The decline in bank lending to small and medium enterprises (SMEs) to a four –year low speaks eloquently of the present state of the economy, putting the brakes on the rising trend in loan disbursement. During FY2024-25, banks distributed Tk 2.05 lakh crore in loans to SMEs, a nine percent drop year on year, according to data from Bangladesh Bank. Covid pandemic in 2020, the war in Ukaine, and the political unrest and mass uprising last year are the bugbear to the progress of the SMEs. The SMEs have not had any respite since the pandemic and the Ukraine war and mass uprising in the country have acted as external shocks which have taken a heavy toll since small businesses, in particular, have low resilience and are vulnerable to shocks. These disruptions have weakened the small firms, with nearly one fourth of them shu5tting down.
According to experts, political uncertainty and the economic slowdown have diminished the borrowing appetite of the small entrepreneurs. Businesses do not want to invest in times of uncertainty. They find it a difficult time, and they are now focused on survival, not expansion. Termed the backbone of the industrial sector, Bangladesh has around 78 lakh cottage,micro, small and medium enterprises, which together contribute about one-fourth of the country’s Gross Domestic Product (GDP). They provide jobs to over 2.4 crore of people across the country. With SMEs struggling to sustain operations and many being forced by the circumstances to close, the job market has worsened.
Besides, the fragility of about a dozen banks has also constrained credit availability for micro businesses. Despite the finance adviser acknowledging In early July that funding challenges are preventing SMEs from realizing their vast potential ,the authorities concerned have so far failed to turn things around. People begin to ask why the authorities have not prioritized this matter more urgently when the economic growth largely depends on the SME sector?
One bank official said that SME loan disbursement reached its lowest point in recent years, clearly reflecting the tough economic climate prevailing at present.Tight liquidity and high non-performing loans are among the major obstacles. The authorities concerned must act on several fronts without delay and steps must be taken to ensure that banks feel secure in lending to SMEs sector.The refinancing windows with lower interest rates should be made promptly available to banks and non-bank leaders ,especially for SME loans.
