'Dhaka is Bangladesh', some people are often heard uttering this three-word sentence to express their disapproval of extreme concentration of administrative decision-making power in the country's capital city.
It is not just power, yet another important element, money, without which power is useless, does also have its unusual concentration in Dhaka. And the banks have made it possible. They have been generously pouring money in one city, keeping most other areas of the country fund-starved.
A study, carried out jointly by two associate professors at the Bangladesh Institute of Bank Management (BIBM) and presented at the two-day Annual Bank Conference held in Dhaka early this week, revealed that capital Dhaka alone had received two-thirds of the total loans disbursed by banks in 2014 and 2015.
Chittagong is another city favoured by the bankers. During the two-year period, mentioned above, it received 20 per cent of the bank credit.
If two cities consume more than 80 per cent of bank credits, the situation with other towns and cities and rural areas in particular is understandable. The study revealed that banks made available only 10 per cent of their loans to the vast majority of people living in the rural areas.
Experts are very often found expressing their concern over an unending migration of people to Dhaka city from other parts of the country only to transform it into an unlivable one. Their observation is not at all unfounded. The overcrowded streets, chaotic traffic and scarcity of basic civic amenities have already earned enough infamy for it. The city is now one of the worst ones on earth, in terms of livability.
But why would not people flock to a place where both power and money are so heavily concentrated? It is, undoubtedly, a natural phenomenon as the people would try to get their share in the pie. The relevant policies and programmes adopted by successive governments have contributed to the accumulation of wealth and power in one place and also in the hands of a few.
The policymakers, however, put up a different stance in public. They tend to show themselves as staunch supporters of decentralisation of power and balanced development of all regions. But concentration of bank credits in one or two places does prove their promises to be hollow.
The study in question also highlighted yet another important aspect of bank credit distribution. It found that a substantial part of the bank loans is concentrated in a few sectors, wholesale and retail trade being at the top of credit recipient, 20.63 per cent during 2013-15 period. Large industries had the second largest share, 20.53 per cent, followed by import financing (10.53 per cent) and small and medium industries (10.49 per cent). Thus, taking import financing and wholesale and retail sector together, trading got more than 31 per cent of the total bank credit disbursed during the 2013-15 period.
Banks have always been interested to lend traders because of shorter repayment period and relatively high lending rates. However, some major scams involving loans given to a few large trading houses, particularly in the port city of Chittagong, have, of late, made the banks rather choosy about trade financing. Yet this type of lending is still on the top of the list of bankers.
The credit disbursement figures, presented in the study report, do also highlight the fact that all types of industries--- large, medium and small--- got only 30 per cent of bank loans. With such low-level of financing, it is hard to expect any breakthrough in the country's manufacturing sector.
In all policy documents of the government and the central bank, there is no dearth of emphasis on providing maximum possible bank finance to the real sectors of the economy that include all types of industries. But in reality, the required level of financing does not come from the banks to industries that need financing.
The reason/s for a long-persisting low level of interest among banks in industrial financing needs to be explored. Is it for rate of profit or risks involved in such lending? A comparative picture concerning the rate of defaults by the two categories of borrowers might also help one to draw a conclusion.
There is no denying that the banking sector in Bangladesh has expanded, according to some experts, beyond the current needs of the economy. But after all these years, it has not gained the required level of maturity when it comes to lending. However, at times, the acts of immaturity or lack of due diligence turn out to be deliberate. That turns out to be a real problem.
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