Private investment in Bangladesh is shrinking by the day, with some banks having extended no credit to the private sector over the past eight months.
Even those untroubled by liquidity concerns have grown cautious, halting loans to industry.
Compounding the crisis, importers remain unable to open letters of credit (LCs), further hampering production across sectors.
No new employment has been created in the country during this period. In the past three months alone, nearly 250 garment factories have shuttered. In other industries too, factory owners have suspended operations, unable to secure the necessary dollars or open LCs.
Reports published in the press suggest a consistent month-on-month decline in private sector loans and investments, casting a long shadow over employment.
Bangladesh Bank sources confirm that private investment through banks has now fallen to its lowest in recent memory.
Loan growth, which stood at 7.28% in December and 7.15% in January, has since dropped below 7% — a figure not seen since the COVID-19 pandemic in 2021. At the time, growth had briefly slipped to a similar level, but otherwise remained in double digits.
The slowdown is attributed in part to a fall in deposit growth, which has dropped below 7.5%, reducing banks’ investable funds. Many institutions now lack the capital to lend to the private sector.
According to Bangladesh Bank, total outstanding loans to the private sector stood at Tk16.80 trillion in January, up from Tk15.67 trillion a year earlier.
However, this growth rate lags significantly behind the current average lending rate, which has risen to around 12% — a sharp increase from under 8% in the same period last year.
The only other instance of loan growth dipping below 8% was in May 2021, when it stood at 7.55% following the pandemic.
Historically, private credit growth had soared, reaching a peak of 25.18% in FY2007–08 and remaining in double digits until November 2019, when it declined to 9.87%.
Adding to the strain, government borrowing from the banking sector has surged. Between July and 10 March of the current fiscal year, the government borrowed a net Tk385.10 billion — almost tripling its January figure of Tk135.71 billion.
The borrowing doubled in just over a month, mirroring the worsening instability.
This economic turbulence is taking a heavy toll on industry. Over the past eight months, more than 100 factories — mostly in the garment and textiles sectors — have closed in Savar, Ashulia, Dhamrai, and Gazipur.
In January, Keya Group alone shut down six of its plants. With each closure, employment opportunities are vanishing, swelling the ranks of the jobless.
Economists and bankers warn that the private sector is the principal engine of economic growth in Bangladesh. Ensuring job creation and economic stability, they argue, hinges on reviving private investment.
Industrial production, marketing, and services all rely heavily on the vitality of private enterprise. If the current trend persists, the business environment may deteriorate further, worsening the already fragile state of loan defaults and investment confidence.
Syed Mahbubur Rahman, managing director of Mutual Trust Bank, remarked that prevailing uncertainty — both economic and political — has left business owners wary of committing to fresh investment.
Although liquidity remains tight, banks are still extending credit to viable projects, he noted.
“Most businesses are focused on managing existing operations rather than expanding,” he said.
“That’s why loan growth in the private sector has dropped so sharply.”
