Businesses’ loan appetite sluggish amid uncertainty [ Tritiyo Matra News ]

Businesses’ loan appetite sluggish amid uncertainty

Local November 09, 2015

The private sector credit growth inched up in September from that of the previous month, but still remained lower than the target set in the monetary policy as the businesspeople maintained a ‘wait-and-see’ approach amid political uncertainty.
According to the latest Bangladesh Bank data, the year-on-year credit growth rate in the private sector rose to 12.88 per cent in September compared with that of 12.69 per cent in August of this year. The private sector credit growth was 12.96 per cent in July.
BB officials, however, feared that given the existing law and order situation in the country, the private sector credit growth would not remain positive in the months to come.
The central bank set a ceiling for the private sector credit growth at 14.30 per cent for the July-December of the financial year 2015-16.
Credit flow to the private sector stood at Tk 5,89,685.60 crore in September 2015 against Tk 5,22,399 crore in the same month of 2014. It was Tk 5,78,176.90 crore in August 2015 against Tk 5,13,083.10 crore in August 2014.
‘The violent political conflicts over the process of holding general elections in the first few months of this year and the ongoing political uncertainty hit the private sector,’ a BB official told New Age on Sunday.
In the situation, the businesspeople adopted a ‘wait and see’ approach to expansion of their business, he said.
Former interim government finance adviser Mirza Azizul Islam told New Age on Sunday that the commercial banks had recently cut their interest rates on lending but they failed to attract the businesspeople to take loans.
The situation indicates that the country’s existing business environment is unfriendly for expanding business, he said.
The ongoing political uncertainty and deterioration in law and order situation were the key causes of the lower private sector credit growth, he said.
‘The businesspeople think that they will default on loans if they take fresh credit from banks now amid sluggish business situation,’ Mirza Aziz said.
Dhaka Chamber of Commerce and Industry president Hossain Khaled told New Age on Sunday that the rise in private sector credit growth in September was insignificant and it had been maintaining a stagnant situation for long.
The businesspeople are now facing shortage of electricity and gas to expand their business that will ultimately hit the private sector credit growth, he said.
Most of the businesspeople are not able to open new enterprises and they are just conducting their existing business due to the shortage of power connection, he said.
The private sector credit growth had stood at 13.19 per cent in the FY15 against the central bank’s target of 15.50 per cent.
The BB failed to achieve the private sector credit growth targets in recent financial years due to the political unrest and uncertainty.
‘The country’s ideal credit growth is between 17 per cent and 18 per cent. But, it is not possible to achieve the growth right now due to the ongoing sluggish investment situation,’ another BB official said.
Some of the large borrowers are now overburdened with debts while a significant number of them have already become loan defaulters, he said.
He said the private sector credit growth would face hurdle in the coming months if the existing political uncertainty and corrosion of law and order situation prevail.
The central bank will fail again to achieve the private sector credit growth target in the first half of the FY16 if the sluggish business trend continues in the coming months, he said.
‘Ensuring a vibrant political environment is highly important to achieve goal in the private sector credit growth,’ the official said.
The BB data showed that the year-on-year credit growth in the overall domestic sector also increased to 9.94 per cent in September from 9.63 per cent in August 2015.
The total credit in the domestic sector stood at Tk 7,23,642.20 crore as of September 2015 against Tk 6,58,218.60 crore as of September 2014. It was Tk 7,09,551.80 crore in August 2015 against Tk 6,47,224.90 crore in August 2014.