Originally posted in The Daily Star on 3 November 2026
Private sector credit growth slips to lowest on record
Weak borrowing means weak investment, and economists warn that means fewer jobs and slower growth
Private sector credit growth has fallen to a historic low as businesses lose their appetite for borrowing, shelve investment plans and banks stay cautious about lending amid mounting economic pressures.
Credit to the private sector grew by just 4.17 percent in September, down from 4.75 percent in August, according to provisional Bangladesh Bank (BB) data.
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Senior central bank officials say they cannot recall such a slump. By their account, growth has not been this weak since at least 1993. The latest figure also missed the BB’s projection of 6.8 percent growth through December this year.
Bankers say the sluggish lending reflects the poor state of business and the wider economy.
In its recent quarterly monetary policy statement, the BB said weak credit demand points to subdued investment, elevated borrower risk, uncertain returns and the impaired balance sheets of several banks.
The central bank noted that commercial banks’ total liquid assets have increased markedly.
“However, their distribution remains uneven; stronger banks possess substantial liquidity, while some weaker banks continue to encounter funding and liquidity pressures,” it said.
Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, said the slowdown mirrors the state of the economy.
“The global situation is not good, there is no energy security, and oil prices keep rising,” said Mahbubur, also a former chairman of the Association of Bankers, Bangladesh (ABB).
He said inflation has eroded people’s purchasing power, domestic trade and commerce are weak, and freight charges have gone up.
Inflation eased slightly to 8.34 percent in September from a year earlier, according to the Bangladesh Bureau of Statistics (BBS), though it was higher than August’s 8.26 percent.
The International Monetary Fund (IMF) recently projected average inflation to rise to 10.9 percent in the current fiscal year, reversing the easing seen in fiscal year 2025-26.
Mahbubur said even money from the business stimulus packages is barely being disbursed because there is no demand for it, so weak credit growth is only to be expected.
“Those who borrow will have to repay the money, after all. We are worried too about when this situation will improve,” he said.
Speaking on condition of anonymity, a senior official of a private bank said there are no major investment projects in the pipeline. Many banks also have limited capacity to extend fresh loans because of the growing burden of non-performing loans (NPLs).
At the end of June this year, bad loans in the banking sector stood at Tk 6,06,555 crore, or 32.78 percent of total disbursed loans, according to BB data.
Fahmida Khatun, distinguished fellow at the Centre for Policy Dialogue (CPD), a local think tank, said the fall is not a good sign for the economy.
“Without investment there will be no employment generation. This could lead to reduced welfare for a large number of people,” said the economist.
She said high borrowing costs, subdued domestic demand, uncertainty over the economic outlook and energy supply, and low confidence in future returns are making firms cautious about expansion. Many are focusing on managing existing operations and debt rather than starting new projects.
Available liquidity will not automatically translate into productive investment if businesses do not see enough demand or predictable conditions to justify expansion, she said.
“The priority is to restore confidence through consistent policies, improved infrastructure and reliable energy supply,” Fahmida said.
Measures to cut the cost and uncertainty of doing business, alongside stronger domestic and export demand, can encourage firms to invest, she added.
Banks should also assess viable proposals carefully so that sound businesses can obtain finance as investment demand recovers, she said.
