Recurring bank loan scams and political instability in the country might be the reason why urban credit in Dhaka and Chittagong showed negative growth between 2012 and 2015, experts said on Wednesday.
During the three-year period, the country saw a series of loan scandals involving Hallmark, Bismillah and BASIC Bank besides pre-poll violence nationwide.
The bankers and experts made the assumption as a BIBM study found negative growth during the period but could not identify the cause.
However, bank-based finance in both rural and urban Bangladesh saw a steady growth from 2009 to 2019.
The findings of the study titled "Impact of Bank Based Rural and Urban Financing on Economic Growth of Bangladesh," was disseminated at a seminar at BIBM in the city.
Associate professor of BIBM Mohammed Sohail Mustafa, who led the research, said the decline in credit flow during three to four years in Dhaka and Chattogram shows that banks shied away from disbursing loan during that period.
He said a series of loan defaults against trust receipt in Dhaka and Chattogram might be the main reason for the fall.
He also said the study looked at the impact of bank-based rural and urban financing, but did not assign reason for the situation.
He said rural and urban financing have significant impact on the country's steady growth.
"Our entrepreneurs are involved in the business of producing and exporting non-conventional items and it has become possible for steady bank credit," he said.
He said rural entrepreneurs are now involved in the farming of crocodile, crab, turtles, worms, ostrich, frog legs, venom of snakes, etc. The list of innovative products is quite large, he added.
Speaking at the programme, Bangladesh Krishi Bank (BKB) Managing Director Md. Ali Hossain Prodhania said the banks' suspension of disbursing new loans during that period is the reason for bank credit fall.
He said banks are not providing quality credit in the rural area.
He said banks are not providing loans in rural areas directly, but do so through microfinance institutions (MFIs) or NGOs.
"It is not quality financing growth," he said.
Bangladesh Bank Deputy Governor S.M. Moniruzzaman said the distribution of credit to the private sector has also had a significant impact on the economic growth.
He said bank finance alone cannot drive the country into achieving the middle-income or developed nation status. "We need to develop alternate finance, secondary market for the growth," he said.
Barkat-e-Khuda, Dr. Muzaffer Ahmed Chair Professor of BIBM and former Professor of Dhaka University said, "We need to work together for getting expected results for our financial sector."
Supernumerary Professor of BIBM Helal Ahmed Chowdhury said the online platform has reduced the gap between rural and urban areas.
He also said credit by banks has significant implication for farming revolution in rural Bangladesh.
Dr. Shah Md. Ahsan Habib, Professor and Director (Training) of BIBM delivered the welcome address while Md. Nazimuddin, executive director of Bangladesh Bank and Director General of BIBM chaired the programme.
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