secured judicial stays, allowing them to run while their defaulted loans—worth millions of dollars—remain frozen in prolonged litigation.

What reform must mean—beyond slogans

Bangladesh does not need theatrical promises; it needs enforceable institutional architecture. From an economic standpoint, allowing loan defaulters into parliament is a guarantee of disaster. A wilful defaulter sitting as an MP has every incentive to weaken recovery laws, expand rescheduling facilities, and shield fellow defaulters.

This entrenches institutional weakness and perpetuates the very regulatory failures the transitional government claims to dismantle. The next parliament must prioritise the recovery of an estimated $234 billion laundered out of the country over the past 15 years. A parliament filled with thieves will never authorise their own prosecution.

Bangladesh must therefore confront campaign finance reform head-on and bar those who broke the banking system—or risk allowing the same financial interests to purchase a new government under a different name.

Students did not rise up in July merely to change faces in power. They fought for systemic change. Allowing loan defaulters to buy seats in the February 2026 parliament would not only represent a political failure—it would be a betrayal of the country's economic future.

Bangladesh deserves an election where integrity is not a disadvantage, and where the institutions meant to protect democracy do not become instruments that enable plunderers to return.

M Kabir Hassan is a Professor at the University of New Orleans. Mohammad Rezoanul Hoque is a PhD student at the University of New Orleans

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.