Businesses continue to show low appetite for loans
The country’s private sector credit growth stood at 12.29 per cent in last fiscal year, much lower than the Bangladesh Bank’s target of 16.50 per cent as the businesspeople were reluctant to expand their business by taking loans from banks due to political violence in the period, said expert and bankers. According to the BB data released on Wednesday, the credit growth rate in the private sector stood at 12.29 per cent in the FY 2013-14 against 10.85 per cent in the FY13.
Credit flow to the private sector stood at Tk 5,07,715.20 crore as of June 2014 against Tk 4,52,157.20 crore as of June 2013. It was Tk 4,07,901.60 crore as of June 2012.
A BB official told New Age on Wednesday that the year-on-year credit growth in the private sector had increased slightly in the FY14 but the rise was at the level required to boost the country’s private sector.
The credit growth in the private sector had hit a 13-year low of 10.85 per cent in the FY13 due to political instability, higher interest rate on lending and bank scams.
The lower credit growth in the private sector has already put an adverse impact on the GDP target for the FY14 as Bangladesh Bureau of Statistics projected that the country’s GDP growth was 6.12 per cent for the FY14, much lower than the initial target of 7.2 per cent, the BB official said.
The violent political conflicts in the first half of the FY14 over the process of holding general elections hit the private sector, he said.
In the situation, the businesspeople adopted a ‘wait and see’ approach to expansion of their business in the period, he said.
The private sector credit growth also hit a 14-and-a-half-year low at 10.60 per cent in December of 2013 compared with that of 16.61 per cent in the same month of 2012.
Former caretaker government adviser Mirza Azizul Islam told New Age on Wednesday that the central bank had failed to boost the private sector credit growth due mainly to political violence and uncertainty in the country.
The political uncertainty still persists, putting a negative impact on the demand for banks’ loans from the businesspeople, he said.
A good number of businessmen earlier became loan defaulters due to sluggish business amid the political unrest and in this situation it became difficult for them to get more loans from banks, he said.
Banks also took a cautious policy to disbursing loan in the private sector to avoid classified loans, he said.
‘Ensuring vibrant political environment is highly important to achieve goal in the private sector credit growth,’ Mirza Aziz said.
Due to the existing political uncertainty, the central bank has taken a lower private sector credit growth of 14.50 per cent in the FY15, the BB official said.
‘In the latest budget for the FY15, the government set the GDP growth target of 7.3 per cent, but it will be a tough job for the government to attain the goal due to the ongoing slower private investment trend,’ he said.
Country’s leading private think-tank Centre for Policy Dialogue earlier said it was an impossible target to
attain the 7.3-per cent GDP growth as the government would have to ensure 25 per cent private investment-GDP ratio.
The CPD said it would need a private investment of around Tk 75,000 crore in a single year to ensure four per cent growth in the private investment-GDP growth.
Only political stability will push up the private sector credit growth, otherwise the businesspeople will continue to show reluctance to initiate new business, another BB official said.
Bangladesh Bureau of Statistics data earlier showed that private investment hit a seven-year low at 21.40 per cent in the FY14.
The private investment as a proportion to gross domestic product decreased to 21.40 per cent in the FY14 from 21.70 per cent in the FY13.
-With New Age input
