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Dhaka Tribune

Time to pay the piper

Our economy cannot be allowed to collapse under the weight of bad loans

Update : 04 Oct 2023, 02:03 PM
Our economy continues to be dragged down by bad loans, an insidious practice that has shown absolutely no signs of relenting.

In fact, non-performing loans (NPLs) kept ballooning by nearly 18.2% to over Tk156,000 crore at the end of June this calendar year according to data released by the central bank. NPLs soared to Tk156,039 crore at the end of June 2023 from Tk131,620 crore in March, and Tk120,656 crore at the end of December 2022.

It is nothing short of a tragedy that, in the midst of a global economic slowdown, the biggest threat to our economy -- specifically our finance sector -- continues to be an internal issue that Bangladesh has struggled with for years if not decades.

Which is an absolute shame as the continued accumulation of NPLs not only poses a severe threat to the stability of the finance industry -- which has been extremely volatile and shaky for the past few years -- but it also limits the availability of credit for potential borrowers who could actually use it, such as entrepreneurs and small and medium-sized enterprises (SMEs).

By continuing to coddle bad borrowers -- who are, more often than not, people of influence -- the government is hurting the economy on more than one front: By crippling our finance sector and denying opportunities to genuine borrowers who have the capability to take a business idea and materialize it.

Last year, one of the conditions set forth by the International Monetary Fund in approving the $4.5 billion loan was to reduce the amount of bad loans being handed out, and that the definition of a “non-performing loan” should be amended and raised to international standards which states that a default loan ratio of up to 3% is deemed tolerable, in contrast to Bangladesh which is at about 9%.

The message needs to be heard loud and clear: Our economy cannot be allowed to collapse under the weight of bad loans.
 
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