Private-sector credit growth hits new lows amid investment stagnation

Bangla Press Desk:  Deep concern has emerged over the country’s investment climate as bank credit growth in the private sector has remained below 7 percent for six consecutive months. By the end of November 2025, private-sector credit growth fell to just 6.58 percent—well below the target set by Bangladesh Bank. Economists warn that this slowdown clearly signals a stagnation in new investment, which could negatively affect employment, industrial output, and overall economic growth.

Professor Mustafizur Rahman, Distinguished Fellow of the Centre for Policy Dialogue (CPD), said, “If there is no new investment, demand for bank credit in the private sector does not increase either. The current credit growth indicates that new industrial establishments and expansionary investments are extremely limited. Reduced investment has a direct impact on employment and GDP growth. The lower the investment, the higher unemployment will rise, and economic growth will slow.”

According to Bangladesh Bank data, private-sector credit disbursement stood at Tk 177,382 crore in November, compared to Tk 166,432 crore in November 2024. This represents a year-on-year growth of 6.58 percent. In October, however, private-sector credit growth fell to a historic low of 6.23 percent.

During the July–November period of the current fiscal year, payments for capital machinery imports declined by more than 16 percent. Economists view this as strong evidence of a freeze in new investment. Bankers say entrepreneurs are reluctant to take new loans due to high interest rates, weak demand, and policy uncertainty.

Mohammad Hatem, President of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said, “No one will take investment risks amid political instability. The ‘mob culture’ that has emerged recently is not business-friendly at all. Without a normal law-and-order situation, neither domestic nor foreign investment will come. If we bring in machinery worth Tk 50 crore and cannot operate it properly for three years, the losses would be enormous.”

Senior bank officials report that following recent political changes, many large industrial enterprises have either shut down or are operating on a limited scale. Several factories belonging to major industrial groups such as Nasa, Beximco, and Gazi are fully or partially closed. Those that remain operational are producing at 60–70 percent less capacity than before.

Mohammad Ali, Managing Director of Pubali Bank Limited, said, “Investment will increase once the business environment normalizes after the election. And when investment rises, bank credit growth will also rise.”

With bank lending interest rates now reaching 15–16 percent, business profitability has dropped sharply. Entrepreneurs say new investment has become virtually impossible at such high rates.

Businesses are also struggling to operate factories properly due to gas shortages, a crisis that has persisted for several months. As a result, companies are unable to produce at desired levels, and many are incurring losses by year-end. Business owners say they have repeatedly raised the issue with the government but have seen no solution, leading to reduced business expansion.

BKMEA President Mohammad Hatem added, “When starting a new business, there are severe shortages of gas and electricity. Before investing, I have to worry about whether I will even get gas. The government is currently unable to ensure uninterrupted gas and power supply. I couldn’t operate my own factory properly due to these shortages. Later, higher costs further squeezed profits.”

As demand for private-sector loans has declined, banks have increased their investments in treasury bills and bonds. A senior official of a private bank said that with weak loan demand, banks are shifting toward these safer investments. At the same time, the government is borrowing heavily from banks through treasury bills and bonds. With limited private investment opportunities, banks are earning nearly 11 percent interest on government securities, which are virtually risk-free. A significant portion of many commercial banks’ income now comes from this sector.

Although concerns existed at the beginning of 2025 regarding rising deposit rates, high inflation, weak credit demand, and political uncertainty, the reality has unfolded in an even more troubling manner.

BP/SP