The country's leading business organization, Bangladesh Chamber of Industries (BCI), has called for policy reforms to resolve the long-term financing crisis, high interest rates, default loan classification policy, and working capital crisis in Bangladesh's industrial and manufacturing sector.
A delegation led by the organization's president Anwar-ul Alam Chowdhury (Parvez) met Bangladesh Bank Governor Md Mostakur Rahman at the central bank's head office on Tuesday (May 12) and presented these proposals.
After the meeting, a letter was handed over by BCI, in which seven-point recommendations were presented in detail to make the country's manufacturing-oriented industries sustainable and competitive.
The letter said that long-term financing in the industrial sector remains a major challenge as the country's capital market is not yet sufficiently developed. In this situation, a call was made to introduce a new financing structure with a grace period of two years along with the introduction of a 12-year long-term loan system.
In addition, it was proposed to expand refinancing facilities for the import of capital equipment and create opportunities to use offshore funds at relatively low interest rates.
At the same time, it was recommended to encourage commercial banks to ensure long-term financing through international development organizations and foreign investment partners.
BCI said that many industrial enterprises are currently suffering from a working capital crisis due to the decline in production, energy crisis, gas supply disruptions, increase in gas prices (274%), increase in bank interest rates (9–15%), depreciation of the taka, high inflation and political uncertainty in the post-Covid-19 period.
In this situation, a demand was made to re-evaluate the working capital facilities of the industrial sector.
In addition, it is proposed to convert the outstanding money related to LC (Letter of Credit) into long-term loans at low interest rates, so that the companies in crisis can return to production without closing.
The letter demands an amendment to the Bangladesh Bank's loan classification policy and stated that currently, loans are classified in three months, which is not in line with the real situation of the industrial sector. It is proposed to increase this period to six months.
BCI alleges that currently, the interest rate in the banking sector has reached 14-15%, which is very stressful for the industrial sector. According to the organization, the reasonable interest rate should be 11-12% considering the actual cost of funds and risk.
In addition, it is called for the introduction of a simple interest system by abolishing bank charges, commissions, penal interest and the complex method of calculating interest (compound rate).
It also proposed to collect interest on a half-yearly basis, so that a balance is created between the bank and the customer.
The letter also highlights some of the complexities of the Credit Information Bureau (CIB) reporting system. It is said that if one company in a group defaults, all the companies in the entire group are put at risk, which is not fair.
The BCI demanded that individual companies be considered as separate entities, saying that this would not unnecessarily harm well-performing companies.
It proposed expanding financing through digital platforms in the small and medium enterprises sector and launching district or cluster-based pilot projects. At the same time, emphasis was placed on simplifying the banking process by reducing additional complexity.
The BCI leaders said that in order to sustain the manufacturing sector in the current economic reality, it is necessary to make banking policies more flexible, realistic and industry-friendly. Otherwise, industrial production may be disrupted and employment and export sectors may also be negatively affected.
