PKB faces loan recovery hurdles amid soaring classified loan ratio

The state-run Probashi Kallyan Bank (PKB) said it is facing unprecedented challenges in loan recovery from outbound workers, at a time when the bank's classified loan ratio surged to 15 per cent in FY24 from 7.5 per cent in the previous fiscal year.
Officials of the bank attribute the spike in classified loans -- a loan that is at risk of default -- to migrant borrowers not paying instalments on time, unsuccessful migration, overseas joblessness and low wages.
As the primary factor behind the abrupt increase, bankers, however, point to the expiration of a Bangladesh Bank waiver in the last financial year.
They said while issues in loan recovery have been in the past, those have now escalated.
According to official data, even though there is a rise in the number of workers going abroad, many are struggling to secure employment and others are faced with underpayment. Besides, a significant number of outbound workers find themselves ensnared in undocumented work, making it difficult for them to remit loan instalments on time.
Under the waiver facility provided by the central bank, PKB's loan classification was managed within the microcredit system, as opposed to term loans. The bank has recently submitted an application to the Bangladesh Bank for an extension of this facility.
The PKB's loan recovery rate is currently about 70 per cent. There are 9,157 classified loans totaling Tk 1.34 billion. The recovery rate for migration loans is 60 per cent.
Established in 2011, the bank offers collateral-free loans to outbound workers and rehabilitation, supporting income-generating activities for returning migrant workers.
It offers migration loans up to Tk 300,000 with an interest rate of 9.0 per cent. The upper limit for the rehabilitation fund is Tk 5.0 million and the lower limit is Tk 0.3 million, with the same interest rate of 9.0 per cent.
The number of beneficiaries of migration loans from PKB is 126,766 workers, with loans amounting to Tk 23.68 billion. As of August this financial year, Tk 10.33 billion has been recovered.
In total, PKB has issued 146,257 loans, amounting to Tk 29.02 billion, with recoveries of Tk 12.52 billion. The current outstanding loan stands at Tk 17.79 billion.
MD Mazibur Rahman, the managing director of PKB, said they are currently facing more challenges in loan recovery than in the past.
He said that they have observed an increase in cases where individuals either don't secure jobs abroad or don't receive wages at the expected level. Besides, those who become undocumented cannot send remittances through legal channels.
Mazibur said that due to these reasons, many borrowers from PKB struggle to repay their loans.
Apart from the migration loan, the recovery rate for rehabilitation loans is also suboptimal, standing at about 40 per cent annually.
Bank officials say many workers who receive rehabilitation loans lack experience in managing business projects, often resulting in struggles to generate income and meet the payments.
According to Mazibur Rahman, a shortage of manpower in the branches is contributing to the low recovery rates.
"We are working on recruiting more staff. Besides, we launched an SMS service last June. This will provide borrowers with necessary alerts related to loans, making the loan disbursement and recovery process more efficient," he said.
Officials familiar with the development also pointed out that migrant workers often prioritise sending money to their families or relatives, which may lead to delayed loan repayments.
A significant number of workers go abroad with additional migration costs. In such cases, they often borrow the remaining funds from various money lenders at high interest rates. Moreover, they tend to receive lower salaries, which makes it challenging to repay bank loans while covering household expenses and other debts.
According to the Bureau of Manpower Employment and Training, Bangladesh sends an average of 700,000 workers abroad each year. Last year, the number surged to 1.1 million and in the first eight months of the current calendar year, over 0.8 million individuals have migrated for overseas jobs.
Most of the workers went to Saudi Arabia and Malaysia in the past eight months. Workers spent between Tk 350,000 and Tk 400,000 to go to Malaysia and between Tk 400,000 and Tk 600,000 for Saudi Arabia.
Migrant experts and sources within the worker community said a significant number of workers are struggling to secure jobs in Saudi Arabia, as they were sent under the pretence of obtaining free visas.
Similar challenges are faced by some workers in Malaysia.
According to migrant rights activists, more than 50,000 workers return home annually from various countries for reasons including unemployment, job loss and workplace harassment.

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