• Tuesday, Feb 25, 2020
  • Last Update : 12:27 am

Lower interest rates are good for business

  • Published at 11:28 pm January 8th, 2020
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Bringing down the interest rate to single digits should encourage more entrepreneurs, both local and foreign

Prime Minister Sheikh Hasina’s request to banks and financial institutions to keep their interest rates to single digits starting April 1 is encouraging, and should go a long way towards holding banks accountable as they move forward.

For too long our business climate has been floundering, and to say that our banking sector has been in a crisis would be an understatement. 

This is no way for a developing economy with ambitious goals to operate, and it is about time something was done.

Bringing down the interest rate to single digits should encourage more entrepreneurs, both local and foreign, to invest in Bangladesh -- this will no doubt be a significant boost to the economy and help with our industrialization and overall business climate.

However, while it is tempting to think of the lowering of interest rates as a quick fix to our banking sector, the reality is far from it. 

The country has, in the recent past, suffered from a severe liquidity crisis, a predicament that now appears to be year-long. 

There is a legitimate cause for concern that, because of this lowered interest rate, people will be discouraged from depositing their money into banks, and it is important for the authorities to monitor this possibility with the utmost diligence.

Additionally, it is the culture of bad loans, negligence towards due diligence, favouritism, and leniency shown towards certain powerful parties that have been responsible for the sorry state of our financial sector.

Therefore, while lower interest rates may indeed be best for business, and provide a boost to the overall business and entrepreneurial climate of the country, it does not completely fix our fledgling finance sector.

Our banking sector remains in need of serious reforms and policy changes for its long-term health.