Increase lending for agriculture and small businesses
Yesterday, experts urged banks to increase loan disbursements for small, micro, small and medium enterprises and the agriculture sector as the majority of lenders are currently showing reluctance to do so.
Outstanding loans in the banking sector increased by 88% in June this year compared to about five and a half years ago.
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Meanwhile, credit growth for the small business and agriculture sectors was only 17% and 28% respectively.
In such a situation, all stakeholders including banks and non-banking financial institutions (NBFIs) should emphasize the issue as these two sectors are the lifeline of the economy, they said. .
They made the recommendations on the closing day of a two-day 9th Annual Banking Conference 2022 hosted by the Bangladesh Institute of Banking Management (BIBM) at its Dhaka office.
Outstanding credit in the agricultural sector represents less than 5 percent of total loans. Policymakers should pay attention to this issue so that bankers do more to improve lending to this sector, says expert
Md Ali Hossain Prodhania, former managing director of Bangladesh Krishi Bank, said small business loans accounted for no more than 15% of outstanding loans in the banking sector.
Moreover, outstanding credit in the agricultural sector represents less than 5% of total loans disbursed, said Prodhania, a supernumerary professor at BIBM.
“Thus, policymakers should pay attention to this issue so that bankers put more effort into improving their loan disbursements to these sectors,” he added.
Mosleh Uddin Ahmed, managing director of the South Bangla Agriculture and Commerce Bank, said many lenders are generally hesitant to lend to small businesses given the higher operating costs and credit risk.
“We all talk about it…but we love giving loans to big borrowers,” he added.
The Bangladesh Bank had rolled out stimulus packages for small businesses during the pandemic, but data from the Bangladesh Institute of Development Studies shows that 58% of entrepreneurs were not even aware of the facility’s existence.
In this context, he suggested that the authority concerned set up a database for these customers.
A total of 26 research papers related to the country’s financial sector were presented at the conference, the closing session of which was attended by Ahmed Jamal, Deputy Governor of the Central Bank, as the main guest.
He said papers by academics and bankers would help identify many critical issues and challenges facing the domestic banking sector.
Md Akhtaruzzaman, Director General of BIBM, and Prashanta K Banerjee and Shah Md Ahsan Habib, Professors of the institution, also spoke at the event.