Foreign-Funded NGOs in Bangladesh After the 2026 Reforms and Aid Cuts: Close-Out, Retrenchment and Assets

Foreign-funded NGOs in Bangladesh: law and money both changed

Foreign-funded NGOs in Bangladesh are operating under a new statute and a smaller funding envelope at the same time. The Foreign Donations (Voluntary Activities) Regulation (Amendment) Act 2026, Act No 54 of 2026, rewrote the registration, project-approval, foreign-personnel and appeal provisions of the 2016 Act, while the shutdown of most US-funded projects in 2025 and wider donor cuts forced boards to scale down, merge or close programmes.[2] [7] [11] The legal questions that follow are practical ones: what the reformed law now requires, how to change or end an approved project, how to let staff go lawfully and what happens to project assets.

This alert is written for country directors, boards and finance leads of international NGOs and Bangladeshi NGOs, and for the donors that fund them. It confirms the status of the 2025 reform under the elected government, sets out the NGO Affairs Bureau steps that apply when funding changes, and explains retrenchment, close-out and asset transfer. Pre-grant checks are covered in our separate guide to NGO due diligence in Bangladesh, and contested cancellations in our analysis of the NGO registration cancellation writ.

Summary: The interim government's amendment ordinance, approved by the Council of Advisers on 29 November 2025, was replaced by Act No 54 of 2026, published on 10 April 2026 and deemed effective from 11 December 2025. The Act keeps the NGO Affairs Bureau at the centre of every foreign-funded activity, but simplifies registration, allows foreign donations of up to Tk 50 lakh a year without project approval on prior notice, extends the appeal period and drops the speech offence. Organisations shrinking after the 2025 aid cuts must still close projects, release staff and transfer assets through the Bureau, the Labour Act and the donor agreement.

Key point: An NGO cannot simply stop. Its activities must stay within the approved project, no bank may debit the mother account without a Bureau release order, retrenched workers are owed notice and statutory compensation, and if the organisation is wound up, the Director General decides where residual funds and assets go: first to the foreign donor, otherwise to the government or an NGO with similar objectives.[1] [12]

At a glance

Swipe or scroll →

Table of Contents

From Council of Advisers approval to Act No 54 of 2026

On 29 November 2025 the Council of Advisers, chaired by Chief Adviser Muhammad Yunus, approved the draft Foreign Donations (Voluntary Activities) Regulation (Amendment) Ordinance 2025, describing a simpler registration process, easier release of grants and no approval requirement for donations of up to Tk 50 lakh a year.[4] The ordinance was promulgated as Ordinance No 77 of 2025.[2]

The elected Parliament did not let it lapse. It enacted the Foreign Donations (Voluntary Activities) Regulation (Amendment) Act 2026, Act No 54 of 2026, with a publication date of 10 April 2026. Section 1(2) deems the Act to have taken effect on 11 December 2025, and section 11 repeals Ordinance No 77 of 2025 while treating anything done under it as done under the Act.[2] For foreign-funded NGOs in Bangladesh, the practical result is continuity: approvals and registrations granted between December 2025 and April 2026 remain valid, and the amended 2016 Act is the governing text.

Registration and renewal

Replaced section 4 requires an applicant to show the likely sources and amount of foreign donations and an outline of how they will be used. The Director General sends the file to the Ministry of Home Affairs and the Financial Institutions Division for their opinion within a prescribed time, and may issue the certificate if no opinion arrives in time.[2] Registration lasts ten years. Renewal must be sought six months before expiry, the Director General reviews the previous five years' activities, and an NGO that applies in time may continue working until the renewal is decided.[2]

Projects, administrative costs and emergencies

Replaced section 6 keeps the core rule: no NGO may receive a foreign donation without Bureau project approval, and its activities must stay within the approved project. A proposal must now specify the exact area of work. Ministry opinion is not needed for a later phase of a multi-phase project in an unchanged area, or for an international NGO's administrative-cost project, and the Director General may approve if a ministry does not respond in time.[2] Administrative spending remains capped at 20 per cent of approved expenditure, and emergency relief projects can be approved, with fund release, within 72 hours.[2]

The Tk 50 lakh notification route

New section 6(9) removes the need for Bureau approval where an NGO receives up to Tk 50 lakh of foreign donations in a year. The relief is conditional: the NGO must inform the Bureau in advance of all project activities and areas, and after the project must submit an audit report prepared by an audit firm on the Bureau's panel within the prescribed time.[2] For an organisation rebuilding with smaller grants from foundations or diaspora donors, this route can keep work going while larger proposals are prepared.

Personnel, appeals and the speech offence

Security clearance for foreign advisers, experts and officers still runs through the Ministry of Home Affairs and stays within the person-months in the approved project, but the Director General may approve, with reasons recorded, if the ministry is silent.[2] Foreign travel paid from project funds must be recorded in the annual report. The offence of making malicious or indecent comments about the Constitution or constitutional institutions was deleted from section 14, and the appeal period under section 17 became 45 days, replacing 30 working days.[2] [5] Section 18 now establishes a Government-NGO Consultative Council chaired by the Principal Secretary to the Prime Minister.[2]

How the NGO Affairs Bureau process works when funding changes

Funding shocks do not suspend the regulatory cycle. The amended Act still requires every foreign donation to be received through a single mother account at a scheduled bank, and no bank may debit that account without the Bureau's fund-release approval.[1] Each NGO must keep accounts, preserve expenditure vouchers for five years after a project ends and file an annual report of its activities.[1] The Bureau's standard registration conditions add that accounts must be audited by a chartered accountancy firm on the Bureau's list, with the audit report and annual report filed within three months.[6]

Governance changes need notice

Restructuring often means a new executive committee, a revised constitution or a move to cheaper premises. The Bureau's registration conditions require any change to the approved executive committee, constitution or address to be notified to the Deputy Commissioner or the Bureau; otherwise the changed committee, address and constitution, and any decision of that committee, are treated as invalid.[6] A board that closes programmes through a newly constituted committee without filing that notice exposes every decision it takes to challenge.

Re-scoping an approved project

Because activities must stay within the approved project and its stated area, cutting districts, components or budget lines is a change to the project rather than an internal management decision.[2] Where a donor reduces a grant, file a revised proposal or close-out plan with the Bureau before spending to the new design, and keep the revised budget within the 20 per cent administrative cap. Moving the mother account to another bank also needs the Bureau's prior approval, and a withdrawal without approval exposes both the NGO and the bank to action.[6]

Subgrants and partner exits

An NGO may pass foreign donations to a Bangladeshi voluntary organisation only if the recipient is registered under Bangladeshi law, the approved project names it with an outline of the funds it will spend, and the granting NGO guarantees implementation.[1] When an international NGO exits, its local partners lose that cover unless they hold their own approvals. Plan the hand-over so that each partner either obtains its own project approval, uses the Tk 50 lakh notification route or winds down its component on the same timetable.[2]

The US aid freeze and its impact on Bangladesh's NGO sector

Immediately after the US presidential inauguration on 20 January 2025, USAID funding and USAID-funded activities were suspended worldwide, with an exception for emergency food supplies, including for the Rohingya refugees in Bangladesh. USAID had been running nearly 100 projects in Bangladesh through about 400 NGOs, and on 25 February 2025 some 10,000 USAID contracts were terminated globally.[7] By May 2025 a platform of laid-off development professionals reported that 55 of the 59 USAID projects under way in Bangladesh had been shut, that Bangladesh had lost about $700 million in assistance and that more than 50,000 people had lost their jobs; there is no official count.[8]

The aggregate numbers hide the damage

Headline inflows held up. Foreign donations released to NGOs reached a record Tk 9,220 crore in FY2024-25, and NGO Affairs Bureau data showed receipts of $838.25 million in FY2025-26, a seven-year high, with fresh commitments of $1.15 billion.[9] [10] Those totals are concentrated. A Bangladesh Institute of Development Studies study presented on 6 October 2026 found that budgets of NGOs relying solely on foreign grants had fallen by an average of 40 per cent, against 12 per cent for NGOs with microfinance operations, and identified about 2,200 small and medium NGOs as most at risk.[11]

Why the pressure will continue

The same study recorded that development assistance from wealthier countries fell by 23 per cent in real terms in 2025, that the United States had shut down USAID and that the UK, Germany and France had cut aid budgets. Funds for previously approved projects were still being released, Tk 101.43 billion in FY2025-26, but new project approvals fell to 1,654 from 2,061 in FY2021-22.[11] Boards should read those figures as a pipeline warning: the money now arriving was mostly committed earlier, and the next cycle is thinner.

The Bureau's response

In March 2025 the Bureau's Director General said he had asked NGOs to absorb laid-off staff into other projects as far as they could, and that the Bureau was preparing a brief for the government on the impact.[7] By September 2025 a Bureau director said NGOs had been advised to give priority to laid-off staff in new projects. At that time the Bureau counted around 2,600 registered NGOs working with foreign funds, about 1,000 of them active and 287 international.[9] That is guidance, not law, but it shapes how a re-hiring policy will be viewed.

Lawful retrenchment for foreign-funded NGOs in Bangladesh

Most job losses in foreign-funded NGOs in Bangladesh follow the end of a project rather than misconduct, and the Bangladesh Labour Act 2006 supplies the framework. The Act excludes non-profit educational, training and research institutions, so an NGO whose establishment falls squarely within that category should take advice on coverage.[12] For most programme and field operations, the safer course is to apply the Act's separation rules, particularly because the amended definition of worker is functional and covers anyone employed for wages in skilled, unskilled, technical, business development or clerical work unless given managerial, administrative or supervisory responsibility in writing.[12]

Fixed-term project staff

Section 26(2) lets an employer end a temporary worker's employment on 30 days' written notice for monthly-rated staff and 14 days for others, but no notice is required where the termination results from the completion, cessation, abolition or abandonment of the temporary work for which the worker was engaged.[12] Project contracts should therefore tie the role expressly to the named project and its end date. A worker kept on rolling renewals across several projects risks being treated as permanent, and then the retrenchment or termination rules apply instead.

Retrenchment of permanent staff

Section 20 allows retrenchment for redundancy. For a worker with at least one year's continuous service, the employer must give one month's written notice stating the reason, or wages in lieu, send a copy to the Chief Inspector or a designated officer and to the collective bargaining agent if there is one, and pay compensation of 30 days' wages for each year of service or gratuity, whichever is higher.[12] Absent an agreement, the last person employed in the affected category is retrenched first, and a retrenched worker who reapplies within a year must be given preference for re-employment.[12]

Final dues and pensions

All dues on retrenchment or termination must be paid within 30 working days of separation.[12] Provident fund balances, gratuity and any Progoti contributions must be reconciled in the same window. In August 2026 the Adviser to the Prime Minister on finance and planning urged local and international NGOs to enrol eligible staff in Progoti, the universal pension scheme for private-sector employees, which makes portability a live issue for staff leaving one NGO for another.[13] Our guides to severance pay in Bangladesh and terminating employees in Bangladesh set out the calculations.

Charging severance to the donor

Donor rules decide who funds the exit. Under the US Uniform Guidance, severance is allowable only to the extent required by law, an employer-employee agreement, established policy or the circumstances of the employment, and severance paid to foreign nationals outside the United States because of a closure or curtailment of activities is unallowable unless required by applicable foreign law or approved by the federal agency.[14] Bangladeshi statutory retrenchment compensation is required by applicable law. Contractual enhancements above it are not, so document which part of each package is statutory.

Project close-out: a sequence that protects the registration

A close-out that leaves reports unfiled or a mother account open can damage the organisation's next renewal, because the Director General reviews the previous five years' activities before renewing.[2] The steps below put the regulatory filings, the workforce and the assets in an order that keeps each one defensible.

Swipe or scroll →

Leases, vehicles and subcontracts

Field offices, guest houses and vehicles are usually held on leases or hire agreements that outlive the project. Read each for notice periods and restoration duties before staff leave, because the people who know the premises are the first to go. Check whether the donor will fund early-termination and restoration costs before the final budget period closes, because costs not agreed in time usually fall on the NGO's own reserves.

Transferring project assets

For foreign-funded NGOs in Bangladesh, asset transfer is where the donor agreement, the Bureau and, on dissolution, the statute meet. While the NGO continues to exist, assets bought with a foreign donation belong to the approved project, so their transfer to a partner or successor organisation should be set out in a revised project or close-out plan filed with the Bureau.[2] The donor agreement then decides who may receive them and on what terms.

US-funded equipment

Where an award incorporates the US Uniform Guidance, equipment no longer needed for the project must be disposed of under the agency's instructions where the award requires them. Equipment with a current fair market value of $10,000 or less per unit may be retained, sold or otherwise disposed of with no further obligation. Above that value the recipient may keep or sell the item but must account for the agency's share of current market value or sale proceeds, and title may be transferred to an eligible third party.[3] If disposition instructions are not given within 120 days, the recipient may retain or sell the item on those terms.[3]

Assets on dissolution, cancellation or expiry

Section 16 applies if registration is cancelled, activities are suspended, the registration term expires or the NGO is abolished on any other ground. The Director General, with the government's prior permission, may restrain banks and others holding the NGO's funds or property from selling or transferring them without written permission, appoint an administrator, and order residual funds and assets to be transferred to the foreign donor after all debts and liabilities are paid.[1] Where transfer to the donor is not possible, the residue goes to the government account or, in appropriate cases, to another NGO with similar objectives.[1]

Planning the destination early

Because section 16 gives the donor first claim, an organisation that wants equipment, clinics or schools to pass to a named local successor should agree that destination with the donor in writing, record it in the close-out plan and have the successor ready to receive it. Debts and staff liabilities rank ahead of any transfer, so a realistic liability schedule is the first document the Director General or an administrator will ask for.[1]

Foreign-funded NGOs in Bangladesh: closing or slimming an INGO country office

An international NGO registers with the Bureau in the same way as a local one; the Act's definition of NGO includes an organisation registered under a foreign country's law that is also registered under the Act.[1] A country office that closes therefore follows the same project close-out, mother-account and asset rules. The difference lies in personnel. Each foreign adviser or officer is cleared against the approved project's person-months, so as projects close, appointments and their clearances should be ended in step and the Bureau told.[2]

Keeping a liaison presence

Not every exit is total. An INGO that wants to keep a small coordinating office can do so through an administrative-cost project, which since 2026 needs no line-ministry opinion, while its remaining programmes run through local partners holding their own approvals.[2] If registration is allowed to expire instead, section 16 is engaged, with the possibility of restraint orders and an administrator, so a timely renewal application, filed at least six months before expiry, keeps control of the exit with the organisation.[2] [1]

Restructuring rather than closing

For many foreign-funded NGOs in Bangladesh the realistic choice is a smaller, differently funded NGO rather than closure. The amended Act helps at the margins: the Tk 50 lakh notification route suits small grants, renewal is decided on the last five years' record, and section 3(2) contemplates an institutional support fund, defined as a donor grant outside project support used as institutional support with Bureau permission, though its detail awaits rules.[2]

Domestic funding routes

The BIDS study recommended a public list of NGOs eligible for government procurement and corporate social responsibility funding, guidelines to implement the NGO provisions of procurement regulations, dedicated funds for small and medium NGOs through the NGO Foundation and PKSF, and legal recognition and tax benefits for social businesses.[11] Finance Minister Amir Khosru Mahmud Chowdhury called at the same seminar for greater NGO participation in government programmes as an alternative source of funding.[11] None of these is yet law, but each points to where new money may come from.

Mergers and programme transfers

Where two NGOs combine programmes, each remains a separately registered body under the Act unless one is wound up. Transferring a programme therefore means a new or revised project approval for the receiving NGO, novation of the donor agreement, transfer of staff on terms that preserve continuous service, and a section 16 process if the transferring NGO is dissolved.[2] [1] Treat it as a regulated transaction, not an informal hand-over.

What to watch in 2027

Three developments will shape the next year for foreign-funded NGOs in Bangladesh: the rules needed to operate the institutional support fund and the Government-NGO Consultative Council; the speed of new project approvals as earlier commitments run down; and whether domestic funding proposals of the kind BIDS recommended are adopted.[2] [11] For pre-grant checks, including the anti-money-laundering expectations banks now apply, see our guide to NGO due diligence, and for a new organisation our guide to NGO registration in Bangladesh.

TRW's NGO and not-for-profit advisory practice advises international and local NGOs on NGO Affairs Bureau filings, project re-scoping, close-out and asset transfer, and our workforce terminations team runs lawful retrenchment programmes. To discuss your organisation, contact TRW in Dhaka.

Frequently asked questions

Is the 2025 foreign donations ordinance still in force?

No. Ordinance No 77 of 2025 was repealed by Act No 54 of 2026, which is deemed effective from 11 December 2025 and treats action taken under the ordinance as taken under the Act.[2]

When did the Council of Advisers approve the amendment?

On 29 November 2025, at a meeting chaired by Chief Adviser Muhammad Yunus.[4]

Do foreign-funded NGOs in Bangladesh still need project approval?

Yes, except that up to Tk 50 lakh a year may be received without approval if the Bureau is told in advance of all activities and areas and an audit by a panel firm is filed after the project.[2]

How long is NGO registration valid?

Ten years. Renewal must be sought six months before expiry, and an NGO that applies in time may continue working until the application is decided.[2]

How many USAID projects in Bangladesh were shut?

A platform of laid-off development professionals reported in May 2025 that 55 of 59 projects had been shut. There is no official government count of the job losses.[8]

What retrenchment compensation do foreign-funded NGOs in Bangladesh owe?

For a worker with a year's continuous service, one month's written notice or wages in lieu, and 30 days' wages for each year of service or gratuity, whichever is higher.[12]

Is notice needed when a fixed-term project role ends?

Not where a temporary worker's employment ends because the temporary work for which they were engaged is completed or ceases. Otherwise 30 or 14 days' notice applies.[12]

Can project funds be moved to a new bank account?

Only with the Bureau's prior approval. Foreign donations must be received through the mother account, and no bank may debit it without a Bureau release order.[1] [6]

Who gets an NGO's assets if it is wound up?

After debts and liabilities, the foreign donor. If that is not possible, the Director General may direct transfer to the government account or to an NGO with similar objectives.[1]

How long is the appeal period against a Bureau order?

45 days since the 2026 amendment, replacing 30 working days.[2] [5]