Private sector credit growth increased slightly in February from the previous months as the demand for credit is rising ahead of PohelaBoishakh and Eid-ul-Fitr -- the two biggest festivals in Bangladesh.
In February, private sector credit growth stood at 8.93 per cent, up from 8.32 per cent in the previous month, according to data from the central bank.
The credit growth has been hovering around the 8 per cent mark for a few months as businesses remain cagey about making fresh investments amid the pandemic.
The figure is 6.48 percentage points lower than the Bangladesh Bank’s target for this fiscal year.
But the credit demand did not rise in full swing as several sectors, including education, are still affected by the coronavirus-induced economic slowdown, said Dhaka Bank Managing Director Emranul Huq.
The country’s educational institutions are still shut and many sectors are connected with the educational activities, which is one of the reasons for the slow credit demand, he added.
Private sector credit growth may drop from the 8 per cent mark in the upcoming days as the second wave of the Covid-19 pandemic has already hit the country, said the Dhaka Bank managing director.
“Our economy has yet to bounce back fully, so the businesses are going slow with their investment plans,” Huq added.
Between February and June last year, private sector credit growth consistently dropped when the global coronavirus pandemic was at its most ominous form.
From 9.2 per cent in January, it came down to 8.6 per cent in June last year as the lenders refrained from disbursing credit during the countrywide shutdown from March 26 to May 30.
Now some small and medium businesses have created a demand for loans on centring the upcoming festivals, but the overall demand for loans have yet to increase, said experts.
“A large number of businesspeople are not showing their interest in expanding business,” said AB Mirza Azizul Islam, a former adviser to a caretaker government.
On the other hand, people’s incomes have eroded, which has resulted in weakened demand, he said, adding that businesses will not produce goods when the demand is dull.
Since the demand is dull, businesses will neither enhance their capacity nor utilise their capacity in full, thus resulting in a decline in credit demand, Islam added.
