Hat Bakso, a small and medium-sized enterprise (SME) that manufactures souvenirs, applied to a private bank for a Tk 2 million cash credit (CC) loan to finance its business operations.
However, the bank is unwilling to lend more than Tk 400,000–500,000. Bank officials have assured the company that if it provides collateral, they can offer a loan worth up to 70–80 per cent of the value of its assets. Yet, just two and a half years ago, the company had received loans of the amount it needed from two banks and has been regularly paying interest on those loans.
Shafat Kadir, chief executive officer (CEO) of Hat Bakso, told Prothom Alo: “We are new entrepreneurs and do not have assets. However, we maintain regular daily transactions and pay the instalments on our existing loans on time. Even so, the bank is willing to provide only one-fourth of the amount we applied for. We cannot do anything with such a small amount. We also applied for a supply chain loan at another bank but have not received it in three months. How can we expand our business if we cannot get loans when we need them?”
Like Shafat Kadir, many businesspeople are unable to secure the loans they need from banks. Even large businesses are showing little interest in investment. Despite various government initiatives, closed industrial units have not resumed operations on any significant scale. As a result, the sluggish conditions that have gripped the private sector for several years are becoming even more pronounced.
Meanwhile, more than half of the country’s banks have largely withdrawn from industrial lending. Their boards of directors are unwilling to take on any new risks. Consequently, private sector credit growth has fallen to its lowest level in history. Credit growth in the private sector has remained below 5 per cent for six consecutive months. Yet, even with an average lending rate of 10 per cent, credit growth would normally be expected to be at a similar level.
In May, Bangladesh Bank announced a Tk 620 billion incentive package to revive activity in the financial sector. Of this amount, Tk 200 billion was allocated to reopening closed factories.
As of 15 October, Tk 5.61 billion had been disbursed from the fund earmarked for reopening closed factories. Meanwhile, approximately Tk 119.6 billion had been released from the entire Tk 620 billion package by the same date.
According to central bank data, private sector credit growth stood at 4.72 per cent in March. It remained at a similar level in April. In May, it edged up slightly to 4.98 per cent before declining again in June and July.
Credit growth stood at 4.75 per cent in August. As a result, private sector credit growth has remained below 5 per cent for six consecutive months. In the 2025–26 fiscal year, credit growth was 4.47 per cent.
Bank officials say businesses that have already invested are now facing uncertainty, leaving little momentum for new investment. Very little lending is going to the industrial sector.
A large share of the loans being disbursed is being used to finance imports of consumer goods and raw materials. Some consumer loans are also being issued. To increase credit growth, the private sector must regain momentum.
That would lead to an increase in lending. In the past, many loans were disbursed under fictitious names and were not put to much use in investment. This has contributed to the deterioration of the banking sector.
Businesses unable to secure loans
Members of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), including NH Apparels, Munshi Attires, DK Knitwear and Fatullah Fashion, have applied for loans from the incentive fund to reopen 78 closed factories.
Another 109 partially closed factories have also sought loans from the fund. However, the owners of these factories are not receiving much response.
On the matter, BKMEA President Mohammad Hatem told Prothom Alo: “As far as we know, no company in the knitwear sector has received a loan from the incentive fund so far. The boards of a few banks have approved loans for two to four partially operational factories, and the proposals have been sent to the central bank. However, no bank board has approved a loan for any closed factory.”
He added that the government wants to restore momentum to business and trade, and the central bank is sincere in its efforts. However, commercial banks are not coming forward adequately in this regard.
Hifs Agro Food Industries, based in Chattogram, applied to a private bank for a Tk 200 million cash credit loan. The bank offered to lend Tk 30–40 million. However, as that amount would not meet its needs, the company has shown little interest in pursuing the loan.
Syed Md Shoaib Hasan, CEO of Hifs Agro Food Industries, told Prothom Alo that no bank was currently willing to lend more than 70–80 per cent of the value of collateral. In the past, however, banks had provided loans worth 120 per cent or more of the collateral’s value.
“Our products used to take 45 days to reach various countries in the Middle East. Now it takes three months. As a result, we need more working capital than before. But we are not getting support from banks. Consequently, we are losing business opportunities,” he said.
Two companies under the steel-sector RRM Group have an approved credit limit of Tk 6 billion for their business operations. However, the group has sought an additional Tk 2 billion in credit facilities because of the rise in the dollar’s price, the reduction in letters of credit (LC) limits and an increase in other business costs. The bank is not approving the request.
Confirming the matter, RRM Group Chairman and Bangladesh Steel Manufacturers Association Secretary General Sumon Chowdhury told Prothom Alo that 48 companies control 90 per cent of the steel market. Of these, 30–32 companies have failed to secure requests for additional credit limits. Due to a shortage of funds, the companies are operating at half their production capacity. “If this continues, the industrial sector will not be able to recover,” he said.
Credit growth in the past
Private sector credit growth stood at 25.84 per cent in the 2010–11 fiscal year, before falling to 19.72 per cent in the following fiscal year. In the 2023–24 and 2024–25 fiscal years, credit growth was 9.84 per cent and 6.49 per cent, respectively.
An analysis of Bangladesh Bank data shows that credit growth accelerated before and after the national elections in 2014 and 2018.
New initiatives to revive the private sector
The government has taken new policy measures, alongside incentives, to increase the flow of credit to the private sector. To this end, Bangladesh Bank has reduced its policy rate for the first time in 21 months. The repo rate, or policy interest rate, has been lowered from 10 per cent to 9.5 per cent.
As a result, banks’ cost of borrowing from Bangladesh Bank has fallen somewhat, creating scope for lending rates to gradually decline. Relevant stakeholders believe, lower lending rates would help boost investment and employment.
However, entrepreneurs consider infrastructure-related issues, including gas and electricity supply, to be major obstacles. They also take the law and order situation into account. Long-standing problems such as tax policy, bribery and corruption remain as well.
Mohammad Ali, managing director of Pubali Bank, told Prothom Alo that many banks had reduced their lending activities after running into difficulties. Besides, there has been little new investment. However, he expects credit growth to gradually increase as disbursement under the incentive package gets underway.
Will the economy regain momentum?
On the one hand, Bangladesh Bank has taken steps to lower interest rates to stimulate the economy. On the other, it has lifted the lending limit imposed on state-owned Sonali Bank to increase loan disbursements. As a result, the bank will be able to lend as it sees fit in response to customer applications.
Since taking office, the BNP government has placed the highest priority on increasing investment and employment. In its election manifesto, the BNP set a target of turning Bangladesh into a trillion-dollar economy by 2034.
Reducing interest rates was also part of the discussion on investment-friendly policies to achieve this goal. Many sound entrepreneurs are now getting loans at interest rates below 10 per cent.
Abul Kasem Khan, former president of the Dhaka Chamber of Commerce and Industry and vice-chairman of A K Khan & Company, told Prothom Alo that the government measures to stimulate the economy were positive.
Many reforms had been undertaken, and more were underway, to improve the business environment. However, their impact would take time to materialise. The global situation was also not favourable, and business confidence had yet to recover.
Abul Kasem Khan added: “The business environment in Bangladesh has still not improved. It takes a year just to complete the procedures required to start a business. A task that should take one day ends up taking a year. Meanwhile, countries such as China and Thailand have moved far ahead. In this age of artificial intelligence, we need to rethink how to improve the business environment. We are encouraging solar power, but offering no incentives. Many countries are providing incentives for the use of solar power.”