Abstract:
This research critically examines how risk governance in micro-banking shapes macroeconomic outcomes in Bangladesh, focusing on the dynamic interplay between financial inclusion, institutional oversight, and economic indicators. The study employs a robust empirical framework, integrating time-series analysis (ARDL bounds testing and ECM) to establish long run and short-run dynamics, with Partial Least Squares Structural Equation Modeling (PL-SEM) to elucidate complex structural relationships. This study complements its quantitative analysis with a qualitative investigation into the impact of operational risk governance on digital financial services (DFS) in Bangladesh, using structured surveys in the Tangail district. Diagnostic and stability tests ensure the robustness of the findings. The evidence challenges the conventional focus on quantitative microfinance growth. In this research framework, there is a unidirectional relationship whereby monetary policy variables influence economic growth, with independent variables like money supply and interest rates clearly impacting GDP growth. Additionally, governance practices predict financial inclusion outcomes, establishing a causal flow from governance to inclusion metrics, further underscoring the unidirectional nature of these dynamics. The study reveals that effective risk governance is the pivotal mechanism for translating financial inclusion into macroeconomic benefits. Specifically, the study highlights the necessity of transitioning towards stronger institutions, integrated regulatory frameworks, and financial products designed to mitigate systemic risks like inflation. For micro-banking models, such as Societal Banking (Ali, 2016, 2020,2025), to achieve their full potential as engines of inclusive growth, the priority must shift from numerical expansion to qualitative institutional strengthening. This governance-centric approach is presented as the critical next step for Bangladesh and comparable economies.

Keywords:
Microfinance, Financial Deepening, Financial Inclusion, Poverty, ARDL Bounds Testing, Cointegration, VECM, PL-SEM , Bangladesh.

JEL Classifications:
C32, G21, O16, I32, E31, E44.