All the governments of developing nations, generally and exclusively, wish to get more investments from foreign countries and local businesses aim at a flourishing economy which results in the overall advancement of a nation by creating employment opportunities, export-import earnings, GDP growth, and the development of human resources. Bangladesh is not an exception. Our political leaders asked several countries to invest in the thriving sectors like garments, drugs, roads and communications, IT, leather industry, and many more sectors in Bangladesh. For that causes, the governments have set up numbers of EPZs over the years. Due to several internal difficulties — political instability, shortage of electricity and gas, labour unrest, infrastructure problems like roads and port, red tape, corruption, and high interest rate in industrial loans — and external challenges the local industries are facing the dilemma of whether to survive or perish. Facing the 360 degree challenges, it is really tough for the local investors to run their industries. Corruption and loan default are unavoidable because of the banking system.
Bangladesh Bank in December last year instructed banks to relax loan rescheduling rules for businesses affected by political instability, which the banks took full advantage of to bring down their classified loan portfolios. If the central bank had not given the opportunity, the banks would have to file cases against their borrowers to realise the loans, said a high official of a private bank. Realising loans by lodging cases against defaulters is difficult. On the other hand, it would have been injustice to the borrowers. The bank rescheduled loans of those who defaulted for genuine reasons, in exchange for 3-5 percent down-payment, compared with 10 percent earlier.
The question important is in the name of recovering defaulting loans how much politics played a role and how many businesses were destroyed, making how many workers unemployed? That is no consideration for the banks. But such an attitude cannot be helpful for survival of businesses and creating job opportunities.
Foreign direct investment (FDI) inflow has remained at low levels due to the same problems faced by local investors. FDI inflows have never reached the level of even one percent of GDP despite the presence of a large number of lucrative incentives.
In business, banking service is essential. To be a defaulter is not unusual because there are ups and downs in business. If the bank wants, instead of helping the business tide over a crisis, can easily destroy the business which has banking relationship with it. The concepts of trust and partnership are so important for business to grow.
Our system is such that a loan defaulter is completely at the mercy of the loan giving bank. It is easy to forget that the person who takes loan is helping the bank’s business. The laws are harsh and defaulter can be treated as a subversive element or a criminal. Exceptions are surely there but if the laws are to be followed to the letters then he is finished along with his business.
Various actions are available against the defaulters. For realization of money he will face a special law under which the suit will be disposed of without considering any counter claim that one can have against the bank. Then Bangladesh Bank will have his name shown in CIB report disqualifying him to do normal business with any bank. The Anti-Corruption Commission will not remain idle and file a criminal case to get him arrested making closure of the business almost certain.
We do not say it happens in every case. But it cannot be said that the legal options are business friendly. No helpful guidelines are forthcoming from Bangladesh Bank or the Board of Investment.
