Bangladesh's Private Sector Credit Falls In September

November 22, 2009 5:09 p.m. EST

Dhaka, Bangladesh (AHN) - Bangladesh's Credit to the private sector dipped below 14 percent in September as lending to new factories dried up due to an acute energy crisis and a major fall in exports, officials told AHN  Sunday.

Private sector credit fell tp 13.65 percent in September 2009, from 14.26 per cent in August and almost half that of the same month last year, according to the central bank statistics.

Banks lent private companies, flat buyers, consumers, farmers and traders US$3.95 billion (BDT 272.492 billion) in September 2009, down from $6.06 billion (BDT 418.662 billion) in the same month last year, the Bangladesh Bank (BB), the country's central bank, data showed.

"We thought credit flow would grow in September as August figures have showed first increase in ten months. But the opposite has happened," a BB senior official told AHN in Dhaka.

The official blamed the global recession and a nationwide acute crisis of gas and electricity for the fall.

The country's exports have declined more than 28 percent in September and more than 11 percent in the first quarter, the worst performance since 2001-2002, as recession-hit western retailers cut orders for apparel items from the South Asian country.

"The entrepreneurs are cautious in investing in new facilities or expanding their existing units against the backdrop of global meltdown. As a result, there is fewer demand for project loans," the BB official added.

"New entrepreneurs are also not interested to set up industrial plants due to shortage of gas and electricity," Managing Director and Chief Executive Officer of Agrani Bank Limited Syed Abu Naser Bukhtear Ahmed told AHN in the capital, Dhaka.

Mr. Bukhtear also said credit flow to the private sector would grow gradually as soon as the government can ensure better supply of gas and electricity.

Credit flow to the private sector has been declining since October 2008 because of a 'go-slow' policy adopted by the businessmen to avoid any financial risk in the face of global recession, the BB officials said.

The growth came down to 24.72 percent in October 2008 from a record high of 26.55 percent in the previous month, they added.

Mr. Bukhtear and BB officials have said that private credit would pick up sharply if the government could fast-track projects under the newly-launched public private partnership (PPP) investment initiative.

"There is no big push for investment in private sector due to lack of big government projects. If the government can launch PPP projects quickly, it would create big demand for credit from the private sector," another BB official said.