Abu Sazzad :
Business leaders of the private sector have underscored the need for availing more foreign loans for expanding their business. A good number of business leaders said that the traders are now seeking foreign loan instead of the loan of commercial banks due to low interest rate.
The country’s private sector needs more foreign loans every year for achieving the expected level of economic growth as well as Sustainable Development Goal (SDG), they said.
The country’s private sector received $1.88 billion foreign loan in the last year 2015, followed by 1.83 billion in 2014, $1.17 billion in 2013, $1.46 billion in 2012, $909.30 million in 2011, $302.77 million in 2010 and $478.09 million in 2009, according to the data of Bangladesh Bank. The Board of Investment (BoI) approved $8.043 billion foreign loans in the last six years.
The businesspeople usually receive foreign loans at maximum interest rate between 6 per cent and 7 per cent while they have to count rate of interest between 11 per cent and 14 per cent for loans from the local banks.
Talking to the New Nation on Wednesday, the Federation of Bangladesh Chambers of Commerce and Industry (FBCC) Director Md. Helal Uddin said, recently a good number of corporate houses received foreign loans for expanding their business.
“The rate of foreign loan is low compared to the rate of private commercial banks, and for this reason, the corporate houses are seeking more foreign loans for expanding business”, said Helal Uddin.
Actually, the business people needs single digit loan for operating their business. The business cost has already increased almost five times, so, the low rate foreign loan will encourage the entrepreneurs for operating their business”, said the FBCCI Director.
Bangladesh Bank (BB) already relaxed the rules for foreign loan with a view to promoting the private sector, said a Senior BB official. Offshore Banking Units (OBUs) of local commercial banks is getting foreign currency from the central bank and to allow local exporters to borrow foreign currency at lower rates. Earlier, the OBUs could only provide loans to foreign investors like those in the Export Processing Zones (EPZs) from fund also mobilised from the foreign sources.
The recent upward trend of foreign exchange reserves has made it possible for the central bank to offer local exporters the low cost foreign currency loan, said another official of Bangladesh Bank.
He said, the central is providing loans from the export development fund (EDF), so, the exporters could get some more low-cost funds.
AB Mirza Azizul Islam, renowned economist and adviser to the former caretaker government told recently that the central bank should be more cautious in allowing banks to bring foreign loans in the country as such type of activities might create financial debacle. The East Asian countries had faced an economic recession in 1997-1998 as they received excessive foreign loans, he said.
The countries failed to repay the foreign loans in due time and consequently they plunged into the financial recession, he said. Receiving excessive foreign loan by the businesspeople will also create a currency mismatch as the businesspeople take the credit in the form of foreign currency, but they generate income in local currency. Under the circumstances, foreign loans would create a pressure on the exchange rate,’ he said.
Mirza Aziz said, sometimes the businesspeople received the foreign loans with repayment tenure of two or three years, but they could earn profit from their investment after five or six years.
Business leaders of the private sector have underscored the need for availing more foreign loans for expanding their business. A good number of business leaders said that the traders are now seeking foreign loan instead of the loan of commercial banks due to low interest rate.
The country’s private sector needs more foreign loans every year for achieving the expected level of economic growth as well as Sustainable Development Goal (SDG), they said.
The country’s private sector received $1.88 billion foreign loan in the last year 2015, followed by 1.83 billion in 2014, $1.17 billion in 2013, $1.46 billion in 2012, $909.30 million in 2011, $302.77 million in 2010 and $478.09 million in 2009, according to the data of Bangladesh Bank. The Board of Investment (BoI) approved $8.043 billion foreign loans in the last six years.
The businesspeople usually receive foreign loans at maximum interest rate between 6 per cent and 7 per cent while they have to count rate of interest between 11 per cent and 14 per cent for loans from the local banks.
Talking to the New Nation on Wednesday, the Federation of Bangladesh Chambers of Commerce and Industry (FBCC) Director Md. Helal Uddin said, recently a good number of corporate houses received foreign loans for expanding their business.
“The rate of foreign loan is low compared to the rate of private commercial banks, and for this reason, the corporate houses are seeking more foreign loans for expanding business”, said Helal Uddin.
Actually, the business people needs single digit loan for operating their business. The business cost has already increased almost five times, so, the low rate foreign loan will encourage the entrepreneurs for operating their business”, said the FBCCI Director.
Bangladesh Bank (BB) already relaxed the rules for foreign loan with a view to promoting the private sector, said a Senior BB official. Offshore Banking Units (OBUs) of local commercial banks is getting foreign currency from the central bank and to allow local exporters to borrow foreign currency at lower rates. Earlier, the OBUs could only provide loans to foreign investors like those in the Export Processing Zones (EPZs) from fund also mobilised from the foreign sources.
The recent upward trend of foreign exchange reserves has made it possible for the central bank to offer local exporters the low cost foreign currency loan, said another official of Bangladesh Bank.
He said, the central is providing loans from the export development fund (EDF), so, the exporters could get some more low-cost funds.
AB Mirza Azizul Islam, renowned economist and adviser to the former caretaker government told recently that the central bank should be more cautious in allowing banks to bring foreign loans in the country as such type of activities might create financial debacle. The East Asian countries had faced an economic recession in 1997-1998 as they received excessive foreign loans, he said.
The countries failed to repay the foreign loans in due time and consequently they plunged into the financial recession, he said. Receiving excessive foreign loan by the businesspeople will also create a currency mismatch as the businesspeople take the credit in the form of foreign currency, but they generate income in local currency. Under the circumstances, foreign loans would create a pressure on the exchange rate,’ he said.
Mirza Aziz said, sometimes the businesspeople received the foreign loans with repayment tenure of two or three years, but they could earn profit from their investment after five or six years.
