Formal private sector borrowing has remained largely stagnant, signaling that credit demand and bank disbursements are still sluggish despite government stimulus measures aimed at rebooting the economy.
It edged up to 4.62% in July but remained below 5% for a fifth consecutive month as an acute energy crisis and weak business demand continue to discourage fresh investment.
Official data shows private sector credit growth dropped to a historic low of 4.47% in June before inching up to 4.62% by late July.
Growth stayed under 5% for five straight months, hovering at 4.72% in March, 4.75% in April, and 4.98% in May.
This persistent weakness persists despite various monetary and fiscal incentives introduced by Bangladesh Bank (BB)—including a Tk60,000 crore stimulus program—designed to revitalize business operations, restore industrial production, and create jobs.
In its half-yearly Monetary Policy Statement (MPS) for July–December, Bangladesh Bank projected private credit growth to reach 6.80% by December.
To stimulate lending, the central bank slashed the policy rate by 50 basis points to 9.50% on July 30.
Nonetheless, sluggish credit expansion indicates both muted borrower demand and cautious bank lending practices.
A central bank official highlighted that BB offered significant loan restructuring relief, including a policy allowing stressed borrowers to regularize defaulted loans with a two-year grace period upon a 2% down payment.
After many struggled to meet that threshold, BB relaxed terms in February, permitting borrowers to pay half the down payment upfront and the remainder within six months.
The subdued appetite for investment loans stems from growing bank risk aversion amid surging non-performing loans (NPLs), alongside macro headwinds hitting private enterprises.
Businesses face severe energy shortages, geopolitical tensions, currency volatility, and persistent inflation that creates an unfavorable investment environment.
Mohammad Hatem, President of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), emphasized that entrepreneurs are in survival mode under current market pressures.
Pointing to energy supply disruptions in major industrial hubs, he questioned how any expansion could occur, expressing skepticism about the reported credit growth and borrowers' ultimate repayment capacity.
Central bank metrics show capital machinery imports dropped 3.57% and industrial raw material imports declined 5.78% by late July.
Policy Exchange Bangladesh Chairman Dr. M Masrur Reaz attributed the slump to compounded shocks -- including the pandemic, the Russia-Ukraine conflict, political volatility, regulatory lapses, and Middle East conflicts -- adding that high inflation and record-low public development spending over FY25 and FY26 have further squeezed private sector contractors and suppliers.