The big regional lending gap emerged one of the major barriers to the country's financial institutions (FIs) in achieving SDGs (sustainable development goals), according to a study released on Sunday.
The study report of the Bangladesh Institute of Bank Management (BIBM) titled "Achieving SDGs in Bangladesh: The role of banking sector" found almost 85 per cent of the banks' advances are concentrated only in Dhaka (66.18%) and Chattogram (18.80%) in 2017.
Six other regions are getting 0nly 20 per cent of the overall loans which experts term lending inequality, not suitable for achieving SDGs by 2030.
Of the regions, Barishal (1.27 %) received the lowest volume of loans while Khulna, Rajshahi, Rangpur, Mymensingh and Sylhet got 4.10 per cent, 4.03 per cent, 2.41 per cent, 1.62 per cent and 1.59 per cent respectively.
Other factors like the growing volume of NPL (non-performing loans) coupled with the declining trend of small and medium enterprise (SME) financing also pose a threat to establishing a sustainable financial sector in the country.
The study report was shared at a seminar in the city on the day. Senior bankers and financial market analysts at the seminar suggested creation of quality liquidity demand all over the country.
They also attached importance to further focus on the SMEs and prevent the scope of capital flight.
Sharing the findings, professor and director of Dhaka School of Bank Management (DSBM) said most of the banking resources concentrated in urban areas.
"Almost 90 per cent of the advances focus on urban areas although rural areas contributed 20 per cent of the deposits. This is unfair," he said. In SME financing, 17.35 per cent of the loans were disbursed in 2017 against 14.51 per cent in 2010. "So, the progress is quite slow here," he added.
BIBM supernumerary professor Md. Yasin Ali said the country needed to ensure access to finance for all so that not a single piece of land remains unutilised due to lack of capital.
He was critical of too many service charges imposed in various forms by the banks.
Talking about the recent cuts in lending and deposit rates, he said the sector needs a comprehensive study to see whether the banks reduce the lending rate.
But, the banks did not wait to implement the reduced deposit rate of 6.0 per cent. "If we calculate inflation rate of 5.7 per cent with inclusion of VAT, taxes and too many service charges of the banks, it is not suitable for financial inclusion," he said.
He laid emphasis on ensuring financial literacy at all stages for a sustainable financial sector.
Keeping cost of fund into consideration, he also recommended expansion of services like agent banking in bringing more unbanked people under the banking coverage instead of expanding branches.
Managing Director and CEO (chief executive officer) of Trust Bank Limited Faruq Mainuddiun Ahmed said the commercial banks were supposed to deal with working capital but they have been investing for industrialisation.
"This is because of complete failure of the financial bodies in the area of industrialisation. We have good policy direction but not the mindset to implement those. That is the main problem," he added.
Managing Director of Bangladesh Krishi Bank Md Ali Hossain Prodhania said the public borrowing would go up in the coming years to meet the requirements for achieving SDGs that might put pressure on banks.
"It would reduce loanable amount of money," he said.
Terming imbalanced growth in deposits (8.0 per cent) and credit (16 per cent) a serious concern for ensuring access to finance, he said the gap needed to be minimised.
Chairing the seminar, Dr. Muzaffar Ahmed Chair Professor Dr Barkat-e-Khuda said the country needs US$928.48 billion to achieve the SDGs by 2030 and 42 per cent will come from the private sector.
"That means, we've to increase private investment but the private investment-GDP ratio remains stagnant at 22 per cent," he said. Talking about the regional lending gap, he advised the government to increase demand for finance in the rural areas, because banks will go to areas where liquidity demand is higher.
He also placed several suggestions like increasing tax-GDP (gross domestic product) ratio, plugging the scope of capital flight.