Increase loans for agriculture, small firms

Experts yesterday urged banks to increase loan disbursements for cottage, micro, small and medium enterprises and the agriculture sector as a majority of the lenders were currently showcasing a reluctance to do so. 

Outstanding loans in the banking sector swelled 88 per cent as of June this year compared to what was about five-and-a-half years ago.

Meanwhile, credit growth for the small-scale firm and agriculture sectors was by only 17 per cent and 28 per cent respectively.

In such a situation, all stakeholders, including banks and non-bank financial institutions (NBFIs), should lay emphasis on the issue as these two sectors are the lifeline of the economy, they said.

They came up with these recommendations on the concluding day of a two-day 9th Annual Banking Conference 2022 organised by the Bangladesh Institute of Bank Management (BIBM) at its office in Dhaka.

Outstanding credit in the agriculture sector is less than 5 per cent of total loans. Policymakers should give attention to this issue such that bankers put in more efforts to enhance loan to this sector, says an expert

Md Ali Hossain Prodhania, a former managing director of Bangladesh Krishi Bank, said loans for the small-scale firms accounted for not more than 15 per cent of the outstanding loans in the banking sector.

Moreover, outstanding credit in the agriculture sector is less than 5 per cent of the total loans disbursed, said Prodhania, a supernumerary professor of the BIBM.

"So, policymakers should give attention to this issue such that bankers put in more efforts to enhance their loan disbursements to these sectors," he added.

Mosleh Uddin Ahmed, managing director of the South Bangla Agriculture and Commerce Bank, said many lenders usually shy away from disbursing loans for the small-scale firms considering the higher operating cost and credit risk involved.

"We all talk about (it)… but we love to disburse loans among large borrowers," he added.

Bangladesh Bank had rolled out stimulus packages for the small-scale firms during the pandemic but data from the Bangladesh Institute of Development Studies show that 58 per cent of the entrepreneurs did not even know about the facility.

Against this backdrop, he suggested that the authority concerned set up a database for such clients.

A total of 26 research papers related to the country's financial sector were presented at the conference, the concluding session of which was attended by Ahmed Jamal, deputy governor of the central bank, as chief guest.

He said the papers by academicians and bankers would help identify many critical issues and challenges confronting the domestic banking industry.

Md Akhtaruzzaman, director general of the BIBM, and Prashanta K Banerjee and Shah Md Ahsan Habib, professors of the institution, also addressed the event.