Private credit growth stuck despite political transition

Private-sector credit growth remains subdued despite a peaceful transition of political power, reflecting persistent economic headwinds and weak business confidence.
Entrepreneurs continue to hold back on expansion plans amid high borrowing costs, energy shortages and lingering uncertainties.
The sluggish credit flow, as low as 6.03 per cent in February 2026, underscores the challenges facing the economy, as both lenders and borrowers adopt a cautious stance in an environment marked by financial stress and structural constraints.
The rate stood at 6.03 per cent in the previous month of January as well, according to the latest data from Bangladesh Bank (BB).
Officials and entrepreneurs identified factors such as higher lending rates, security concerns in industrial belts and pre-election uncertainties as key reasons behind the reluctance of businesses to expand.
Seeking anonymity, a BB official said private sector players appear reluctant to borrow from commercial lenders, particularly since the July-August mass uprising in 2024, due to multiple challenges including the energy crisis, deterioration in law and order in manufacturing hubs, high lending rates and post-uprising political uncertainties.
On the other hand, he noted, commercial banks have become increasingly cautious in approving fresh loans to the private sector amid a persistently high level of non-performing loans (NPLs).
In fact, private sector credit growth has been on a downward trend for several months.
Director General of the Bangladesh Institute of Bank Management (BIBM), Dr Md Ezazul Islam, said the country witnessed a peaceful general election in February, which he believes could help restore investor confidence.
"We hope private sector credit growth will start gaining momentum from the last quarter of this fiscal year," the economist added.
Anwar-ul Alam Chowdhury, President of the Bangladesh Chamber of Industries (BCI), said industrial units have struggled to maintain production in recent months due to the energy crisis and security concerns.
"Increased lending rates have dealt the final blow. Under such circumstances, who will expand their business? Even running existing operations has become extremely difficult for entrepreneurs," he said.

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