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Access to reliable energy is crucial for development, yet many rural areas in southern Bangladesh suffer from electricity shortages, impeding essential services and hindering social and economic progress. This paper proposes integrating renewable energy-based microgrids to provide sustainable and reliable electricity, thereby improving living conditions and boosting economic growth. A detailed survey in Ruma, Bandarban, was conducted for load estimation. Simulation results for on-grid and off-grid microgrids are obtained using HOMER Pro and PVsyst software. The off-grid system includes 21.8 kW of PV, 15 kW of hydro, and 222 kWh of battery storage, while the on-grid system includes a 200 kW PV system and a 15 kW hydro turbine. The levelized cost of energy (LCOE) is 0.15 USD/kWh off-grid and 0.03 USD/kWh on-grid. The on-grid system shows economic sustainability with a 6.8-year break-even point, 13 % IRR, and 8.7 % ROI. Environmental analysis shows significant greenhouse gas reductions, with CO2 emissions decreasing from 227,778 kg/year to 199,016 kg/year. Additionally, a sensitivity analysis is conducted, which underscores the resilience of the proposed hybrid microgrid system to weather variations and cost fluctuations. This paper provides a comprehensive foundation for policymakers to consider renewable microgrids as a solution for rural electrification in southern Bangladesh, utilizing solar and hydropower resources.