Staff Reporter :
Credit expansion to the private sector has become a big challenge for the government policymakers as growth of such credit remained stagnant for the last two years, affecting recovery of the national economy, sources said.
They said private sector credit has failed to take off in line with the target of monetary policy amid sluggish investment demand.
According to the Bangladesh Bank (BB) data, the credit growth in the private sector rose to 12.15 percent in September compared with that of 11.39 percent in August this year. The growth was 11.25 per cent in July.
“Although the private sector credit has grown slightly during the last three months, it still remained low from that of the central bank’s monetary policy target as an investment inertia has created among the businessmen due to unfavourable business climate prevailing in the country,” Dr Zaid Bakht, Research Director of Bangladeshi Institute of Development Studies (BIDS) told The New Nation on Saturday.
The investors are showing much apathy in taking bank loans to expand their business on account of poor infrastructure and fear of further flare up in political unrest, resulting sluggish growth in private sector credit, he said.
The private sector credit growth stood at 12.27 percent in the last financial year, much lower than the BB’s target of 16.50 per due to the political unrest in the period.
The growth also hit a 14-and-a-half-year low at 10.60 percent in December of 2013 compared with the growth of 16.61 percent in 2012. Such a situation forced the central bank to lower the private sector credit
growth at 14.50 percent for the fiscal year 2014-15. Zaid Bakht, who is also a director of Sonali Bank, further added that the credit expansion to the private sector remained low throughout the last year. A similar situation is also prevailing in the current year posing a challenge to the government policymakers who are desperately trying to lure both local and foreign investment to take the country to an inclusive growth path.
“But the task of the government policymakers becomes difficult in the wake of sluggish investment climate,” he said, adding, “Sluggish investment also lowered the GDP growth to 6.12 percent last fiscal from the target of 7.2 percent”.
Dr Zaid Bakht said the business community has apparently adopted a ‘wait-and-see’ policy considering the overall investment climate of the country. “The credit may not pick up unless the government ensures a congenial business and political environment. Timely completion of mega development projects could also help accelerating the private investment,” he noted.
“Banking sector credit growth remained stagnant for the two years due to apathy of the borrowers,” said a senior executive of a private bank.
He added: We have adequate liquid funds to expand our lending business. But the borrowers are not showing interest in taking fresh loans. The lesser credit demand from the investors has helped pile up a huge amount of excess liquidity in our bank affecting profitability of it.
“Poor infrastructure is mainly responsible for the disappointing credit growth in the private sector, said Dr AB Mirza Azizul Islam, a former finance adviser of the caretaker government.
“Stability in the country’s political arena is in sight and it may contribute to pick-up in banks credit to the sector,” he observed.
Emphasizing the need for interest rate cut, Mirza Azizul Islam said, “The central bank should look into the matter immediately because low funding cost can create investors appetite for loans making a sold path of credit growth in banking sector.
“BB should give special emphasis on providing easy loans for productive sectors in order to bring the banking system’s excess liquidity into the investment to accelerate economic growth and job creation,” he added.
Credit expansion to the private sector has become a big challenge for the government policymakers as growth of such credit remained stagnant for the last two years, affecting recovery of the national economy, sources said.
They said private sector credit has failed to take off in line with the target of monetary policy amid sluggish investment demand.
According to the Bangladesh Bank (BB) data, the credit growth in the private sector rose to 12.15 percent in September compared with that of 11.39 percent in August this year. The growth was 11.25 per cent in July.
“Although the private sector credit has grown slightly during the last three months, it still remained low from that of the central bank’s monetary policy target as an investment inertia has created among the businessmen due to unfavourable business climate prevailing in the country,” Dr Zaid Bakht, Research Director of Bangladeshi Institute of Development Studies (BIDS) told The New Nation on Saturday.
The investors are showing much apathy in taking bank loans to expand their business on account of poor infrastructure and fear of further flare up in political unrest, resulting sluggish growth in private sector credit, he said.
The private sector credit growth stood at 12.27 percent in the last financial year, much lower than the BB’s target of 16.50 per due to the political unrest in the period.
The growth also hit a 14-and-a-half-year low at 10.60 percent in December of 2013 compared with the growth of 16.61 percent in 2012. Such a situation forced the central bank to lower the private sector credit
growth at 14.50 percent for the fiscal year 2014-15. Zaid Bakht, who is also a director of Sonali Bank, further added that the credit expansion to the private sector remained low throughout the last year. A similar situation is also prevailing in the current year posing a challenge to the government policymakers who are desperately trying to lure both local and foreign investment to take the country to an inclusive growth path.
“But the task of the government policymakers becomes difficult in the wake of sluggish investment climate,” he said, adding, “Sluggish investment also lowered the GDP growth to 6.12 percent last fiscal from the target of 7.2 percent”.
Dr Zaid Bakht said the business community has apparently adopted a ‘wait-and-see’ policy considering the overall investment climate of the country. “The credit may not pick up unless the government ensures a congenial business and political environment. Timely completion of mega development projects could also help accelerating the private investment,” he noted.
“Banking sector credit growth remained stagnant for the two years due to apathy of the borrowers,” said a senior executive of a private bank.
He added: We have adequate liquid funds to expand our lending business. But the borrowers are not showing interest in taking fresh loans. The lesser credit demand from the investors has helped pile up a huge amount of excess liquidity in our bank affecting profitability of it.
“Poor infrastructure is mainly responsible for the disappointing credit growth in the private sector, said Dr AB Mirza Azizul Islam, a former finance adviser of the caretaker government.
“Stability in the country’s political arena is in sight and it may contribute to pick-up in banks credit to the sector,” he observed.
Emphasizing the need for interest rate cut, Mirza Azizul Islam said, “The central bank should look into the matter immediately because low funding cost can create investors appetite for loans making a sold path of credit growth in banking sector.
“BB should give special emphasis on providing easy loans for productive sectors in order to bring the banking system’s excess liquidity into the investment to accelerate economic growth and job creation,” he added.
