BM Desk: There was a period of turmoil in 2024. Once more, the banking industry saw a poor liquidity flow. The loan distribution in the cottage, micro, small, and medium-sized business (CMSME) sector has been impacted by all of this.
Following Corona, distribution declined last year. In 2024, CMSME received a total of 2 lakh 14 thousand 418 crore taka. This is a decrease of 6.5 percent, or 14,895 crore taka, from the previous year.
The concerned said that more employment is generated at low cost through investment in small and medium enterprises. That is why in developing countries, emphasis is always placed on distribution in these sectors. The central bank has also been taking various initiatives to increase loan disbursement in this sector for quite some time. Through a directive this year, it has been ordered to disburse at least 27 percent of the total loan of the banking sector to CMSME. It has been asked to provide loans of up to 25 lakh taka for women without collateral and up to 5 lakh taka for other cases. Such traders who do not have a Taxpayer Identification Number (TIN) have been given the opportunity to take a loan of up to five lakh taka with other business certificates.
Global Islami Bank Chairman and prominent banker Mohammad Nurul Amin told Samakal that there was political and social unrest throughout a large part of 2024. The elections at the beginning of last year and the subsequent student-public movement created an unstable environment. Due to which, loan disbursement may have decreased. Because, investment is very low in any uncertainty. The overall loan growth of the private sector has fallen to 7 percent. It may remain like this for some more days.
According to Bangladesh Bank data, CMSME loan disbursement generally always increases. However, it decreased last year. Earlier, due to the lockdown during Corona, there was stagnation in most of the work. As a result, loan disbursement decreased in 2020. That year, the disbursement fell to one lakh 53 thousand 496 crore taka. The previous year, in 2019, the disbursement amount was one lakh 67 thousand 971 crore taka. This means that the disbursement has decreased by 14,475 crore taka or 8.62 percent in a year.
The stakeholders indicated that investing in small and medium enterprises generates more employment at a lower cost. Consequently, developing countries consistently prioritize distribution within these sectors. The central bank has been implementing various initiatives to enhance loan disbursement in this area for an extended period. This year, a directive was issued mandating that at least 27 percent of the total loans from the banking sector be allocated to CMSME. Additionally, it has been instructed to offer loans of up to 25 lakh taka to women without requiring collateral, and up to 5 lakh taka for other cases. Traders lacking a Taxpayer Identification Number (TIN) have been granted the opportunity to secure a loan of up to five lakh taka with alternative business certificates.
Mohammad Nurul Amin, Chairman of Global Islami Bank and a notable banker, informed Samakal that there was significant political and social unrest throughout much of 2024. The elections at the start of last year, along with the subsequent student-public movement, contributed to an unstable environment. As a result, loan disbursement may have declined, as investment tends to be very low during periods of uncertainty. The overall growth of private sector loans has dropped to 7 percent and may continue at this level for some time.
Data from Bangladesh Bank shows that loan disbursement for CMSME typically experiences consistent growth. However, it saw a decline last year. Previously, the lockdown during the Corona pandemic caused a halt in most activities, leading to a decrease in loan disbursement in 2020. That year, the total disbursement fell to one lakh 53 thousand 496 crore taka. In contrast, the previous year, 2019, saw a disbursement amount of one lakh 67 thousand 971 crore taka. This indicates a reduction of 14,475 crore taka or 8.62 percent over the course of a year.
According to Bangladesh Bank data, the loan balance of banks and financial institutions in the CMSME sector stood at 3,13,176 crore taka at the end of last December. In 2023, banks and financial institutions disbursed a total of 2,29,313 crore taka loans to CMSME. In 2022, the disbursement amount was 2,20,489 crore taka. In 2023, the loan disbursement increased by 8,823 taka; which is 4 percent. Earlier, in 2022, the loan in this sector increased by 35,61 crore taka or about 19 percent. In 2021, the total disbursement to CMSME was 1,85,428 crore taka. Which was 32,320 crore taka or about 21 percent more than the previous year.
According to Private Mutual Trust Bank Managing Director Syed Mahbubur Rahman, there were several forms of instability in 2024. As a result, there was little demand for loans. Once more, SME loan default rates are often high, with the exception of one or two institutions. These might have decreased the quantity. He thinks that the decline in the distribution of SME loans was not caused by the liquidity issue. Media was informed by a Bangladesh Bank official that the central bank has long issued directives to expand the distribution of CMSME loans in order to boost employment through bolstering economic activity. This industry has access to a number of refinancing programs and low-interest incentives.
